questions and answers are attached, please show me detail solution of each question.

ANSWERS ARE AT THE END OF THIS DOCUMENT 1) On December 1, 2011, East Co. purchased a tract of land as a factory site for $300,000. The old building on the property was razed, and salvaged materials resulting from demolition were sold. Additional costs incurred and salvage proceeds realized during December 2011 were as follows: Cost to raze old building Legal fees for purchase contract and to record ownership Title guarantee insurance Proceeds from sale of salvaged materials $25,000 5,000 6,000 4,000 In East's December 31, 2011 balance sheet, what amount should be reported as land? 2) South Co. purchased a machine that was installed and placed in service on January 1, 2010 at a cost of $240,000. Salvage value was estimated at $40,000. The machine is being depreciated over 10 years by the double declining balance method. For the year ended December 31, 2011, what amount should South report as depreciation expense? 3) On January 1, 2010, Bart Company purchased equipment at a cost of $105,000. The equipment was estimated to have a useful life of 5 years and a salvage value of $15,000. Bart uses sum-ofthe-years'-digits method of depreciation. What should the accumulated depreciation balance be on December 31, 2013? 4) Amble Inc. exchanged a truck with a carrying value of $12,000 and a fair value of $20,000 for a truck and $5,000 cash. The transaction lacks commercial substance. At what amount should Amble record the truck received in the exchange? 5) A company acquired three machines for $100,000 in a package deal. The three assets had a book value of $80,000 on the seller's books. An appraisal costing the purchaser $1,000 indicated that the three machines had the following market values (book values are given in parentheses): Machine 1: $30,000 ($20,000) Machine 2: $40,000 ($25,000) Machine 3: $50,000 ($35,000) At what amount should the three assets be individually recorded in the buyer's books? 6) In an exchange, the Stars traded a whirlpool to the Rangers for a smaller whirlpool on January 2, 2002. The following information is provided to you: Stars Cost of whirlpool and related accumulated depreciation (A/D) (A/D) Cash received from the Rangers Fair value of Star's whirlpool Rangers Cost of whirlpool and related accumulated depreciation (A/D) (A/D) Cash paid to the Stars Fair value of Ranger's whirlpool $850,000 (cost) and 640,000 $ 37,000 $270,000 $930,000 (cost) and 630,000 $ 37,000 $ -?- Assume a fair exchange (both parties agreed as to the fair values). i. What was the fair value of the Rangers's whirlpool at the time of the exchange? ii. What is the amount of the gain (loss) on exchange recognized by the Rangers? (identify whether this is a gain or a loss). iii. How much Boot did the Rangers receive in this exchange? iv. How much is the total (implied) gain on the exchange for the Stars? v. What percentage of this total implied Gain (in iv above) will the Stars recognize? 7) During 2002, Sloan, Inc. began a project to construct a new corporate headquarters. The following are costs incurred by Sloan for this project: $1,000 government fine during construction, due to construction safety violations. Interest of $186,000 on construction financing incurred during completion of construction. Interest of $147,000 on construction financing paid after construction. $12,000 architecture fees. $65,000 cost of razing existing building on land. What amount of the above costs should be capitalized to the cost of the building? 8) Del Piero Company exchanges its delivery trucks and $100,000 for similar type delivery trucks from Gerrard Company. For both companies, the future cash flows are not expected to change as a result of this exchange. Relevant information on the date of exchange is as follows: Del Piero Company: Trucks (at cost):$400,000 Accumulated depreciation: 100,000 Fair market value: $400,000 Gerrard Company: Trucks (at cost): $600,000 Accumulated depreciation: 200,000 Fair market value: $500,000 i) ii) How does Del Piero record the exchange? How does Gerrard record the exchange? 9) Builder, Inc. exchanges a work-truck and $5,000 cash for a power screed. Builder's truck has an original cost of 25,000 and accumulated depreciation of $15,000 at the time of the exchange. The truck has a fair value of $12,000. Assuming that the exchange is expected to change future cash flows, how should Builder record the exchange? 10) Builder, Inc. exchanges a work-truck and $5,000 cash for a power screed. Builder's truck has an original cost of 25,000 and accumulated depreciation of $15,000 at the time of the exchange. The truck has a fair value of $7,000. Assuming that the exchange is expected to change future cash flows, how should Builder record the exchange? 11) RealEstate, Inc. exchanges vacant land with another real estate investor for another piece of vacant land. RealEstate Inc.'s land is worth $1,000,000 and its carrying value is $1,250,000. How should RealEstate record the exchange? 12) Martin Buber Co. purchased land as a factory site for $400,000. The process of tearing down two old buildings on the site and constructing the factory required 6 months. The company paid $42,000 to raze the old buildings and sold salvaged lumber and brick for $6,300. Legal fees of $1,850 were paid for title investigation and drawing the purchase contract. Payment to an engineering firm was made for a land survey, $2,200, and for drawing the factory plans, $68,000. The land survey had to be made before definitive plans could be drawn. Title insurance on the property cost $1,500, and a liability insurance premium paid during construction was $900. The contractor's charge for construction was $2,740,000. The company paid the contractor in two installments: $1,200,000 at the end of 3 months and $1,540,000 upon completion. Interest costs of $170,000 were incurred to finance the construction. Determine the cost of the land and building. ANSWERS: 1) 332,000 2) 38,400 3) 84,000 4) 15,000 5) $25,250; $33,667; $42,083 6) i. $ 233,000 / ii. $ (67,000) (Loss) / iii. Zero / iv. $ 60,000 / v. 13.70% 7) 198,000 8) Del Piero Company Entry to Record Exchange: Trucks (New)........................... 400,000 Accumulated depreciation............. 100,000 Trucks (Old).............................. 400,000 Cash..................................... 100,000 Gerrard Company Entry to Record Exchange: Cash.........................................................100,000 Trucks (New)............................................... 320,000 Accumulated depreciation.................................200,000 Trucks (Old)............................................ 600,000 Gain on Sale of Trucks................................. 20,000 9) Equipment(new)..................$17,000 Accumulated depreciation .......$15,000 Truck (old) ................$25,000 Cash .........................$5,000 Gain on exchange .........$2,000 10) Equipment (new)....................... $12,000 Accumulated depreciation .............$15,000 Loss on exchange ........................$3,000 Truck (old)............................... $25,000 Cash.........................................$5,000 11) Land (new )...............$1,000,000 Loss on disposal............$250,000 Land (old).....................$1,250,000 12) Land: $439,050 / Building $2,981,000 Land Land $ 400,000 Razing 42,000 Salvage (6,300) Legal Fees 1,850 Title Ins. 1,500 Total: $ 439,050 Building Survey $2,200 Plans 68,000 Liability Ins. 900 Construction 2,740,000 Interest 170,000 Total: $ 2,981,100 Answer key is at the end of this document. 1. Wriglee, Inc. went to court this year and successfully defended its patent from infringement by a competitor. The cost of this defense should be charged to a. b. c. d. 2. In January, 2002, Findley Corporation purchased a patent for a new consumer product for $720,000. At the time of purchase, the patent was valid for fifteen years. Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only ten years. During 2007 the product was permanently removed from the market under governmental order because of a potential health hazard present in the product. What amount should Findley charge to expense during 2007, assuming amortization is recorded at the end of each year? a. b. c. d. 3. $480,000. $360,000. $72,000. $48,000. January 2, 2008, Koll, Inc. purchased a patent for a new consumer product for $270,000. At the time of purchase, the patent was valid for 15 years; however, the patent's useful life was estimated to be only 10 years due to the competitive nature of the product. On December 31, 2011, the product was permanently withdrawn from the market under governmental order because of a potential health hazard in the product. What amount should Koll charge against income during 2011, assuming amortization is recorded at the end of each year? a. b. c. d. 4. patents and amortized over the legal life of the patent. legal fees and amortized over 5 years or less. expenses of the period. patents and amortized over