1. On October 1, 20X1, a company purchased a piece of land by agreeing to pay the seller $450,000 in two years. If the company had borrowed the money from a bank to pay the seller immediately, management estimates the bank would have required interest of 9%. For what amount should the company record the land on the date of purchase (rounded to the nearest dollar)?

Multiple Choice

• $450,000.

• $412,844.

• $378,756.

• $369,000.

2. Wolf Computer exchanged a machine with a book value of $40,000 and a fair value of $45,000 for a patent. In addition, Wolf paid $6,000 as part of the exchange. Wolf should recognize:

Multiple Choice

• A gain of $11,000.

• A loss of $1,000.

• A gain of $5,000.

• No gain or loss.

3. Which of the following situations would disqualify interest from being capitalized as part of an asset's cost?

Multiple Choice

• The asset is being constructed for the companys own use.

• The asset is being constructed as a discrete project with the intent to be sold.

• The asset includes inventory that is routinely manufactured by the company.

• The interest is incurred during the construction period of the asset.

4. Wolf Computer exchanged a machine with a book value of $40,000 and a fair value of $45,000 for a very similar machine. In addition, Wolf paid $6,000 as part of the exchange. Wolf should recognize:

Multiple Choice

• A gain of $11,000.

• A loss of $1,000.

• A gain of $5,000.

• No gain or loss.