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Exam 10: Property, plant, and Equipment and Intangible Assets: Acquisition and Disposition

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Question 51

Multiple Choice

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In computing capitalized interest,average accumulated expenditures:

A) Is the arithmetic mean of all construction expenditures.
B) Is determined by time-weighting individual expenditures made during the asset construction period.
C) Is multiplied by the company's most recent financing rates.
D) All of these answer choices are correct.

E) A) and C)
F) None of the above

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Question 52

Multiple Choice

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Interest capitalized for 2017 was:

A) $104,625.
B) $ 86,805
C) $ 87,875.
D) $ 67,500.

E) B) and C)
F) A) and D)

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Question 53

Multiple Choice

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During 2016,the Longhorn Oil Company incurred $5,000,000 in exploration costs for each of 20 oil wells drilled in 2016 in west Texas.Of the 20 wells drilled,14 were dry holes.Longhorn uses the successful efforts method of accounting.Assuming that none of the oil found is depleted in 2016,what oil exploration expense would Longhorn charge for this activity in its 2016 income statement?

Briefly explain the differences between U.S.GAAP and International Financial Reporting Standards in accounting for research and development expenditures other than software development costs.

Use the following to answer questions Montana Mining Co.(MMC) paid $200 million for the right to explore and extract rare metals from land owned by the state of Montana.To obtain the rights,MMC agreed to restore the land to a suitable condition for other uses after its exploration and extraction activities.MMC incurred exploration and development costs of $60 million on the project. MMC has a credit-adjusted risk free interest rate is 7%.It estimates the possible cash flows for restoring the land,three years after its extraction activities begin,as follows: -The asset retirement obligation (rounded) that should be reported on MMC's balance sheet one year after the extraction activities begin is:

Assuming that the exchange lacks commercial substance,Alamos would record a gain/(loss) of:

In Case B,Pensacola would record a gain/(loss) of:

Lake Incorporated purchased all of the outstanding stock of Huron Company paying $950,000 cash.Lake assumed all of the liabilities of Huron.Book values and fair values of acquired assets and liabilities were: Lake would record goodwill of:

On July 1,2016,Larkin Co.purchased a $400,000 tract of land that is intended to be the site of a new office complex.Larkin incurred additional costs and realized salvage proceeds during 2016 as follows: What would be the balance in the land account as of December 31,2016?

The interest capitalization period for a self-constructed asset ends either when the asset is substantially complete and ready for use or when interest costs no longer are being incurred.

A distinguishing characteristic of intangible assets is the degree of uncertainty about when or if they will provide future benefits.

The basic principle used to value an asset acquired in a nonmonetary exchange is to value it at:

During the current year,Compton Crate Corporation acquired all of the outstanding common stock of Little Lacy Ltd.(LLL),paying $60 million in cash.Compton recorded the assets acquired as follows: The book value of LLL's assets and owners' equity before the acquisition were $50 million and $30 million,respectively. Required: Compute the fair value of LLL's liabilities that Compton assumed in the acquisition.

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the correct term.

The FASB's required accounting treatment for research and development costs often understates both net income and assets.

Bloomington Inc.exchanged land for equipment and $3,000 in cash.The book value and the fair value of the land were $104,000 and $90,000,respectively. Bloomington would record equipment and a gain/(loss)of:

Goodwill is:

Demolition costs to remove an old building from land purchased as a site for a new building are considered part of the cost of the new building.

Average accumulated expenditures:

Assuming that the exchange has commercial substance,Horton would record land-new and a gain/(loss)of: