CHAPTER i10 ACQUISITION iAND iDISPOSITION iOF PROPERTY, iPLANT, iAND iEQUIPMENT TESTBANK VERIFIED

CHAPTER i10 ACQUISITION iAND iDISPOSITION iOF PROPERTY, iPLANT, iAND iEQUIPMENT TRUE-FALSE—Conceptual Answer No. Description F 1. Nature iof iproperty, iplant, iand iequipment. T 2. Nature iof iproperty, iplant, iand iequipment. F 3. Cost iof iremoving iold ibuilding. T 4. Insurance ion iequipment ipurchased. F 5. Accounting ifor ispecial iassessments. T 6. Overhead icosts iin iself-constructed iassets. F 7. Overhead icosts iin iself-constructed iassets. F 8. Interest icapitalization. F 9. Qualifying iassets ifor iinterest icapitalization. T 10. Avoidable iinterest. T 11. Interest icapitalization ion iland ipurchase. T 12. Deferred-payment icontracts. T 13. Accounting ifor inon-monetary iexchanges. F 14. Recognizing ilosses ion inon-monetary iexchanges. T 15. Government igrant. F 16. Government igrant iand iasset’s icost. T 17. Government igrant iassets. F 18. Accounting ifor igovernment igrant. T 19. IFRS irequirements ifor igovernment igrants. F 20. Recognizing igains ion inon-monetary iexchanges. T 21. Deferred irevenue ion igovernment igrant. T 22. Recognizing igovernment igrant. T 23. Costs isubsequent ito iacquisition. T 24. Definition iof iimprovements. F 25. Involuntary iconversion igains/losses. MULTIPLE ICHOICE—Conceptual Answer No. Description d 26. Definition iof iplant iassets. b 27. Characteristics iof iplant iassets. d 28. Characteristics iof iplant iassets. c 29. Composition iof iland icost. c 30. Composition iof iland icost. c 31. Determination iof iland icost. d 32. Determine icost iof iland iused ias ia iparking ilot. a 33. Determine icost iof imachinery. b 34. Classification iof ifences iand iparking ilots. d S35. Accounting ifor ioverhead icosts. d 36. Determine icosts icapitalized ifor iself-constructed iassets. d 37 i. Assets iwhich iqualify ifor iinterest icapitalization. a 38. Assets iwhich iqualify ifor iinterest icapitalization. c 39. Definition iof i"avoidable iinterest." Test iBank ifor iIntermediate iAccounting: iIFRS iEdition 10 i- i2 MULTIPLE ICHOICE—Conceptual i(cont.) Answer No. Description a 40. Period iof itime iover iwhich iinterest imay ibe icapitalized. b 41. Maximum iamount iof iannual iinterest ithat imay ibe icapitalized. b 42. Interest icapitalization—weighted-average ifactor. a 43. Classification iof iinterest iearned ion isecurities ipurchased iwith iborrowed ifunds. d 44. Write-off iof icapitalized iinterest icosts. c S45. Conditions ifor iinterest icapitalization. a S46. Capitalization iof iinterest ion iconstructed iassets. a 47. Interest icapitalization/interest irevenue. d 48. Government igrants-deferred irevenue iapproach. b 49. Accounting ifor igovernment igrants. b 50. Classification iof iDeferred iGrant iRevenue. a 51. Government igrants' ieffect ion iSFP. d 52. IFRS irequirements ifor igovernment igrants. c 53. Government igrant iand iasset icost. c 54. Government igrants’ ieffect ion iexpenses/income. c S55. Non-monetary iexchanges iand iculmination iof iearning iprocess. a S56. Recognizing igains/losses iin iexchange ihaving icommercial isubstance. a S57. Valuation iof inon-monetary iasset. b P58. Gain irecognition ion iplant iasset iexchange. c 59. Valuation iof iplant iassets. d 60. Plant iasset iacquired iby iissuance iof istock. d 61. Valuation iof inon-monetary iexchanges. a 62. Gain irecognition ion ia inon-monetary iexchange. c 63. Gain irecognition ion ia inon-monetary iexchange. c 64. Capital iexpenditure. d 65. Identification iof ia icapital iexpenditure. a 66. Identification iof ia icapital iexpenditure. c P67. Accounting ifor irevenue iexpenditures. d S68. Accounting ifor icapital iexpenditures. d 69. Determine iloss ion isale iof idepreciable iasset. c 70. Knowledge iof iinvoluntary iconversions. P iThese iquestions ialso iappear iin ithe iProblem-Solving iSurvival iGuide. S iThese iquestions ialso iappear iin ithe iStudy iGuide. MULTIPLE ICHOICE—Computational Answer No. Description b 71. Determine icost iof iland. d 72. Determine icost iof ibuilding. d 73. Calculate icost iof iland iand ibuilding. c 74. Calculate icost iof iequipment. c 75. Calculate icost iof iequipment. b 76. Determine icost iof iland. c 77. Determine icost iof ibuilding. b 78. Determine icost iof iland iimprovements. a 79. Interest icapitalization/depreciation iexpense. d 80. Overhead iincluded iin iself-constructed iasset. Acquisition iand iDisposition iof iProperty, iPlant, iand iEquipment 10 i- i3 d 81. Overhead iincluded iin iself-constructed iasset. MULTIPLE ICHOICE—Computational i i(cont.) Answer No. Description a 82. Calculate iinterest ito ibe icapitalized. b 83. Calculate iaverage iaccumulated iexpenditures. a 84. Calculate iinterest ito ibe icapitalized. b 85. Calculate iaverage iaccumulated iexpenditures. a 86 Calculate iaverage iaccumulated iexpenditures. c 87. Calculate iamount iof iinterest ito ibe icapitalized. b 88. Calculate iweighted-average iaccumulated iexpenditures. a 89. Calculate iweighted-average iaccumulated iexpenditures. d 90. Calculate iweighted-average iaccumulated iexpenditures. a 91. Calculate iactual iinterest icost iincurred iduring iyear. b 92. Calculate iamount iof iinterest ito ibe icapitalized. c 93. Calculate iamount iof iinterest ito ibe icapitalized. c 94. Calculate iweighted-average iaccumulated iexpenditures. b 95. Calculate iinterest ito ibe icapitalized. d 96. Calculate iweighted-average iaccumulated iexpenditures. b 97. Calculate iinterest ito ibe icapitalized. b 98. Calculate iweighted-average iaccumulated iexpenditures. d 99. Calculate iweighted-average iinterest irate. d 100. Calculate iamount iof iavoidable iinterest. a 101. Calculate iamount iof iactual iinterest. c 102. Calculate iamount iof iinterest iexpense. c 103. Calculate iinterest ito ibe icapitalized. a 104. Calculate iinterest ito ibe icapitalized. b 105. Calculate iinterest ito ibe icapitalized. d 106. Calculate iinterest ito ibe icapitalized. a 107. Exchange iwith icommercial isubstance. c 108. Exchange ilacking icommercial isubstance. d 109. Exchange ilacking icommercial isubstance. b 110. Calculate iamount iof igrant irevenue. d 111. Calculate idepreciation iexpense/government igrant. b 112. Calculate idepreciation iexpense/government igrant. a 113. Calculate ibook ivalue iof igovernment igrant iasset. a 114. Calculate igovernment igrant ieffect ion inet iincome. d 115. Recording igovernment igrant. b 116. Calculate iamount iof igrant irevenue. b 117. Calculate iDeferred iGrant iRevenue ibalance. a 118. Exchange iof inon-monetary iassets. a 119. Exchange ilacking icommercial isubstance. c 120. Exchange ilacking icommercial isubstance. b 121. Valuation iof ia inon-monetary iexchange. a 122. Valuation iof ia inon-monetary iexchange. c 123. Calculate igain ion iexchange ilacking icommercial isubstance. a 124. Allocation iof icost iin ia ilump isum ipurchase. d 125. Allocation iof icost iin ia ilump isum ipurchase. c 126. Calculate icost iof iland iacquired. c 127. Determine icost iof ipurchased imachine. c 128. Calculate icost iof itruck ipurchased. b 129. Calculate icost iof imachine ipurchased. Test iBank ifor iIntermediate iAccounting: iIFRS iEdition 10 i- i4 d 130. Allocation iof icost iof ia ilump isum ipurchase. MULTIPLE ICHOICE—Computational i i(cont.) Answer No. Description b 131. Calculate icost iof iequipment. d 132. Acquisition iof iequipment iby iexchange iof istock iheld ias ian iinvestment. b 133. Exchange ilacking icommercial isubstance. b 134. Exchange ilacking icommercial isubstance i/gain. b 135. Exchange ilacking icommercial isubstance i/gain. d 136. Valuation iof ia inon-monetary iexchange. a 137. Exchange ilacking icommercial isubstance/gain. d 138. Valuation iof ia inon-monetary iexchange. b 139. Gain irecognition iof ia inon-monetary iexchange. a 140. Valuation iof ia inon-monetary iexchange. b 141. Valuation iof ia inon-monetary iexchange. b 142. Calculate igain ion inon-monetary iexchange. d 143. Calculate iloss ion inon-monetary iexchange. b 144. Calculate igain ion inon-monetary iexchange. d 145. Calculate iloss ion inon-monetary iexchange. c 146. Calculate icash ireceived ifrom isale iof imachinery. c 147. Calculate icash ireceived ifrom isale iof imachinery. b 148. Calculate iloss ion isale iof imachine. b 149. Calculate igain ion isale iof iequipment. MULTIPLE ICHOICE—CPA iAdapted Answer No. Description c 150. Determine icost iof iland. b 151. Classification iof isale iof ibuilding. b 152. Determine iinterest icost ito ibe icapitalized. a 153. Valuation iof ia inon-monetary iexchange. a 154. Exchange ilacking icommercial isubstance. d 155. Costs isubsequent ito iacquisition. a 156. Valuation iof ireplacement iequipment. EXERCISES Item Description E10-157 Plant iasset iaccounting. E10-158 Weighted-average iaccumulated iexpenditures. E10-159 Capitalization iof iinterest. E10-160 Non-monetary iexchange. E10-161 Non-monetary iexchange. E10-162 Capitalizing ivs. iexpensing. E10-163 Non-monetary iexchange. E10-164 Government igrants. E10-165 Government igrants. Acquisition iand iDisposition iof iProperty, iPlant, iand iEquipment 10 i- i5 PROBLEMS Item Description P10-166 Capitalizing iacquisition icosts. P10-167 Capitalization iof iinterest. P10-168 Capitalization iof iinterest. P10-169 Asset iacquisition P10-170 Non-monetary iexchange. P10-171 Non-monetary iexchange. P10-172 Non-monetary iexchange. P10-173 Non-monetary iexchange. P10-174 Non-monetary iexchange. CHAPTER iLEARNING iOBJECTIVES 1. Describe iproperty, iplant, iand iequipment. 2. Identify ithe icosts ito iinclude iin ithe iinitial ivaluation iof iproperty, iplant, iand iequipment. 3. Describe ithe iaccounting iproblems iassociated iwith iself-constructed iassets. 4. Describe ithe iaccounting iproblems iassociated iwith iinterest icapitalization. 5. Understand iaccounting iissues irelated ito iacquiring iand ivaluing iplant iassets. 6. Describe ithe iaccounting itreatment ifor icosts isubsequent ito iacquisition. 7. Describe ithe iaccounting itreatment ifor ithe idisposal iof iproperty, iplant, iand iequipment. Test iBank ifor iIntermediate iAccounting: iIFRS iEdition 10 i- i6 SUMMARY iOF iLEARNING iOBJECTIVES iBY iQUESTIONS Item Type Item Type Item Type Item Type Item Type Item Type Item Type Learning iObjective i1 1. TF 2. TF 26. MC 27. MC 28. MC Learning iObjective i2 3. TF 30. MC 34. MC 74. MC 78. MC 157. E 4. TF 31. MC 71. MC 75. MC 79. MC 162. E 5. TF 32. MC 72. MC 76. MC 150. MC 166. P 29. MC 33. MC 73. MC 77. MC 151. MC Learning iObjective i3 6. TF S35. MC 80. MC 158. E 7. TF 36. MC 81. MC 159. E Learning iObjective i4 8. TF 40. MC 47. MC 88. MC 95. MC 102. MC 157. E 9. TF 41. MC 82. MC 89. MC 96. MC 103. MC 159. E 10. TF 42. MC 83. MC 90. MC 97. MC 104. MC 162. E 11. TF 43. MC 84. MC 91. MC 98. MC 105. MC 167. P 37. MC 44. MC 85. MC 92. MC 99. MC 106. MC 168. P 38. MC S45. MC 86. MC 93. MC 100. MC 125. MC 39. MC S46. MC 87. MC 94. MC 101. MC 152. MC Learning iObjective i5 12. TF 49. MC 61. MC 116. MC 128. MC 140. MC 163. E 13. TF 50. MC 62. MC 117. MC 129. MC 141. MC 164. E 14. TF 51. MC 63. MC 118. MC 130. MC 142. MC 165. E 15. TF 52. MC 107. MC 119. MC 131. MC 143. MC 169. P 16. TF 53. MC 108. MC 120. MC 132. MC 144. MC 170. P 17. TF 54. MC 109. MC 121. MC 133. MC 145. MC 171. P 18. TF S55. MC 110. MC 122. MC 134. MC 153. MC 172. P 19. TF S56. MC 111. MC 123. MC 135. MC 154. MC 173. P 20. TF S57. MC 112. MC 124. MC 136. MC 157. E 174. P 21. TF P58. MC 113. MC 125. MC 137. MC 160. E 22. TF 59. MC 114. MC 126. MC 138. MC 161. E 48. MC 60. MC 115. MC 127. MC 139. MC 162. E Learning iObjective i6 23. TF 64. MC 66. MC S68. MC 156. MC 162. E 24. TF 65. MC P67. MC 155. MC 157. E Learning iObjective i7 25. TF 70. MC 147. MC 149. MC 69. MC 146. MC 148. MC Note: TF i= iTrue-False MC i= iMultiple iChoice P i= iProblem E i= iExercise Acquisition iand iDisposition iof iProperty, iPlant, iand iEquipment 10 i- i7 TRUE-FALSE—Conceptual 1. Assets iclassified ias iproperty, iplant, iand iequipment ican ibe ieither iacquired ifor iuse iin ioperations, ior iacquired ifor iresale. 2. Assets iclassified ias iproperty, iplant, iand iequipment imust ibe iboth ilong-term iin inature iand ipossess iphysical isubstance. 3. When iland iwith ian iold ibuilding iis ipurchased ias ia ifuture ibuilding isite, ithe icost iof iremoving ithe iold ibuilding iis ipart iof ithe icost iof ithe inew ibuilding. 4. Insurance ion iequipment ipurchased, iwhile ithe iequipment iis iin itransit, iis ipart iof ithe icost iof ithe iequipment. 5. Special iassessments ifor ilocal iimprovements isuch ias istreet ilights iand isewers ishould ibe iaccounted ifor ias iland iimprovements. 6. Variable ioverhead icosts iincurred ito iself-construct ian iasset ishould ibe iincluded iin ithe icost iof ithe iasset. 7. Companies ishould iassign ino iportion iof ifixed ioverhead ito iself-constructed iassets. 8. When icapitalizing iinterest iduring iconstruction iof ian iasset, ian iimputed iinterest icost ion istock ifinancing imust ibe iincluded. 9. Assets iunder iconstruction ifor ia icompany’s iown iuse ido inot iqualify ifor iinterest icost icapitalization. 10. Avoidable iinterest iis ithe iamount iof iinterest icost ithat ia icompany icould itheoretically iavoid iif iit ihad inot imade iexpenditures ifor ithe iasset. 11. When ia icompany ipurchases iland iwith ithe iintention iof ideveloping iit ifor ia iparticular iuse, iinterest icosts iassociated iwith ithose iexpenditures iqualify ifor iinterest icapitalization. 12. Assets ipurchased ion ilong-term icredit icontracts ishould ibe irecorded iat ithe ipresent ivalue iof ithe iconsideration iexchanged. 13. Companies iaccount ifor ithe iexchange iof inon-monetary iassets ion ithe ibasis iof ithe ifair ivalue iof ithe iasset igiven iup ior ithe ifair ivalue iof ithe iasset ireceived. 14. When ia icompany iexchanges inon-monetary iassets iand ia iloss iresults, ithe icompany irecognizes ithe iloss ionly iif ithe iexchange ihas icommercial isubstance. 15. A igovernment igrant igenerally isubsidizes ia icompany iby itransferring iresources ito ithat icompany. 16. When ia icompany iacquires ian iasset ithrough ia igovernment igrant, ithe iasset's icost iis izero iso ithe icost irecorded iis ithe idirect icost, isuch ias ilegal ifees, iincurred. 17. Assets iacquired ithrough igovernment igrants iare igenerally irecorded iat ifair ivalue. Test iBank ifor iIntermediate iAccounting: iIFRS iEdition 10 i- i8 18. When ian iasset iacquired ithrough ia igovernment igrant iis irecorded ion ithe ibooks, iequity iwill iincrease iby ithe icost iof ithe iasset. 19. IFRS irequires ithe iincome iapproach ito iaccount ifor iassets ireceived ithrough igovernment igrants. 20. Under iIFRS, iall igains ion inon-monetary iexchanges iare irecognized, iregardless iof iwhether ithe itransaction ihas icommercial isubstance ior inot. 21. The ifair ivalue iof ian iasset iacquired ithrough ia igovernment igrant ican ibe irecorded ias ideferred irevenue iand irecognized ias iincome iover ithe ilife iof ithe iasset. 22. One iway iof irecognizing ia igovernment igrant iis ito ideduct ithe igrant ifrom ithe icarrying iamount iof ithe iassets ireceived ifrom ithe igrant. 23. Costs iincurred isubsequent ito ithe iacquisition iof ian iasset iare icapitalized iif iit iis iprobable ithat ithe icompany iwill iobtain ifuture ieconomic ibenefits. 24. Improvements iare ioften ireferred ito ias ibetterments iand iinvolve ithe isubstitution iof ia ibetter iasset ifor ithe ione icurrently iused. 25. Companies ialways itreat igains ior ilosses ifrom ian iinvoluntary iconversion ias ipart iof idiscontinued ioperations. True iFalse iAnswers—Conceptual Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. 1. F 6. T 11. T 16. F 21. T 2. T 7. F 12. T 17. T 22. T 3. F 8. F 13. T 18. F 23. T 4. T 9. F 14. F 19. T 24. T 5. F 10. T 15. T 20. F 25. F Acquisition iand iDisposition iof iProperty, iPlant, iand iEquipment 10 i- i9 MULTIPLE iCHOICE—Conceptual 26. Plant iassets imay iproperly iinclude a. deposits ion imachinery inot iyet ireceived. b. idle iequipment iawaiting isale. c. land iheld ifor ipossible iuse ias ia ifuture iplant isite. d. none iof ithese. 27. Which iof ithe ifollowing iis inot ia imajor icharacteristic iof ia iplant iasset? a. Possesses iphysical isubstance b. Acquired ifor iresale c. Acquired ifor iuse d. Long-term iin inature 28. Which iof ithese iis inot ia imajor icharacteristic iof ia iplant iasset? a. Possesses iphysical isubstance b. Acquired ifor iuse iin ioperations c. Long-term iin inature d. All iof ithese iare imajor icharacteristics iof ia iplant iasset. 29. Cotton iHotel iCorporation irecently ipurchased iEmporia iHotel iand ithe iland ion iwhich iit iis ilocated iwith ithe iplan ito itear idown ithe iEmporia iHotel iand ibuild ia inew iluxury ihotel ion ithe isite. iThe icost iof ithe iEmporia iHotel ishould ibe a. depreciated iover ithe iperiod ifrom iacquisition ito ithe idate ithe ihotel iis ischeduled ito ibe itorn idown. b. written ioff ias iloss iin ithe iyear ithe ihotel iis itorn idown. c. capitalized ias ipart iof ithe icost iof ithe iland. d. capitalized ias ipart iof ithe icost iof ithe inew ihotel. 30. The icost iof iland idoes inot iinclude a. costs iof igrading, ifilling, idraining, iand iclearing. b. costs iof iremoving iold ibuildings. c. costs iof iimprovements iwith ilimited ilives. d. special iassessments. 31. The icost iof iland itypically iincludes ithe ipurchase iprice iand iall iof ithe ifollowing icosts iexcept a. grading, ifilling, idraining, iand iclearing icosts. b. street ilights, isewers, iand idrainage isystems icost. c. private idriveways iand iparking ilots. d. assumption iof iany iliens ior imortgages ion ithe iproperty. 32. If ia icorporation ipurchases ia ilot iand ibuilding iand isubsequently itears idown ithe ibuilding iand iuses ithe iproperty ias ia iparking ilot, ithe iproper iaccounting itreatment iof ithe icost iof ithe ibuilding iwould idepend ion a. the isignificance iof ithe icost iallocated ito ithe ibuilding iin irelation ito ithe icombined icost iof ithe ilot iand ibuilding. b. the ilength iof itime ifor iwhich ithe ibuilding iwas iheld iprior ito iits idemolition. c. the icontemplated ifuture iuse iof ithe iparking ilot. d. the iintention iof imanagement ifor ithe iproperty iwhen ithe ibuilding iwas iacquired. Test iBank ifor iIntermediate iAccounting: iIFRS iEdition 10 i- i10 33. The idebit ifor ia isales itax iproperly ilevied iand ipaid ion ithe ipurchase iof imachinery ipreferably iwould ibe ia icharge ito a. the imachinery iaccount. b. a iseparate ideferred icharge iaccount. c. miscellaneous itax iexpense i(which iincludes iall itaxes iother ithan ithose ion iincome). d. accumulated idepreciation--machinery. 34. Fences iand iparking ilots iare ireported ion ithe istatement iof ifinancial iposition ias a. current iassets. b. land iimprovements. c. land. d. property iand iequipment. S35. To ibe iconsistent iwith ithe ihistorical icost iprinciple, ioverhead icosts iincurred iby ian ienterprise iconstructing iits iown ibuilding ishould ibe a. allocated ion ithe ibasis iof ilost iproduction. b. eliminated icompletely ifrom ithe icost iof ithe iasset. c. allocated ion ian iopportunity icost ibasis. d. allocated ion ia ipro irata ibasis ibetween ithe iasset iand inormal ioperations. 36. Which iof ithe ifollowing icosts iare icapitalized ifor iself-constructed iassets? a. Materials iand ilabor ionly b. Labor iand ioverhead ionly c. Materials iand ioverhead ionly d. Materials, ilabor, iand ioverhead 37. Which iof ithe ifollowing iassets ido inot iqualify ifor icapitalization iof iinterest icosts iincurred iduring iconstruction iof ithe iassets? a. Assets iunder iconstruction ifor ia icompany's iown iuse. b. Assets iintended ifor isale ior ilease ithat iare iproduced ias idiscrete iprojects. c. Assets ifinanced ithrough ithe iissuance iof ilong-term idebt. d. Assets inot icurrently iundergoing ithe iactivities inecessary ito iprepare ithem ifor itheir iintended iuse. 38. Assets ithat iqualify ifor iinterest icost icapitalization iinclude a. assets iunder iconstruction ifor ia icompany's iown iuse. b. assets ithat iare iready ifor itheir iintended iuse iin ithe iearnings iof ithe icompany. c. assets ithat iare inot icurrently ibeing iused ibecause iof iexcess icapacity. d. All iof ithese iassets iqualify ifor iinterest icost icapitalization. 39. When icomputing ithe iamount iof iinterest icost ito ibe icapitalized, ithe iconcept iof i"avoidable iinterest" irefers ito a. the itotal iinterest icost iactually iincurred. b. a icost iof icapital icharge ifor iequity. c. that iportion iof itotal iinterest icost iwhich iwould inot ihave ibeen iincurred iif iexpenditures ifor iasset iconstruction ihad inot ibeen imade. d. that iportion iof iaverage iaccumulated iexpenditures ion iwhich ino iinterest icost iwas iincurred. Acquisition iand iDisposition iof iProperty, iPlant, iand iEquipment 10 i- i11 40. The iperiod iof itime iduring iwhich iinterest imust ibe icapitalized iends iwhen a. the iasset iis isubstantially icomplete iand iready ifor iits iintended iuse. b. no ifurther iinterest icost iis ibeing iincurred. c. the iasset iis iabandoned, isold, ior ifully idepreciated. d. the iactivities ithat iare inecessary ito iget ithe iasset iready ifor iits iintended iuse ihave ibegun. 41. Which iof ithe ifollowing istatements iis itrue iregarding icapitalization iof iinterest? a. Interest icost icapitalized iin iconnection iwith ithe ipurchase iof iland ito ibe iused ias ia ibuilding isite ishould ibe idebited ito ithe iland iaccount iand inot ito ithe ibuilding iaccount. b. The iamount iof iinterest icost icapitalized iduring ithe iperiod ishould inot iexceed ithe iactual iinterest icost iincurred. c. When iexcess iborrowed ifunds inot iimmediately ineeded ifor iconstruction iare itemporarily iinvested, iany iinterest iearned ishould ibe irecorded ias iinterest irevenue. d. The iminimum iamount iof iinterest ito ibe icapitalized iis idetermined iby imultiplying ia iweighted iaverage iinterest irate iby ithe iamount iof iaverage iaccumulated iexpenditures ion iqualifying iassets iduring ithe iperiod. 42. Construction iof ia iqualifying iasset iis istarted ion iApril i1 iand ifinished ion iDecember i1. iThe ifraction iused ito imultiply ian iexpenditure imade ion iApril i1 ito ifind iweighted-average iaccumulated iexpenditures iis a. 8/8. b. 8/12. c. 9/12. d. 11/12. 43. When ifunds iare iborrowed ito ipay ifor iconstruction iof iassets ithat iqualify ifor icapitalization iof iinterest, ithe iexcess ifunds inot ineeded ito ipay ifor iconstruction imay ibe itemporarily iinvested iin iinterest-bearing isecurities. iInterest iearned ion ithese itemporary iinvestments ishould ibe a. offset iagainst iinterest icost iincurred iduring iconstruction. b. used ito iincrease ithe icost iof iassets ibeing iconstructed. c. multiplied iby ian iappropriate iinterest irate ito idetermine ithe iamount iof iinterest ito ibe icapitalized. d. recognized ias irevenue iof ithe iperiod. 44. Interest icost ithat iis icapitalized ishould a. be iwritten ioff iover ithe iremaining iterm iof ithe idebt. b. be iaccumulated iin ia iseparate ideferred icharge iaccount iand iwritten ioff iequally iover ia i40-year iperiod. c. not ibe iwritten ioff iuntil ithe irelated iasset iis ifully idepreciated ior idisposed iof. d. none iof ithese. S45. Which iof ithe ifollowing iis inot ia icondition ithat imust ibe isatisfied ibefore iinterest icapitalization ican ibegin ion ia iqualifying iasset? a. Interest icost iis ibeing iincurred. b. Expenditures ifor ithe iassets ihave ibeen imade. c. The iinterest irate iis iequal ito ior igreater ithan ithe icompany's icost iof icapital. d. Activities ithat iare inecessary ito iget ithe iasset iready ifor iits iintended iuse iare iin iprogress. Test iBank ifor iIntermediate iAccounting: iIFRS iEdition 10 i- i12 Acquisition iand iDisposition iof iProperty, iPlant, iand iEquipment 10 i- i13 S46. Which iof ithe ifollowing iis ithe irecommended iapproach ito ihandling iinterest iincurred iin ifinancing ithe iconstruction iof iproperty, iplant iand iequipment? a. Capitalize ionly ithe iactual iinterest icosts iincurred iduring iconstruction. b. Charge iconstruction iwith iall icosts iof ifunds iemployed, iwhether iidentifiable ior inot. c. Capitalize ino iinterest iduring iconstruction. d. Capitalize iinterest icosts iequal ito ithe iprime iinterest irate itimes ithe iestimated icost iof ithe iasset ibeing iconstructed. 47. Interest irevenue iearned ion ispecific iborrowings ifor iqualifying iassets a. reduces ithe icost iof ithe iqualifying iasset. b. reduces iinterest iexpense ireported ion ithe iincome istatement. c. increases iequity iin ithe iperiod iearned. d. none iof ithese. 48. If ia igovernment ientity iprovides ian iinterest ifree iloan ito ia icompany iand ithe icompany iaccounts ifor ithe igrant iusing ithe ideferred irevenue iapproach, a. no iinterest iexpense iwill ibe irecorded. b. the iinterest ielement iis iinitially irecorded ias iDiscount ion iNoted iPayable. c. the iinterest ielement iis iamortized ito iDeferred iGrant iRevenue iover ithe iterm iof ithe iloan. d. all iof ithese. 49. Which iof ithe ifollowing iis inot itrue iwith iregard ito ithe iaccounting ifor igovernment igrants? a. Assets imay ibe irecorded iat ifair ivalue ior inominal icost. b. Companies imay iuse ieither ithe icapital ior iincome iapproach ito iaccount ifor ithe iasset iand ithe igrant. c. Companies imay iapply ithe iincome iapproach ieither iby irecording ithe igrant ias ideferred irevenue ior ias ian iadjustment ito ithe iasset. d. Both ia iand ic. 50. The iaccount iDeferred iGrant iRevenue iis iclassified ias i a. a iseparate icomponent iof ishareholders' iequity. b. a inon-current iliability. c. Other iincome iand iexpense. d. Revenue. Test iBank ifor iIntermediate iAccounting: iIFRS iEdition 10 i- i14 51. When ian iasset iacquired ithrough igovernment igrants iis irecorded iusing ithe icapital iapproach, a. assets iand iequity iincrease iby ithe ifair ivalue iof ithe iasset. b. assets iand iliabilities iincrease iby ithe ifair ivalue iof ithe iasset. c. assets iand iequity iincrease iby ithe icost iof ithe iasset. d. assets iand iliabilities iincrease iby ithe icost iof ithe iasset. 52. Which iof ithe ifollowing iis irequired iby iIFRS? a. Resources iacquired ithrough igovernment igrants imust ibe irecorded iat icost. b. Resources iacquired ithrough igovernment igrants imust ibe irecorded iat ifair ivalue. c. Resources iacquired ithrough igovernment igrants imust ibe iaccounted ifor iusing ithe icapital iapproach. d. Resources iacquired ithrough igovernment igrants imust ibe iaccounted ifor iusing ithe iincome iapproach. 53. If ithe icost iof ithe iasset iis irecorded inet iof ithe igovernment igrant, a. equity iwill ilikely ibe ioverstated. b. liabilities iwill ilikely ibe ioverstated. c. assets iwill ilikely ibe iunderstated. d. revenues iwill ilikely ibe iunderstated. 54. Which iof ithe ifollowing iis itrue iregarding ithe ialternative iways ito iapply ithe iincome iapproach ito iaccounting iof iresources iacquired ithrough igovernment igrants? a. expenses iwill ibe ihigher iand inet iincome ilower iif ithe igrant iis irecorded ias ideferred irevenue. b. expenses iwill ibe ihigher iand inet iincome ilower iif ithe igrant iis iaccounted ifor ias ian iadjustment ito ithe iasset. c. depreciation iexpense iwill ibe ihigher iif ithe igrant iis irecorded ias ideferred irevenue, ibut inet iincome iwill ibe ithe isame iunder ithe itwo ialternatives. d. depreciation iexpense iwill ibe ihigher iif ithe igrant iis irecorded ias ian iadjustment ito ithe iasset, ibut inet iincome iwill ibe ithe isame iunder ithe itwo ialternatives. S55. Which iof ithe ifollowing inon-monetary iexchange itransactions ihas icommercial isubstance? a. Exchange iof iassets iwith ino idifference iin ifuture icash iflows. b. Exchange iof iproducts iby icompanies iin ithe isame iline iof ibusiness iwith ino idifference iin ifuture icash iflows. c. Exchange iof iassets iwith ia idifference iin ifuture icash iflows. d. Exchange iof ian iequivalent iinterest iin isimilar iproductive iassets ithat icauses ithe icompanies iinvolved ito iremain iin iessentially ithe isame ieconomic iposition. S56. When icash iis iinvolved iin ian iexchange ihaving icommercial isubstance. a. gains ior ilosses iare irecognized iin itheir ientirety. b. a igain ior iloss iis icomputed iby icomparing ithe ifair ivalue iof ithe iasset ireceived iwith ithe ifair ivalue iof ithe iasset igiven iup. c. only igains ishould ibe irecognized. d. only ilosses ishould ibe irecognized. Acquisition iand iDisposition iof iProperty, iPlant, iand iEquipment 10 i- i15 S57. The icost iof ia inon-monetary iasset iacquired iin iexchange ifor ianother inon-monetary iasset iand ithe iexchange ihas icommercial isubstance iis iusually irecorded iat a. the ifair ivalue iof ithe iasset igiven iup, iand ia igain ior iloss iis irecognized. b. the ifair ivalue iof ithe iasset igiven iup, iand ia igain ibut inot ia iloss imay ibe irecognized. c. the ifair ivalue iof ithe iasset ireceived iif iit iis iequally ireliable ias ithe ifair ivalue iof ithe iasset igiven iup. d. either ithe ifair ivalue iof ithe iasset igiven iup ior ithe iasset ireceived, iwhichever ione iresults iin ithe ilargest igain i(smallest iloss) ito ithe icompany. P58. Ringler iCorporation iexchanges ione iplant iasset ifor ia isimilar iplant iasset iand igives icash iin ithe iexchange. iThe iexchange iis inot iexpected ito icause ia imaterial ichange iin ithe ifuture icash iflows ifor ieither ientity. iIf ia igain ion ithe idisposal iof ithe iold iasset iis iindicated, ithe igain iwill a. be ireported iin ithe iOther iincome iand iexpense isection iof ithe iincome istatement. b. effectively ireduce ithe iamount ito ibe irecorded ias ithe icost iof ithe inew iasset. c. effectively iincrease ithe iamount ito ibe irecorded ias ithe icost iof ithe inew iasset. d. be icredited idirectly ito ithe iretained iearnings iaccount. 59. Plant iassets ipurchased ion ilong-term icredit icontracts ishould ibe iaccounted ifor iat a. the itotal ivalue iof ithe ifuture ipayments. b. the ifuture iamount iof ithe ifuture ipayments. c. the ipresent ivalue iof ithe ifuture ipayments. d. none iof ithese. 60. When ia iplant iasset iis iacquired iby iissuance iof iordinary ishares, ithe icost iof ithe iplant iasset iis iproperly imeasured iby ithe a. par ivalue iof ithe ishares. b. stated ivalue iof ithe ishares. c. book ivalue iof ithe ishares. d. fair ivalue iof ithe ishares. 61. When ia iclosely iheld icorporation iissues ipreference ishares ifor iland, ithe iland ishould ibe irecorded iat ithe a. total ipar ivalue iof ithe ishares iissued. b. total ibook ivalue iof ithe ishares iissued. c. total iliquidating ivalue iof ithe ishares iissued. d. fair ivalue iof ithe iland. 62. Accounting irecognition ishould ibe igiven ito ithe igain irealized ion ia inon-monetary iexchange iof iplant iassets iexcept iwhen ithe iexchange ihas a. no icommercial isubstance iand iadditional icash iis ipaid. b. commercial isubstance iand iadditional icash iis ireceived. c. commercial isubstance iand iadditional icash iis ipaid. d. All iof ithese icause irecognition iof ia igain. 63. For ia inon-monetary iexchange iof iplant iassets, iaccounting irecognition ishould inot ibe igiven ito a. a iloss iwhen ithe iexchange ihas ino icommercial isubstance. b. a igain iwhen ithe iexchange ihas icommercial isubstance. c. a igain iwhen ithe iexchange ihas ino icommercial isubstance. d. a iloss iwhen ithe iexchange ihas icommercial isubstance. Test iBank ifor iIntermediate iAccounting: iIFRS iEdition 10 i- i16 64. An iimprovement imade ito ia imachine iincreased iits ifair ivalue iand iits iproduction icapacity iby i25% iwithout iextending ithe imachine's iuseful ilife. iThe icost iof ithe iimprovement ishould ibe a. i expensed. b. debited ito iaccumulated idepreciation. c. capitalized iin ithe imachine iaccount. d. allocated ibetween iaccumulated idepreciation iand ithe imachine iaccount. 