1. Tau Inc. decide to construct a new manufacturing facility for its own use. Construction on the manufacturing facility began on January 1, 2018 and was completed December 31, 2018. Tau inc borrowed $1 million at 5% on January 1, 2018 to help finance the construction. The company also had a 6 million bond and a 2 million long-term note payable with interest rates of 8% and 5% respectively. All of Taus debt was outstanding for all outstanding for all of 2018.

Based on the expenditure incurred in the construction project, Tau calculated its average accumulated expenditures to be $1,900,000.

What amount of interest rated of the other debt (i.e. the bond and note payable) can Tau capitalize in 2018?

A. $45,000

B. $ 65, 250

C. $ 580,000

D. $137,750

E. $95,000

2. During 2018, Donovan. determined that it could capitalize $300,000 of interest related to the construction of its new office building. What amount of interest expense should Donovan report on its 2018 income statement, assuming the company incurred interest during 2018 on the following pieces of debt: a $5 million long-term note payable with an 8% interest rate and a $7 million bond with a 6% interest rate?

a. $1,120,000

b. $820,000

c. $20,490

d. $300,000

e. $520,000

3. Smith corp. acquired all of the common stocks of Penn inc. for $124 million. On the date of purchase, Penns identifiable tangible and intangible assets had a fair value of $205 million and a book value of $180 million. Both the fair value and book value of Penns liabilities on the date of purchase were $95 million. What amount of goodwill would smith record as a result of its acquisition of Penn?

A. $70 million

B. $99 million

C. $39 million

D. $14 million

E. $ 25 million

4. On May 1,2018, Wilson inc. purchased equipment for $65 million that will be depreciated on a straight-line basis using a useful life of 10 years and a salvage value of $5 million. On December 31,2018, Wilson management determined that the equipment should be evaluated for impairment. The undiscounted future cash flows to be provided by the equipment was estimated to be $62 million and the fair value of the equipment was $58 million as of December 31,2018. As a result of its impairment test, Wilson would record:

a. An impairment loss of $3 million

b. An impairment loss of $4 million

c. An impairment loss of $7 million

d. No impairment loss

e. An impairment loss of $1 million