the remaining useful life of the patent. $ 27,000 $162,000 $189,000 $216,000 Weaver Boxing Company needs to determine if its indefinite-life intangibles other than goodwill have been impaired and should be reduced or written off on its balance sheet. The impairment test(s) to be used is (are): a. b. c d. Recoverability test and Fair Value Test Recoverability Test only Fair Value Test only None 5. LRF Corporation purchased a patent for $500,000 on January 1, 2006. It had a useful life of 5 years. On July 1, 2008, LRF spent $110,000 to successfully defend the patent in a lawsuit. LRF feels that as of July 1, 2008, the remaining useful life is 4.5 years. What amount should be reported for patent amortization expense for 2008? a. b. c. d. 6. Malrom Manufacturing Company acquired a patent on a manufacturing process on January 1, 2006 for $10,000,000. It was expected to have a 10 year life and no residual value. Malrom uses straight-line amortization for patents. On December 31, 2007, the expected future cash flows expected from the patent were expected to be $800,000 per year for the next eight years. The present value of these cash flows, discounted at Malrom's market interest rate, is $4,800,000. At what amount should the patent be carried on the December 31, 2007 balance sheet? a. b. c. d. 7. $50,000. $100,000. $90,000. $80,000. $10,000,000 $8,000,000 $6,400,000 $4,800,000 Torres Company's 12/31/08 balance sheet reports assets of $6,000,000 and liabilities of $2,500,000. All of Torres' assets' book values approximate their fair value, except for land, which has a fair value that is $400,000 greater than its book value. On 12/31/08, Wu Corporation paid $6,100,000 to acquire Torres. What amount of goodwill should Wu record as a result of this purchase? a. b. c. d. $ -0$ 100,000 $2,200,000 $2,600,000 8. In 2006, Edwards Corporation incurred research and development costs as follows: Materials and equipment: $80,000 Personnel: $120,000 Indirect costs: $150,000 These costs relate to a product that will be marketed in 2007. It is estimated that these costs will be recouped by December 31, 2009. The equipment has no alternative future use. What is the amount of research and development costs that should be expensed in 2006? a. b. c. d. 9. $150,000. $200,000. $270,000. $350,000. On January 1, 20x1, Whitman Co. purchased a patent from Donovan Corporation to be used in its routine production. Whitman paid $320,000 and estimates the patent's economic life to be 8 years. On October 1, 20x1, Whitman purchased a machine which can be used in a variety of its research and development activities for its entire useful life. The machine costs $140,000, has an expected useful life of 10 years, and an estimated salvage value of $20,000. Also on June 25 1, 20x1, Whitman paid Lehmann Laboratories $59,000 for research and development work performed by Lehmann under contract for Whitman. Assume use of straight-line amortization and depreciation wherever appropriate and that there are no other transactions related to the above events in 20x1. The amounts to be reported by Whitman on the income statement for the year ended December 31, 20x1 for depreciation expense, R&D expense and amortization expense, respectively, will be: a. b. c. d. 3,000; 59,000; 40,000 0; 62,000; 40,000 3,000; 62,000; 0 0; 51,000; 40,000 10. January 2, 2004, Regina, Inc. purchased a patent for a new consumer product for $180,000. At the time of purchase, the patent was valid for 15 years; however, the patent's useful life was estimated to be only 10 years due to the competitive nature of the product. On December 31, 2007, the product was permanently withdrawn from sale. What amount should Regina charge (both loss and amortization) against income during 2007? a. b. c. d. 11. Rome Company buys a division of Auxerre Company, Division A, for $2,300,000 in 2008. The fair value of Division A's net identifiable assets at the time of the purchase is $2,100,000. In 2009, the book value of Division A's total assets is $2,700,000 and total liabilities is $900,000. It is determined that Division A's fair value in 2009 is $1,750,000. The balance of the Division A's Goodwill account for 2009 should be: a. b. c. d. 12. $18,000 $108,000 $126,000 $144,000 -0$100,000 $150,000 $200,000 Rome Company buys a division of Auxerre Company, Division A, for $2,300,000 in 2008. The fair value of Division A's net assets at the time of the purchase is $2,100,000. In 2009, the book value of Division A's total assets is $2,700,000 and