65. Which iof ithe ifollowing iis ia icapital iexpenditure? a. Payment iof ian iaccount ipayable b. Retirement iof ibonds ipayable c. Payment iof iincome itaxes d. None iof ithese 66. Which iof ithe ifollowing iis inot ia icapital iexpenditure? a. Repairs ithat imaintain ian iasset iin ioperating icondition b. An iaddition c. A ibetterment d. A ireplacement P67. In iaccounting ifor iplant iassets, iwhich iof ithe ifollowing ioutlays imade isubsequent ito iacquisition ishould ibe ifully iexpensed iin ithe iperiod ithe iexpenditure iis imade? a. Expenditure imade ito iincrease ithe iefficiency ior ieffectiveness iof ian iexisting iasset b. Expenditure imade ito iextend ithe iuseful ilife iof ian iexisting iasset ibeyond ithe itime iframe ioriginally ianticipated c. Expenditure imade ito imaintain ian iexisting iasset iso ithat iit ican ifunction iin ithe imanner iintended d. Expenditure imade ito iadd inew iasset iservices S68. An iexpenditure imade iin iconnection iwith ia imachine ibeing iused iby ia icompany ishould ibe a. expensed iimmediately iif iit imerely iextends ithe iuseful ilife ibut idoes inot iimprove ithe iquality. b. expensed iimmediately iif iit imerely iimproves ithe iquality ibut idoes inot iextend ithe iuseful ilife. c. capitalized iif iit imaintains ithe imachine iin inormal ioperating icondition. d. capitalized iif iit iincreases ithe iquantity iof iunits iproduced iby ithe imachine. 69. The isale iof ia idepreciable iasset iresulting iin ia iloss iindicates ithat ithe iproceeds ifrom ithe isale iwere a. less ithan icurrent ifair ivalue. b. greater ithan icost. c. greater ithan ibook ivalue. d. less ithan ibook ivalue. 70. Which iof ithe ifollowing istatements iabout iinvoluntary iconversions iis ifalse? a. An iinvoluntary iconversion imay iresult ifrom icondemnation ior ifire. b. The igain ior iloss ifrom ian iinvoluntary iconversion iis ireported iin iother iincome iand iexpense ion ithe iincome istatement. c. The igain ior iloss ifrom ian iinvoluntary iconversion ishould inot ibe irecognized iwhen ithe icompany ireinvests iin ireplacement iassets. Acquisition iand iDisposition iof iProperty, iPlant, iand iEquipment 10 i- i17 d. All iof ithese. Multiple iChoice iAnswers—Conceptual Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. 26. d 33. a 40. a 47. a 54. c 61. d 68. d 27. b 34. b 41. b 48. d 55. c 62. a 69. d 28. d 35. d 42. b 49. b 56. a 63. c 70. c 29. c 36. d 43. a 50. b 57. a 64. c 30. c 37. d 44. d 51. a 58. b 65. d 31. c 38. a 45. c 52. d 59. c 66. a 32. d 39. c 46. a 53. c 60. d 67. c Solutions ito ithose iMultiple iChoice iquestions ifor iwhich ithe ianswer iis i“none iof ithese.” 26. Assets iused iin inormal ibusiness ioperations. 44. Capitalized iinterest iis idepreciated iover ithe irelated iasset’s iuseful ilife. 65. Capital iexpenditures iinclude iadditions, ibetterments, iimprovements, iand imajor irepairs. MULTIPLE ICHOICE—Computational Use ithe ifollowing iinformation ifor iquestions i71 iand i72. Wilson iCo. ipurchased iland ias ia ifactory isite ifor i$600,000. iWilson ipaid i$60,000 ito itear idown itwo ibuildings ion ithe iland. iSalvage iwas isold ifor i$5,400. iLegal ifees iof i$3,480 iwere ipaid ifor ititle iinvestigation iand imaking ithe ipurchase. iArchitect's ifees iwere i$31,200. iTitle iinsurance icost i$2,400, iand iliability iinsurance iduring iconstruction icost i$2,600. iExcavation icost i$10,440. iThe icontractor iwas ipaid i$2,200,000. iAn iassessment imade iby ithe icity ifor ipavement iwas i$6,400. iInterest icosts iduring iconstruction iwere i$170,000. 71. The icost iof ithe iland ithat ishould ibe irecorded iby iWilson iCo. iis a. $660,480. b. $666,880. c. $669,880. d. $676,280. 72. The icost iof ithe ibuilding ithat ishould ibe irecorded iby iWilson iCo. iis a. $2,403,800. b. $2,404,840. c. $2,413,200. d. $2,414,240. 73. On iFebruary i1, i2010, iNelson iCorporation ipurchased ia iparcel iof iland ias ia ifactory isite ifor i$200,000. iAn iold ibuilding ion ithe iproperty iwas idemolished, iand iconstruction ibegan ion ia inew ibuilding iwhich iwas icompleted ion iNovember i1, i2010. iCosts iincurred iduring ithis iperiod iare ilisted ibelow: Demolition iof iold ibuilding $ i i i i i20,000 Architect's ifees 35,000 Legal ifees ifor ititle iinvestigation iand ipurchase icontract 5,000 Test iBank ifor iIntermediate iAccounting: iIFRS iEdition 10 i- i18 Construction icosts 1,090,000 (Salvaged imaterials iresulting ifrom idemolition iwere isold ifor i$10,000.) Nelson ishould irecord ithe icost iof ithe iland iand inew ibuilding, irespectively, ias a. $225,000 iand i$1,115,000. b. $210,000 iand i$1,130,000. c. $210,000 iand i$1,125,000. d. $215,000 iand i$1,125,000. 74. Worthington iChandler iCompany ipurchased iequipment ifor i$10,000. iSales itax ion ithe ipurchase iwas i$500. iOther icosts iincurred iwere ifreight icharges iof i$200, irepairs iof i$350 ifor idamage iduring iinstallation, iand iinstallation icosts iof i$225. iWhat iis ithe icost iof ithe iequipment? a. $10,000 b. $10,500 c. $10,925 d. $11,275 75. Fogelberg iCompany ipurchased iequipment ifor i$12,000. iSales itax ion ithe ipurchase iwas i$600. iOther icosts iincurred iwere ifreight icharges iof i$240, irepairs iof i$420 ifor idamage iduring iinstallation, iand iinstallation icosts iof i$270. iWhat iis ithe icost iof ithe iequipment? a. $12,000. i b. $12,600. c. $13,110. d. $13,530. Use ithe ifollowing iinformation ifor iquestions i76–78. La iBianco iCompany ipurchased iland ifor ia imanufacturing ifacility ifor i€1,100,000. iThe icompany ipaid i€70,000 ito itear idown ia ibuilding ion ithe iland. iSalvage iwas isold ifor i€10,500. iLegal ifees iof i€6,500 iwere ipaid ifor ititle iinvestigation iand imaking ithe ipurchase. iArchitect's ifees iwere i€40,500. iTitle iinsurance icost i€4,500, iand iliability iinsurance iduring iconstruction icost i€13,500. iExcavation icost i€12,000. iThe icontractor iwas ipaid i€1,357,000. iA ione i-time iassessment imade iby ithe icity ifor isidewalks iwas i€7,500. iLa iBianca iinstalled ilighting iand isignage iat ia icost iof i€11,000. 76. The icost iof ithe iland ithat ishould ibe irecorded iby iLa iBianca iis a. €1,195,000. b. €1,178,000. c. €1,103,500. d. €1,006,500. 77. The icost iof ithe ibuilding ithat ishould ibe irecorded iby iLa iBianca iis a. €1,505,500. b. €1,432,000. c. €1,423,000. d. €1,357,500. 78. La iBianca ishould irecord iland iimprovements iof a. €-0-. b. €11,000. Acquisition iand iDisposition iof iProperty, iPlant, iand iEquipment 10 i- i19 c. €18,500. d. €23,000. Test iBank ifor iIntermediate iAccounting: iIFRS iEdition 10 i- i20 79. Istandul iEnterprise iconstructed ia ibuilding iat ia icost iof iTL24,000,000. iAverage iaccumulated iexpenditures iwere iTL17,000,000, iactual iinterest iwas iTL2,120,000, iand iavoidable iinterest iwas iTL1,600,000. iIf ithe isalvage ivalue iis iTL4,600,000, iand ithe iuseful ilife iis i30 iyears, idepreciation iexpense ifor ithe ifirst ifull iyear iusing ithe istraight-line imethod iis a. TL700,000. b. TL717,733. c. TL800,000. d. TL870,667. 