Question 36

ABC Company issues $10,000,000, 8%, 10-year bonds at 96.5 on July 1, 2019. Interest is paid on July 1 and January 1. The journal entry to record the issuance will include

1. a debit to cash for $10,000,000

2. a credit to cash for $9,650,000

3. a credit to bonds payable for $9,650,000

4. a debit to discount on bonds payable for $350,000

Question 37

DEF Corporation retires its $100,000 face value bonds at 105 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is $103,745. The entry to record the redemption will include a

1. credit of $3,745 to Loss on Extinguishment of Debt.

2. credit of $1,255 to Gain on Extinguishment of Debt.

3. debit of $3,745 to Bonds Payable.

4. debit of $103,745 to Bonds Payable.

Question 38

The adjusted trial balance for RST Ltd at the end of the current year, 2019, contained the following accounts.

5-year Bonds Payable 8% Bond Interest Payable Notes Payable (3 mo.) Notes Payable (5 yr.) Mortgage Payable ($15,000 due currently) Salaries and Wages Payable

Taxes Payable (due 3/15 of 2020)

$1,600,000 50,000 40,000 165,000 200,000 18,000 25,000

The total non-current liabilities reported on the statement of financial position are a. $1,865,000. b. $1,850,000.

c. $1,950,000. d. $1,965,000.

13

Question 39

When a note payable is issued for property, goods, or services, the present value of the note may be measured by

a. the fair value of the property, goods, or services. b. the fair value of the note. c. using an imputed interest rate to discount all future payments on the note. d. All of these answer choices are correct.

Question 26

Which of the following costs of goodwill should be amortized over their estimated useful lives?

Costs of goodwill from a business combination Costs of developing

accounted for as a purchase goodwill internally a. No No b. No Yes c. Yes Yes d. Yes No

Question 27

Maximum Corporation incurred $420,000 of research and development costs to develop a product for which a patent was granted on January 2, 2014. Legal fees and other costs associated with registration of the patent totaled $80,000. On March 31, 2019, Maximum paid $150,000 for legal fees in a successful defense of the patent. The total amount capitalized for the patent through March 31, 2019 should be

a. $200,000. b. $230,000. c. $470,000. d. $650,000.

Question 16

Simone Ltd purchased equipment in 2018 at a cost of $900,000. Two years later it appeared to Simone Ltd that this equipment had suffered an impairment of value. In early 2020, the carrying amount of the equipment is $540,000 and it is estimated that the fair value is now only $360,000. The entry to record the impairment is

a. b.

c. d.

Retained Earnings ................................................ Accumulated DepreciationEquipment... Retained Earnings ................................................

180,000 180,000

180,000 Reserve for Loss on Impairment of Equipment 180,000

No entry is necessary as a write-off violates the historical cost principle. Loss on Impairment of Equipment ...................... 180,000

Accumulated Depreciation and impairment-Equipment 180,000

The period of time during which interest must be capitalized stops when

1. no further interest cost is being incurred.

2. the asset is abandoned, sold, or fully depreciated.

3. the asset is substantially complete and ready for its intended use.

4. the activities that are necessary to get the asset ready for its intended use

   have begun.

   Question 8

   $84,000 36,000 12,000 19,200

   9,600

   Honey Charity possessed an idle real estate consisting of land and a factory building. Honey Charity transferred the legal title to Lawson Co. as an incentive for Lawson to establish manufacturing operations in the Country. Lawson paid nothing for this property, which had a fair market value of $3,750,000 at the date of the grant. Lawson should record this non-monetary transaction as a

5. credit to other comprehensive income for $3,750,000

6. Memo entry only.

7. credit to Contribution Revenue for $3,750,000.

8. credit to Donated Capital for $3,750,000.

   Question 9

   During 2019, Benson Corporation constructed assets costing $2,000,000. The weighted-average accumulated expenditures on these assets during 2019 were $1,200,000. To help pay for construction, $880,000 was borrowed at 15% on January 1, 2019. Other than the construction funds borrowed, the only other debt outstanding during the year was a $1,000,000, 10-year, 7% note payable dated January 1, 2013. What is the amount of interest that should be capitalized by Benson during 2019?

   a. $180,000. b. $70,000. c. $202,000. d. $154,400.

   Question 10

   A machine cost $120,000, has annual depreciation of $30,000, and has accumulated depreciation of $90,000 on December 31, 2018. On April 1, 2019, when the machine has a market value of $29,000, it is exchanged for a machine with a fair value of $135,000 and the proper amount of cash is paid. The exchange lacked commercial substance.

   The new machine should be recorded at a. $106,000.

   b. $126,500. c. $135,000. d. $128,500