total liabilities is $900,000. It is determined that Division A's fair value in 2009 is $1,750,000. Assuming a tax rate of 30%, the effect of Goodwill impairment on Rome's 2009 net income is: a. b. c. d. a reduction of $140,000 a reduction of $70,000 a reduction of $35,000 -0- 13. Ribbery Company purchases Robben Company for $800,000 cash on January 1, 2011. The book value of Robben Company's net assets, as reflected on its December 31, 2010 balance sheet is $620,000. An analysis by Ribbery on December 31, 2010 indicates that the fair value of Robben's tangible assets exceeded the book value by $60,000, and the fair value of identifiable intangible assets exceeded book value by $45,000. How much goodwill should be recognized by Ribbery Company when recording the purchase of Robben Company? a. b. c. d. 14. Lopez Corp. incurred $420,000 of research and development costs to develop a product for which a patent was granted on January 2, 2006. Legal fees and other costs associated with registration of the patent totaled $80,000. On March 31, 2011, Lopez paid $150,000 for legal fees in a successful defense of the patent. The total amount capitalized for the patent through March 31, 2011 should be a. b. c. d. 15. $230,000. $500,000. $570,000. $650,000. On January 2, 2011, Klein Co. bought a trademark from Royce, Inc. for $1,000,000. An independent research company estimated that the remaining useful life of the trademark was 10 years. Its unamortized cost on Royce's books was $800,000. In Klein's 2011 income statement, what amount should be reported as amortization expense? a. b. c. d. 16. $ -0$180,000 $120,000 $75,000 $100,000. $ 80,000. $ 50,000. $ 40,000. Blue Sky Company's 12/31/10 balance sheet reports assets of $5,000,000 and liabilities of $2,000,000. All of Blue Sky's assets' book values approximate their fair value, except for land, which has a fair value that is $300,000 greater than its book value. On 12/31/10, Horace Wimp Corporation paid $5,100,000 to acquire Blue Sky. What amount of goodwill should Horace Wimp record as a result of this purchase? a. b. c. d. $ -0$100,000 $1,800,000 $2,100,000 17. Floyd Company purchases Haeger Company for $800,000 cash on January 1, 2011. The book value of Haeger Company's net assets, as reflected on its December 31, 2010 balance sheet is $620,000. An analysis by Floyd on December 31, 2010 indicates that the fair value of Haeger's tangible assets exceeded the book value by $60,000, and the fair value of identifiable intangible assets exceeded book value by $45,000. How much goodwill should be recognized by Floyd Company when recording the purchase of Haeger Company? a. b. c. d. 18. Harrel Company acquired a patent on an oil extraction technique on January 1, 2010 for $5,000,000. It was expected to have a 10 year life and no residual value. Harrel uses straight-line amortization for patents. On December 31, 2011, the expected future cash flows expected from the patent were expected to be $600,000 per year for the next eight years. The present value of these cash flows, discounted at Harrel's market interest rate, is $2,800,000. At what amount should the patent be carried on the December 31, 2011 balance sheet? a. b. c. d. 19. $ -0$180,000 $120,000 $75,000 $5,000,000 $4,800,000 $4,000,000 $2,800,000 MaBelle Corporation incurred the following costs in 2010: Acquisition of R&D equipment with a useful life of 4 years in R&D projects $600,000 Start-up costs incurred when opening a new plant 140,000 Advertising expense to introduce a new product 700,000 Engineering costs incurred to advance a product to full production stage 400,000 What amount should MaBelle record as research & development expense in 2010? a. b. c. d. $ 550,000 $ 740,000 $1,000,000 $1,140,000 20. When a company is developing, which of the following costs associated with a trademark would not be allowed to be capitalized? a. b. c. d. Attorney fees. Consulting fees. Research and development fees. Design costs. Answers: 1-d / 2-b / 3-c / 4-c / 5-c / 6-d / 7-c / 8-d / 9-b / 10-c / 11-c / 12-c / 13-d / 14-a / 15-a / 16-c / 17-d / 18-c / 19-a / 20-c Answer Key is at the End 1) On January 1, 2012, Joe, Inc. purchased a new machine for $50,000. The cost to reinforce the warehouse foundation to hold the machine was $500 and wages of $1,000 were paid to the maintenance crew to install the machine. The company spent $500 during 2012 for general maintenance related to the new machine. How are these costs recorded? 