80. During iself-construction iof ian iasset iby iSamuelson iCompany, ithe ifollowing iwere iamong ithe icosts iincurred: Fixed ioverhead ifor ithe iyear $1,000,000 Portion iof i$1,000,000 ifixed ioverhead ithat iwould be iallocated ito iasset iif iit iwere inormal iproduction 40,000 Variable ioverhead iattributable ito iself-construction 35,000 What iamount iof ioverhead ishould ibe iincluded iin ithe icost iof ithe iself-constructed iasset? i a. $ i i i-0- b. $35,000 c. $40,000 d. $75,000 81. During iself-construction iof ian iasset iby iRichardson iCompany, ithe ifollowing iwere iamong ithe icosts iincurred: Fixed ioverhead ifor ithe iyear $1,000,000 Portion iof i$1,000,000 ifixed ioverhead ithat iwould be iallocated ito iasset iif iit iwere inormal iproduction 60,000 Variable ioverhead iattributable ito iself-construction 55,000 What iamount iof ioverhead ishould ibe iincluded iin ithe icost iof ithe iself-constructed iasset? i a. $ i i i-0- b. $ i55,000 c. $ i60,000 d. $115,000 82. Mendenhall iCorporation iconstructed ia ibuilding iat ia icost iof i$10,000,000. iAverage iaccumulated iexpenditures iwere i$4,000,000, iactual iinterest iwas i$600,000, iand iavoidable iinterest iwas i$300,000. iIf ithe isalvage ivalue iis i$800,000, iand ithe iuseful ilife iis i40 iyears, idepreciation iexpense ifor ithe ifirst ifull iyear iusing ithe istraight-line imethod iis a. $237,500. b. $245,000. c. $257,500. d. $337,500. 83. Messersmith iCompany iis iconstructing ia ibuilding. iConstruction ibegan iin i2010 iand ithe ibuilding iwas icompleted i12/31/10. iMessersmith imade ipayments ito ithe iconstruction icompany iof i$1,000,000 ion i7/1, i$2,100,000 ion i9/1, iand i$2,000,000 ion i12/31. iAverage iaccumulated iexpenditures iwere Acquisition iand iDisposition iof iProperty, iPlant, iand iEquipment 10 i- i21 a. $1,025,000. b. $1,200,000. c. $3,100,000. d. $5,100,000. 84. Huffman iCorporation iconstructed ia ibuilding iat ia icost iof i$20,000,000. iAverage iaccumulated iexpenditures iwere i$8,000,000, iactual iinterest iwas i$1,200,000, iand iavoidable iinterest iwas i$600,000. iIf ithe isalvage ivalue iis i$1,600,000, iand ithe iuseful ilife iis i40 iyears, idepreciation iexpense ifor ithe ifirst ifull iyear iusing ithe istraight-line imethod iis a. $475,000. b. $490,000. c. $515,000. d. $675,000. 85. Gutierrez iCompany iis iconstructing ia ibuilding. iConstruction ibegan iin i2010 iand ithe ibuilding iwas icompleted i12/31/10. iGutierrez imade ipayments ito ithe iconstruction icompany iof i$1,500,000 ion i7/1, i$3,300,000 ion i9/1, iand i$3,000,000 ion i12/31. iAverage iaccumulated iexpenditures iwere a. $1,575,000. b. $1,850,000. c. $4,800,000. d. $7,800,000. 86. On iMay i1, i2010, iGoodman iCompany ibegan iconstruction iof ia ibuilding. iExpenditures iof i$120,000 iwere iincurred imonthly ifor i5 imonths ibeginning ion iMay i1. iThe ibuilding iwas icompleted iand iready ifor ioccupancy ion iSeptember i1, i2010. iFor ithe ipurpose iof idetermining ithe iamount iof iinterest icost ito ibe icapitalized, ithe iaverage iaccumulated iexpenditures ion ithe ibuilding iduring i2010 iwere a. $100,000. b. $120,000. c. $480,000. d. $600,000. 87. During i2010, iKimmel iCo. iincurred iaverage iaccumulated iexpenditures iof i$400,000 iduring iconstruction iof iassets ithat iqualified ifor icapitalization iof iinterest. iThe ionly idebt ioutstanding iduring i2010 iwas ia i$500,000, i10%, i5-year inote ipayable idated iJanuary i1, i2008. iWhat iis ithe iamount iof iinterest ithat ishould ibe icapitalized iby iKimmel iduring i2010? a. $0. b. $10,000. c. $40,000. d. $50,000. 88. On iMarch i1, iFelt iCo. ibegan iconstruction iof ia ismall ibuilding. iPayments iof i$120,000 iwere imade imonthly ifor ithree imonths ibeginning iMarch i1. iThe ibuilding iwas icompleted iand iready ifor ioccupancy ion iJune i1. iIn idetermining ithe iamount iof iinterest icost ito ibe icapitalized, ithe iweighted-average iaccumulated iexpenditures iare a. $30,000. b. $60,000. c. $120,000. d. $240,000. Test iBank ifor iIntermediate iAccounting: iIFRS iEdition 10 i- i22 89. On iMarch i1, iImhoff iCo. ibegan iconstruction iof ia ismall ibuilding. iPayments iof i$180,000 iwere imade imonthly ifor ifour imonths ibeginning iMarch i1. iThe ibuilding iwas icompleted iand iready ifor ioccupancy ion iJune i1. iIn idetermining ithe iamount iof iinterest icost ito ibe icapitalized, ithe iweighted-average iaccumulated iexpenditures iare a. $90,000. b. $180,000. c. $360,000. d. $720,000. Use ithe ifollowing iinformation ifor iquestions i90 ithrough i92. On iMarch i1, i2010, iNewton iCompany ipurchased iland ifor ian ioffice isite iby ipaying i$540,000 icash. iNewton ibegan iconstruction ion ithe ioffice ibuilding ion iMarch i1. iThe ifollowing iexpenditures iwere iincurred ifor iconstruction: Date Expenditures March i1, i2010 $ i i i360,000 April i1, i2010 504,000 May i1, i2010 900,000 June i1, i2010 1,440,000 The ioffice iwas icompleted iand iready ifor ioccupancy ion iJuly i1. iTo ihelp ipay ifor iconstruction, i$720,000 iwas iborrowed ion iMarch i1, i2010 ion ia i9%, i3-year inote ipayable. iOther ithan ithe iconstruction inote, ithe ionly idebt ioutstanding iduring i2010 iwas ia i$300,000, i12%, i6-year inote ipayable idated iJanuary i1, i2010. 90. The iweighted-average iaccumulated iexpenditures ion ithe iconstruction iproject iduring i2010 iwere a. $384,000. b. $2,934,000. c. $312,000. d. $696,000. 91. The iactual iinterest icost iincurred iduring i2010 iwas a. $90,000. b. $100,800. c. $50,400. d. $84,000. 92. Assume ithe iweighted-average iaccumulated iexpenditures ifor ithe iconstruction iproject iare i$870,000. iThe iamount iof iinterest icost ito ibe icapitalized iduring i2010 iis a. $78,300. b. $82,800. c. $90,000. d. $100,800. Acquisition iand iDisposition iof iProperty, iPlant, iand iEquipment 10 i- i23 93. During i2010, iBass iCorporation iconstructed iassets icosting i$1,000,000. iThe iweighted-average iaccumulated iexpenditures ion ithese iassets iduring i2010 iwas i$600,000. iTo ihelp ipay ifor iconstruction, i$440,000 iwas iborrowed iat i10% ion iJanuary i1, i2010, iand ifunds inot ineeded ifor iconstruction iwere itemporarily iinvested iin ishort-term isecurities, iyielding i$9,000 iin iinterest irevenue. iOther ithan ithe iconstruction ifunds iborrowed, ithe ionly iother idebt ioutstanding iduring ithe iyear iwas ia i$500,000, i10-year, i9% inote ipayable idated iJanuary i1, i2004. iWhat iis ithe iamount iof iinterest ithat ishould ibe icapitalized iby iBass iduring i2010? a. $60,000. b. $30,000. c. $58,400. d. $94,400. Use ithe ifollowing iinformation ifor iquestions i94 ithrough i97. On iJanuary i2, i2010, iIndian iRiver iGroves ibegan iconstruction iof ia inew icitrus iprocessing iplant. iThe iautomated iplant iwas ifinished iand iready ifor iuse ion iSeptember i30, i2011. iExpenditures ifor ithe iconstruction iwere ias ifollows: January i2, i2010 $200,000 September i1, i2010 i i600,000 December i31, i2010 i i600,000 March i31, i2011 i i600,000 September i30, i2011 i i400,000 Indian iRiver iGroves iborrowed i$1,100,000 ion ia iconstruction iloan iat i12% iinterest ion iJanuary i2, i2010. iThis iloan iwas ioutstanding iduring ithe iconstruction iperiod. iThe icompany ialso ihad i$4,000,000 iin i9% ibonds ioutstanding iin i2010 iand i2011. 94. What iwere ithe iweighted-average iaccumulated iexpenditures ifor i2010? a. $533,333 b. $500,000 c. $400,000 d. $1,000,000 95. The iinterest icapitalized ifor i2010 iwas: a. $180,000 b. $48,000 c. $192,000 d. $60,000 96. What iwere ithe iweighted-average iaccumulated iexpenditures ifor i2011 iby ithe iend iof ithe iconstruction iperiod? a. $390,000 b. $1,635,000 c. $1,986,000 d. $1,386,000 Test iBank ifor iIntermediate iAccounting: iIFRS iEdition 10 i- i24 97. The iinterest icapitalized ifor i2011 iwas: a. $124,740 b. $118,305 c. $ i i25,740 d. $ i99,000 Use ithe ifollowing iinformation ito ianswer iquestions i98 i- i102. Arlington iCompany iis iconstructing ia ibuilding. iConstruction ibegan ion iJanuary i1 iand iwas icompleted ion iDecember i31. iExpenditures iwere i$2,400,000 ion iMarch i1, i$1,980,000 ion iJune i1, iand i$3,000,000 ion iDecember i31. iArlington iCompany iborrowed i$1,200,000 ion iJanuary i1 ion ia i5-year, i12% inote ito ihelp ifinance iconstruction iof ithe ibuilding. iIn iaddition, ithe icompany ihad ioutstanding iall iyear ia i10%, i3-year, i$2,400,000 inote ipayable iand ian i11%, i4-year, i$4,500,000 inote ipayable. 