Question
Which of the following costs should not be capitalized as an acquisition cost? Group of answer choices A) Cost to update wiring to accommodate new
- Which of the following costs should not be capitalized as an acquisition cost?
Group of answer choices
A) Cost to update wiring to accommodate new factory equipment new factory equipment
B) Cost to ship newly purchased computer equipment to factory
C) Cost to calibrate measuring equipment before initial use
D) Cost to train employees to use new factory equipment
- Which of the following costs should not be capitalized as an acquisition cost?
Group of answer choices
A) Cost to update wiring to accommodate new factory equipment new factory equipment
B) Cost to ship newly purchased computer equipment to factory
C) Cost to calibrate measuring equipment before initial use
D) Cost to train employees to use new factory equipment
Privett, Inc. purchased land in 2019. An existing structure was demolished, and a new warehouse was constructed on the property in September of 2019. Privett hired construction workers at a rate of $25 per hour to do the work (1,680 hours in total). Privett's operations manager spent 25% of his time in September supervising the construction.
Warehouse Construction Cost Data | |||
Purchase price - Land | $125,000 | Cost to remove structure on land | $10,000 |
Operation manager's monthly salary | 5,000 | Proceeds from sale of metal from demolished structure | 3,000 |
Paving of parking lot | 10,000 | Landscaping costs | 12,000 |
Foundation work | 15,000 | Direct materials - Warehouse | 105,000 |
Parking lot lighting | 10,000 | Closing costs on land purchase | 5,000 |
Electrical/Plumbing contractors | 25,000 | ||
Hourly wage rate - Workers | 25 | Payroll tax rate (all employees) | 10% |
Privett had an appraisal done in October 2019. The land and land improvements were appraised for $150,000 and $50,000, respectively; the building was appraised for $175,000.
What is the amount in the Land account related to this construction project?
Group of answer choices
A) $122,000
B) $127,000
C) $130,000
D) $125,000
E) $137,000
Privett, Inc. purchased land in 2019. An existing structure was demolished, and a new warehouse was constructed on the property in September of 2019. Privett hired construction workers at a rate of $25 per hour to do the work (1,680 hours in total). Privett's operations manager spent 25% of his time in September supervising the construction.
Warehouse Construction Cost Data | |||
Purchase price - Land | $125,000 | Cost to remove structure on land | $10,000 |
Operation manager's monthly salary | 5,000 | Proceeds from sale of metal from demolished structure | 3,000 |
Paving of parking lot | 10,000 | Landscaping costs | 12,000 |
Foundation work | 15,000 | Direct materials - Warehouse | 105,000 |
Parking lot lighting | 10,000 | Closing costs on land purchase | 5,000 |
Electrical/Plumbing contractors | 25,000 | ||
Hourly wage rate - Workers | 25 | Payroll tax rate (all employees) | 10% |
Privett had an appraisal done in October 2019. The land and land improvements were appraised for $150,000 and $50,000, respectively; the building was appraised for $175,000
What is the depreciable cost of the warehouse project?
Group of answer choices
A) $220,250
B) $228,700
C) $207,000
D) $192,575
- Metropolis Products purchased property (land and building) for $1,000,000. The building will be used in operations. The most recent property tax assessment values the land at $600,000 and the building at $200,000.
The journal entry to record the purchase includes a debit of $__________ to Land
Group of answer choices
A) $600,000
B) $500,000
C) $750,000
D) $700,000
The fair value of a 50-year old building to be purchased by a public company cannot be reliably determined. Which of the following statements is(are) true about the purchase?
Group of answer choices
A) If the building is purchased with company stock, the building should be recorded at the fair value of the stock
B) If the building is being purchased with company debt (five-year noninterest-bearing loan), and the prevailing interest rate is known, the building should be recorded at the present value of the payments required under the loan agreement.
C) If the building is being purchased with company debt (five-year noninterest-bearing loan), and the prevailing interest rate is not known, the building should be recorded using the seller's original cost.
D) A and B
E) B and C
- Annapolis Corporation borrowed $600,000 on December 1, 2018, to finance construction of a new office building. The interest rate on the loan was 8%. Construction began on January 1, 2019, and the building was completed in March 2020. The following payments were made in 2019 related to the building project:
Jan. 1 | Purchased the land | $120,000 |
Mar. 1 | Made progress payment to contractor | 150,000 |
Aug. 1 | Made progress payment to contractor | 180,000 |
Dec. 1 | Made progress payment to contractor | 90,000 |
How much of the interest should be capitalized?
Group of answer choices
A) $16,600
B) $26,200
43,200
D) $24,000
Pepperoni's Pizza incurred the following costs during 2019:
Purchase of warming units for delivery vehicles | $25,000 |
Cost to install warming units | 2,000 |
Replacement parts for refurbishment of pizza ovens | 6,000 |
Labor related to refurbishment of ovens | 2,000 |
The refurbishment improved the efficiency of the ovens by 20% but did not extend the oven's useful life. This is the first time Pepperoni's had installed warming units in its vehicles.
Of the above costs, $___________ should be capitalized
Group of answer choices
A) $ 8,000
B) $27,000
C) $31,000
D) $25,000
E) $35,000
- Allegiance, Inc. has a large factory operating in western Washington. In 2020, extensive mold was discovered in the factory. The mold, located in the air duct system, was caused by several roof leaks that had been there for several years. The cost to remove the mold was $200,000. The cost was material to the company.
Which of the following statements is accurate?
Group of answer choices
A) The cost to remove the mold should be expensed in 2020
B) The cost to remove the mold should be capitalized and depreciated over the remaining useful life of the factory building
C) The cost to remove the mold should be capitalized and the service life of the building should be extended.
D) The cost to remove the mold should be capitalized and the service life of the building should be reduced
- Account balances in Yellowstone, LLC's fixed asset accounts at the beginning and end of the year are as follows:
Beginning of year | End of year | |
Property, plant, and equipment | $200,000 | $160,000 |
Accumulated depreciation | 85,000 | 90,000 |
The company sold some equipment at a loss of $10,000. The company also purchased equipment during the year for $50,000. Depreciation expense was $20,000.
What were the proceeds on the sale of the equipment?
Group of answer choices
A) $80,000
B) $ 5,000
C) $95,000
D) $65,000
- Delany's Deconstruction purchased a truck on June 15, 2015, for $35,000. A 6% sales tax was added to the cost. In addition, Delany's paid $2,500 to ship the truck to its main office. The truck arrived on July 1, just in time to start work on a major customer project. The truck was estimated to have a 10-year service life.
On January 1, 2018, Delany's purchased and installed a truck-mounted generator for $8,000 (sales tax included). With the generator, Delany's was able to increase the number of services provided to its customers. On July 1, 2019, Delany's replaced two of the tires on the truck for $1,000. On December 31, 2020, Delany's sold the truck for $22,000.
Delany's Deconstruction recognized a ______ of $_______ on the sale. (Delany's uses the straight-line method of depreciation.)
Group of answer choices
A) Gain; $1,450
B) Gain: $650
C) Loss; $1,389
D) Loss; $422
E) Loss; $620
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