2) On July 1, 2012, Joe, Inc. purchased a parcel of land to construct an office building for $500,000. Costs related to the project are listed below: Legal fees for title investigation and purchase contract Demolition of old building on property Architect's fees Survey of property required by architect to draw building plans Construction cost of office building Salvaged materials from demolition of old building were sold $5,000 10,000 15,000 5,000 515,000 5,000 How should the cost of the land and new building be recorded? 3) Joe, Inc. traded a large delivery truck for a smaller delivery truck and $5,000 cash. The old truck cost $55,000 and had a net book value of $31,000. The large truck had a fair value of $25,000. How will assets, accumulated depreciation, liabilities, net income, retained earnings and stockholder's equity change because of Joe, Inc.'s entry to record the exchange? 4) Joe, Inc. purchased a machine on January 1, 2009 for $60,000; the machine had an estimated salvage value of $5,000 and an estimated useful life of 10 years. Early in 2012, it was estimated that the equipment would have a remaining useful life of 5 years (including 2012) and a salvage value of $3,000. If Joe, Inc. uses sum-of-the-years'-digits depreciation method, how much depreciation expense will be recognized for 2012? 5) Joe, Inc. exchanges an old machine plus $100,000 in cash for a new machine costing $200,000. The old machine was originally purchased for $150,000 and has $100,000 of accumulated depreciation. What are the journal entries to record the transaction assuming the exchange has: a) commercial substance; b) no commercial substance? 6) First Co. and Second Co. traded the below equipment. Equipment (original cost) Accumulated depreciation Fair market value of equipment Cash received (paid) First Co. $550,000 335,000 270,000 30,000 Second Co. $425,000 175,000 240,000 (30,000) Assuming the transaction changes the future cash flows of both companies, how should First Co. and Second Co. record the exchange? Assuming the transaction does not change the future cash flows of either company, how should First Co. and Second Co. record the exchange? 7) Joe, Inc. paid cash and purchased the following assets from Bush, Inc. at an auction for $1,000,000 on June 1, 2012. The information on the independent appraisal of the fair value of the assets and the book values of the assets on Valdes' balance sheet is listed below: Land Inventory Machine Assessed Value 600,000 400,000 200,000 Book Value on Bush's Balance Sheet 280,000 425,000 340,000 What will be the cost of the land, inventory and machine be recorded at on Joe, Inc.'s books? 8) Joe, Inc. purchased a machine on July 10, 2008 for $250,000 and assumed that the machine has a useful life of 10 years and a salvage value of $25,000. Joe, Inc. sells this machine on December 31, 2011 for $110,000. Assuming that Joe, Inc. uses the Double-Declining Balance depreciation method and nearest full month policy, what is the journal entry to record the sale? 9) Joe, Inc. constructs a building on land the company already owns. The construction started on April 1, 2010 and concluded on February 28, 2011. The following information on Joe, Inc.'s bank loans is available: Construction Loan Other Loan (1) Other Loan (2) Date Borrowed 12/31/2010 12/31/2008 12/31/2007 Amount ($) 500,000 600,000 300,000 Annual Interest Rate 10% 9% 6% Term 5 yrs 10 yrs 10 yrs Joe, Inc. makes annual interest payments to the bank on December 31 of each year. During 2010, Joe, Inc. incurred the following costs in the construction of the building: Exenditure Date 04/01/2010 Expenditure Amount ($) 600,000 06/01/2010 150,000 11/01/2010 300,000 What is the journal entry to record the interest payments made on December 31, 2010 and interest capitalization? 10) Equipment with a five-year useful life and an estimated salvage value of 10 percent of the original cost was purchased on January 1, 2010. Depreciation expense for 2011 would be what percent of the original cost using the: (1) straight-line method, (2) double-declining balance method, and (3) sum-of-yearsdigits method? 11) Joe, Inc. purchased a machine on January 1, 2008 for $110,000. The machine was being depreciated using the straight-line method over an estimated useful life of 5 years, with a salvage value of $10,000. At the beginning of 2012, the company paid $35,000 to overhaul the machine. This increased the output of the machine and increased the useful life of the machine by 3 years (8 years total). What is the depreciation expense recorded for the machine in 2012? 