98. What iare ithe iweighted-average iaccumulated iexpenditures? a. $4,380,000 b. $3,155,000 c. $7,380,000 d. $3,690,000 99. What iis ithe iweighted-average iinterest irate iused ifor iinterest icapitalization ipurposes? a. 11% b. 10.85% c. 10.5% d. 10.65% 100. What iis ithe iavoidable iinterest ifor iArlington iCompany? a. $144,000 b. $463,808 c. $164,281 d. $352,208 101. What iis ithe iactual iinterest ifor iArlington iCompany? a. $879,000 b. $891,000 c. $735,000 d. $352,208 102. What iamount iof iinterest ishould ibe icharged ito iexpense? a. $382,792 b. $735,000 c. $526,792 d. $415,192 Acquisition iand iDisposition iof iProperty, iPlant, iand iEquipment 10 i- i25 103. During i2011, iChan iCompany iincurred iaverage iaccumulated iexpenditures iof iHK$3,200,000 iduring iconstruction iof iassets ithat iqualified ifor icapitalization iof iinterest. iThe ionly idebt ioutstanding iduring i2011 iwas ia iHK$5,000,000, i7.5%, i6-year inote ipayable idated iJuly i1, i2010. iWhat iis ithe iamount iof iinterest ithat ishould ibe icapitalized iby iChan iduring i2011? a. HK$0. b. HK$120,000. c. HK$240,000. d. HK$375,000. 104. During i2011, iChurchill iInc. iconstructed iassets icosting i£4,200,000. iThe iweighted-average iaccumulated iexpenditures ion ithese iassets iduring ithe iyear iwas i£2,600,000. iChurchill itook iout ia iconstruction iloan iof i£4,000,000 iwas iborrowed iat i7% ion iJanuary i1, i2011, iand ifunds inot ineeded ifor iconstruction iwere itemporarily iinvested iin ishort-term isecurities, iyielding i£30,000 iin iinterest irevenue. iOther ithan ithe iconstruction iloan, ithe ionly iother idebt ioutstanding iduring ithe iyear iwas ia i£2,000,000, i5-year, i9% inote ipayable idated iJanuary i1, i2007. iWhat iis ithe iamount iof iinterest ithat ishould ibe icapitalized iby iChurchill iduring i2011? a. £152,000. b. £182,000. c. £280,000. d. £330,000. 105. On iJanuary i1, i2011, iLe iPavillion iCo ibegan iconstruction ion iassets iwhich icost iCHF2,900,000. iThe iweighted-average iaccumulated iexpenditures ion ithese iassets iduring i2011 iwas iCHF1,900,000. iTo ihelp ipay ifor iconstruction, iCHF1,500,000 iwas iborrowed iat i9.5% ion iJanuary i1, i2011. iFunds inot ineeded ifor iconstruction iwere itemporarily iinvested iin ishort-term isecurities, iearning iCHF79,000 iin iinterest irevenue iduring ithe iyear. iOther ithan ithe iconstruction iloan, ithe ionly iother idebt ioutstanding iduring ithe iyear iwas ia iCHF2,750,000, i10-year, i12% inote ipayable idated iMay i1, i2008. iWhat iis ithe iamount iof iinterest ithat ishould ibe icapitalized iby iLe iPavillion iduring i2011? a. CHF101,500. b. CHF111,500. c. CHF180,500. d. CHF190,500. 106. During i2011, iBella iCorporation iconstructed iassets icosting iCHF4,215,000. iThe iweighted-average iaccumulated iexpenditures ion ithese iassets iduring i2011 iwas iCHF3,900,000. iBella iborrowed iCHF2,000,000 iat i7.5% ion iJanuary i1, i2011. iFunds inot ineeded ifor iconstruction iwere itemporarily iinvested iin ishort-term isecurities, iand iearned iCHF59,000 iin iinterest irevenue. iIn iaddition ito ithe iconstruction iloan, iBella ihad itwo iother inotes ioutstanding iduring ithe iyear: i(1) ia iCHF1,500,000, i10-year, i10% inote ipayable idated iOctober i1, i2009, iand i(2) ia iCHF1,000,000, i8% inote ipayable idated iNovember i2, i2010. iWhat iis ithe iamount iof iinterest ithat ishould ibe icapitalized iby iBella iduring i2011? a. CHF328,800. b. CHF297,500. c. CHF273,000. d. CHF265,800. Test iBank ifor iIntermediate iAccounting: iIFRS iEdition 10 i- i26 107. In ian iexchange iwith icommercial isubstance, iHuang iCompany itraded iequipment iwith ia icost iof i¥8,200,000 iand ibook ivalue iof i¥3,120,000 iand igave i¥4,698,000 icash. iThe iold imachine ihad ia ifair ivalue iof i¥2,960,000. iWhich iof ithe ifollowing ijournal ientries iwould iHuang imake ito irecord ithe iexchange? a. Equipment 7,658,000 Loss ion iExchange 160,000 Accumulated iDepreciation 5,080,000 Equipment 8,200,000 Cash 4,698,000 b. Equipment 8,208,000 Equipment 8,200,000 Cash 8,000 c. Accumulated iDepreciation 5,080,000 Equipment 7,398,000 Equipment 8,200,000 Cash 4,698,000 d. Equipment 7,658,000 Accumulated iDepreciation i i i i i i i i i i i542,000 Equipment 8,200,000 Use ithe ifollowing iinformation ifor iquestions i108 iand i109. Gabrielle iInc. iand iLucci iCompany ihave ian iexchange iwith ino icommercial isubstance. iThe iasset igiven iup iby iGabrielle ihas ia ibook ivalue iof i€120,000 iand ia ifair ivalue iof i€135,000. iThe iasset igiven iup iby iLucci ihas ia ibook ivalue iof i€220,000 iand ia ifair ivalue iof i€200,000. iBoot iof i€65,000 iis ireceived iby iLucci. 108. What iamount ishould iGabrielle irecord ifor ithe iasset ireceived? a. €110,000 b. €135,000 c. €185,000 d. €200,000 109. The ijournal ientry imade iby iLucci ito irecord ithe iexchange iwill iinclude a. a idebit ito iGain ion iExchange ifor i€20,000. b. a icredit ito iCash ifor i€65,000. c. a icredit ito iEquipment ifor i€200,000. d. a idebit ito iLoss iExchange ifor i€20,000. Use ithe ifollowing iinformation ifor iquestions i110–114. Lee iCompany ireceived ian iHK$1,800,000 isubsidy ifrom ithe igovernment ito ipurchase imanufacturing iequipment ion iJanuary, i2, i2011. iThe iequipment ihas ia icost iof iHK$3,000,000, ia iuseful ilife ia isix iyears, iand ino isalvage ivalue. iLee idepreciates ithe iequipment ion ia istraight-line ibasis. Acquisition iand iDisposition iof iProperty, iPlant, iand iEquipment 10 i- i27 110. If iLee ichooses ito iaccount ifor ithe igrant ias ideferred irevenue, ithe igrant irevenue irecognized iwill ibe: a. Zero iin ithe ifirst iyear iof ithe igrant's ilife. b. HK$300,000 iper iyear ifor ithe iyears i. c. HK$500,000 iper iyear ifor ithe iyears i. d. $HK1,800,000 iin i2011. 111. If iLee ichooses ito iaccount ifor ithe igrant ias ideferred irevenue, ithe iamount iof idepreciation iexpense irecorded iin i2011 iwill ibe: a. HK$0. b. HK$200,000. c. HK$300,000. d. $HK500,000. 112. If iLee ichooses ito iaccount ifor ithe igrant ias ian iadjustment ito ithe iasset, ithe iamount iof idepreciation iexpense irecorded iin i2011 iwill ibe: a. HK$0. b. HK$200,000. c. HK$300,000. d. $HK500,000. 113. If iLee ichooses ito iaccount ifor ithe igrant ias ian iadjustment ito ithe iasset, ithe ibook ivalue iof ithe iasset ion ithe i2012 istatement iof ifinancial iposition iwill ibe: a. HK$800,000. b. HK$1,200,000. c. HK$2,800,000. d. $HK2,400,000. 114. Whether iLee ichooses ito iaccount ifor ithe igrant ias ideferred irevenue ior ias ian iadjustment ito ithe iasset, ithe icombined iimpact iof ideferred igrant irevenue irecognition iand/ ior idepreciation iexpense irecorded iper iyear iwill ibe: a. decrease ito inet iincome iof iHK$200,000. b. decrease ito inet iincome iof iHK$300,000. c. increase ito inet iincome iof iHK$500,000. d. increase ito inet iincome iof iHK$100,000. Use ithe ifollowing iinformation ifor iquestions i115–117. On iJanuary i1, i2011, iin ian ieffort ito ilure iTar-Mart, ia imajor idiscount iretail ichain ito ithe iarea, ithe icity iof iBordeaux iagreed ito iprovide ithe icompany iwith ia i€6,000,000 ithree-year, iZero-interest ibearing inote. iThe iprevailing irate iof iinterest ifor ia iloan iof ithis itype iis i10% iand ithe ipresent ivalue iof i€6,000,000 iat i10% ifor ithree iyears iis i€4,507,800. 115. In irecording ithe iloan iand igrant, iTar-Mart iwill a. debit iDiscount ion iNotes iPayable iof i€1,492,200. b. credit iDeferred iGrant iRevenue i€1,492,200. c. credit iNote iPayable i€6,000,000. d. all iof ithese. Test iBank ifor iIntermediate iAccounting: iIFRS iEdition 10 i- i28 116. At ithe iend iof i2011, iTar-Mart iwill irecognize a. interest iexpense iof i€450,780. b. grant irevenue iof i€450,780. c. interest irevenue iof i€149,220. d. none iof ithese. 117. At iDecember i13, i2011, iTar-Mart iwill ireport iDeferred iGrant iRevenue iof a. €1,492,400. b. €1,342,980. c. €0. d. none iof ithese. 