12) Joe tests one of its machines for impairment. The fair market value of the machine is $450,000. The original cost of the machine is $800,000 and the related accumulated depreciation account has a balance of $300,000 at the time of the impairment test. The remaining useful life of the machine is estimated to be 7 years. What amount of impairment loss should Joe, Inc. recognize if it expects that this machine will generate cash flows of $70,000 annually? What amount of impairment loss should Joe, Inc. recognize if it expects that this machine will generate cash flows of $80,000 annually? 13) Joe, Inc. acquires a copper mine at a cost of $1,000,000 in 2010. Intangible development costs are $240,000 and the cost of tangible equipment is $60,000. After extraction has occurred, Joe, Inc. must restore the property. The estimated fair value of the restoration cost is $40,000. The residual value of the copper mine is $100,000. It is estimated that 5,000 tons of copper can be extracted. In the year of acquisition, 2,100 tons were extracted and 500 tons were sold. How much cost of goods sold (depletion expense) should be recognized in 2010? What is ending inventory in 2010? What is the ending balance in the Copper Mine account? 14) Equipment is purchased on July 1, 2011 for $250,000. The estimated salvage value and useful life are $25,000 and 5 years, respectively. What is the depreciation expense for 2012 under: (1) straight-line method, (2) sum-of-years-digits method, and (3) double-declining balance method? 15) Joe, Inc. purchased a machine for $100,000 on January 1, 2005. The estimated useful life was 10 years; the estimated salvage value was $10,000. Joe, Inc. used the straight-line method of depreciation. In early 2012, the machine became obsolete and the company removed it from operations because of a new invention in the industry. As a result the machine had no resale value. What amount of expense should Joe, Inc. recognize in 2012 related to the machine? 16) Joe, Inc. purchased a competitor in 2010 for $950,000. The results of an appraisal of the value of the assets and liabilities of the competitor is below: Cash Fair Value ($) 100,000 Accounts Receivable 200,000 Inventory 1,000,000 Property, Plant and Equipment 1,500,000 Accounts Payable 810,000 Notes Payable 1,200,000 Prepare the journal entry to record the acquisition? 17) Related to (16) above, an internal analysis of Joe, Inc. performed on December 31, 2012 indicated that the fair value of the company was $5,000,000, including goodwill that was recorded for an acquisition of a competitor in 2010. The internal analysis also indicated that the fair value of Joe, Inc.'s assets and liabilities (other than goodwill) on December 31, 2012 were: Cash Fair Value ($) 400,000 Accounts Receivable 550,000 Inventory 3,500,000 Property, Plant and Equipment 4,950,000 Accounts Payable 1,600,000 Notes Payable 2,900,000 Prepare any necessary journal entry related to the above information. Answer Key 1. Machine: 51,500 Maintenance expense: 500 2. Land: 510,000 Building: 535,000 3. Assets, Net Income, Retained Earnings, and Stockholders Equity go down by 6,000. Accumulated Depreciation goes down by 24,000. Liabilities are not affected. 4. DE 2012: 10,000 5. Commercial Substance A/D Machine New Gain on Disposal Cash Machine Old 100,000 200,000 50,000 100,000 150,000 No Commercial Substance: Entire gain is deferred and deducted from the capitalized value of new machine A/D 100,000 Machine New 150,000 Cash 100,000 Machine Old 150,000 6. Commercial Substance First Company A/D Cash Equipment New Gain on Disposal Equipment Old Second Company A/D Loss on Disposal Equipment New Cash Equipment Old 335,000 30,000 240,000 55,000 550,000 175,000 10,000 270,000 30,000 425,000 No Commercial Substance First Company A/D Cash Equipment New Gain on Disposal Equipment Old 335,000 30,000 191,111 6,111 550,000 Second Company Same as with commercial substance 7. Land: 500,000 Inventory: 333,333 Machine: 166,667 8. Cash A/D Loss on Disposal Machine 110,000 134,800 5,200 250,000 9. Building Interest Expense Cash 10. S-L: 18% DDB: 24% 57,000 65,000 122,000 SYD: 24% 11. DE 2012: 13,750 12. Cash Flow (70,000): Loss = 50,000; Cash Flow (80,000): Loss = 0 13. COGS: 118,000 14. S-L: 45,000 End Inventory: 377,600 DDB: 80,000SYD:67,500 15. Loss = 37,000 16. Cash A/R Inventory PP&E Goodwill A/P N/P Cash 100,000 200,000 1,000,000 1,500,000 160,000 810,000 1,200,000 950,000 17. Loss on Impairment 60,000 Goodwill 60,000 Mine: 784,400