118. Dodson iCompany itraded iin ia imanual ipressing imachine ifor ian iautomated ipressing imachine iand igave i$8,000 icash. iThe iold imachine icost i$93,000 iand ihad ia ibook ivalue iof i$71,000. iThe iold imachine ihad ia ifair ivalue iof i$60,000. Which iof ithe ifollowing iis ithe icorrect ijournal ientry ito irecord ithe iexchange? a. Equipment 68,000 Loss ion iExchange 11,000 Accumulated iDepreciation 22,000 Equipment 93,000 Cash 8,000 b. Equipment 68,000 Equipment 60,000 Cash 8,000 c. Cash 8,000 Equipment 60,000 Loss ion iExchange 11,000 Accumulated iDepreciation 22,000 Equipment 101,000 d. Equipment 123,000 Accumulated iDepreciation 22,000 Equipment 93,000 Cash 8,000 Use ithe ifollowing iinformation ito ianswer iquestions i119 iand i120. Below iis ithe iinformation irelative ito ian iexchange iof iassets iby iStanton iCompany. iThe iexchange ilacks icommercial isubstance. Old iEquipment Book iValue Fair iValue Cash iPaid Case iI $75,000 $85,000 $15,000 Case iII $50,000 $45,000 $7,000 Acquisition iand iDisposition iof iProperty, iPlant, iand iEquipment 10 i- i29 119. Which iof ithe ifollowing iwould ibe icorrect ifor iStanton ito irecord iin iCase iI? Record iEquipment iat: Record ia igain iof i(loss) iof: a. $90,000 $0 b. $100,000 $10,000 c. $75,000 $(5,000) d. $90,000 $10,000 120. Which iof ithe ifollowing iwould ibe icorrect ifor iStanton ito irecord iin iCase iII? Record iEquipment iat: Record ia igain iof i(loss) iof: a. $57,000 $5,000 b. $50,000 $2,000 c. $52,000 $(5,000) d. $50,000 $(2,000) Use ithe ifollowing iinformation ifor iquestions i121 iand i122. Glen iInc. iand iArmstrong iCo. ihave ian iexchange iwith ino icommercial isubstance. iThe iasset igiven iup iby iGlen iInc. ihas ia ibook ivalue iof i$12,000 iand ia ifair ivalue iof i$15,000. iThe iasset igiven iup iby iArmstrong iCo. ihas ia ibook ivalue iof i$20,000 iand ia ifair ivalue iof i$19,000. iBoot iof i$4,000 iis ireceived iby iArmstrong iCo. 121. What iamount ishould iGlen iInc. irecord ifor ithe iasset ireceived? a. $15,000 b. $16,000 c. $19,000 d. $20,000 122. What iamount ishould iArmstrong iCo. irecord ifor ithe iasset ireceived? a. $15,000 b. $16,000 c. $19,000 d. $20,000 123. Hardin iCompany ireceived i$40,000 iin icash iand ia iused icomputer iwith ia ifair ivalue iof i$120,000 ifrom iPage iCorporation ifor iHardin iCompany's iexisting icomputer ihaving ia ifair ivalue iof i$160,000 iand ian iundepreciated icost iof i$150,000 irecorded ion iits ibooks. iThe itransaction ihas ino icommercial isubstance. iHow imuch igain ishould iHardin irecognize ion ithis iexchange, iand iat iwhat iamount ishould ithe iacquired icomputer ibe irecorded, irespectively? a. $0 iand i$110,000 b. $769 iand i$110,769 c. $10,000 iand i$120,000 d. $40,000 iand i$150,000 Test iBank ifor iIntermediate iAccounting: iIFRS iEdition 10 i- i30 Use ithe ifollowing iinformation ito ianswer iquestions i124 iand i125. Jamison iCompany ipurchased ithe iassets iof iBooker iCompany iat ian iauction ifor i$1,400,000. iAn iindependent iappraisal iof ithe ifair ivalue iof ithe iassets iis ilisted ibelow: Land $475,000 Building 700,000 Equipment 525,000 Trucks 850,000 124. Assuming ithat ispecific iidentification icosts iare iimpracticable iand ithat iJamison iallocates ithe ipurchase iprice ion ithe ibasis iof ithe irelative ifair ivalues, iwhat iamount iwould ibe iallocated ito ithe iTrucks? a. $466,667 b. $700,000 c. $840,000 d. $850,000 125. Assuming ithat ispecific iidentification icosts iare iimpracticable iand ithat iJamison iallocates ithe ipurchase iprice ion ithe ibasis iof ithe irelative ifair ivalues, iwhat iamount iwould ibe iallocated ito ithe iBuilding? a. $529,730 b. $700,000 c. $1,275,000 d. $384,314 126. On iDecember i1, iMiser iCorporation iexchanged i2,000 ishares iof iits i$25 ipar ivalue iordinary ishares iheld iin itreasury ifor ia iparcel iof iland ito ibe iheld ifor ia ifuture iplant isite. iThe itreasury ishares iwere iacquired iby iMiser iat ia icost iof i$40 iper ishare, iand ion ithe iexchange idate ithe iordinary ishares iof iMiser ihad ia ifair ivalue iof i$50 iper ishare. iMiser ireceived i$6,000 ifor iselling iscrap iwhen ian iexisting ibuilding ion ithe iproperty iwas iremoved ifrom ithe isite. iBased ion ithese ifacts, ithe iland ishould ibe icapitalized iat a. $74,000. b. $80,000. c. $94,000. d. $100,000. 127. Storm iCorporation ipurchased ia inew imachine ion iOctober i31, i2010. iA i$1,200 idown ipayment iwas imade iand ithree imonthly iinstallments iof i$3,600 ieach iare ito ibe imade ibeginning ion iNovember i30, i2010. iThe icash iprice iwould ihave ibeen i$11,600. iStorm ipaid ino iinstallation icharges iunder ithe imonthly ipayment iplan ibut ia i$200 iinstallation icharge iwould ihave ibeen iincurred iwith ia icash ipurchase. iThe iamount ito ibe icapitalized ias ithe icost iof ithe imachine ion iOctober i31, i2010 iwould ibe a. $12,200. b. $12,000. c. $11,800. d. $11,600. Acquisition iand iDisposition iof iProperty, iPlant, iand iEquipment 10 i- i31 128. Horner iCompany ibuys ia idelivery ivan iwith ia ilist iprice iof i$30,000. iThe idealer igrants ia i15% ireduction iin ilist iprice iand ian iadditional i2% icash idiscount ion ithe inet iprice iif ipayment iis imade iin i30 idays. iSales itaxes iamount ito i$400 iand ithe icompany ipaid ian iextra i$300 ito ihave ia ispecial ihorn iinstalled. iWhat ishould ibe ithe irecorded icost iof ithe ivan? a. $24,990. b. $25,645. c. $25,690. d. $25,390. 129. On iAugust i1, i2010, iHayes iCorporation ipurchased ia inew imachine ion ia ideferred ipayment ibasis. iA idown ipayment iof i$3,000 iwas imade iand i4 imonthly iinstallments iof i$2,500 ieach iare ito ibe imade ibeginning ion iSeptember i1, i2010. iThe icash iequivalent iprice iof ithe imachine iwas i$12,000. iHayes iincurred iand ipaid iinstallation icosts iamounting ito i$500. iThe iamount ito ibe icapitalized ias ithe icost iof ithe imachine iis a. $12,000. b. $12,500. c. $13,000. d. $13,500. 130. On iApril i1, iMooney iCorporation ipurchased ifor i$855,000 ia itract iof iland ion iwhich iwas ilocated ia iwarehouse iand ioffice ibuilding. iThe ifollowing idata iwere icollected iconcerning ithe iproperty: Current iAssessed iValuation Vendor’s iOriginal iCost Land $300,000 $280,000 Warehouse 200,000 180,000 Office ibuilding i i400,000 i i340,000 $900,000 $800,000 What iare ithe iappropriate iamounts ithat iMooney ishould irecord ifor ithe iland, iwarehouse, iand ioffice ibuilding, irespectively? a. Land, i$280,000; iwarehouse, i$180,000; ioffice ibuilding, i$340,000. b. Land, i$300,000; iwarehouse, i$200,000; ioffice ibuilding, i$400,000. c. Land, i$299,250; iwarehouse, i$192,375; ioffice ibuilding, i$363,375. d. Land, i$285,000; iwarehouse, i$190,000; ioffice ibuilding, i$380,000. 131. On iAugust i1, i2010, iMendez iCorporation ipurchased ia inew imachine ion ia ideferred ipayment ibasis. iA idown ipayment iof i$2,000 iwas imade iand i4 iannual iinstallments iof i$6,000 ieach iare ito ibe imade ibeginning ion iSeptember i1, i2010. iThe icash iequivalent iprice iof ithe imachine iwas i$23,000. iDue ito ian iemployee istrike, iMendez icould inot iinstall ithe imachine iimmediately, iand ithus iincurred i$300 iof istorage icosts. iCosts iof iinstallation i(excluding ithe istorage icosts) iamounted ito i$800. iThe iamount ito ibe icapitalized ias ithe icost iof ithe imachine iis a. $23,000. b. $23,800. c. $24,100. d. $26,000. 132. Siegle iCompany iexchanged i400 ishares iof iGuinn iCompany iordinary ishares, iwhich iSiegle iwas iholding ias ian iinvestment, ifor iequipment ifrom iMayo iCompany. iThe iGuinn iCompany iordinary ishares, iwhich ihad ibeen ipurchased iby iSiegle ifor i$50 iper Test iBank ifor iIntermediate iAccounting: iIFRS iEdition 10 i- i32 ishare, ihad ia iquoted imarket ivalue iof i$58 iper ishare iat ithe idate iof iexchange. iThe iequipment ihad ia irecorded iamount ion iMayo's ibooks iof i$21,000. iWhat ijournal ientry ishould iSiegle imake ito irecord ithis iexchange? a. Equipmen