Ans Doc117


10. In October 2003, Daryl Company exchanged a used packaging machine having a book value of $240,000 for a dissimilar new machine with a market value of $310,000. The company paid a cash difference of $30,000. The market value of the used packaging machine was determined to be $280,000. In its income statement for the year ended December 31, 2003, how much gain should Daryl recognize on this exchange?
A. $0 C. $30,000
B. $10,000 D. $40,000
11. Luther Soaps purchased a machine on January 1, 2004, for $18,000 cash. The machine has an estimated useful life of four years and a salvage value of $4,700. Luther uses theĀ  double-declining-balance method of depreciation for all its assets. What will be the machine’s book value as of December 31, 2005?
A. $5,100 C. $4,500
B. $4,700 D. $4,300
12. A company using the group depreciation method for its delivery trucks retired one of its delivery trucks after the average service life of the group was reached. Cash proceeds were received from a salvage company. The net carrying amount of these group asset
accounts would be decreased by the
A. original cost of the truck.
B. original cost of the truck less the cash proceeds.
C. cash proceeds received.
D. cash proceeds received and original cost of the truck.
13. Mackay, Inc. was organized late in 2002 and began operations on January 1, 2003.
Prior to the start of operations, the following costs were incurred:
Attorney’s fees for incorporating $18,000
State incorporation filing fees 12,000
Mackay amortizes organization costs over the maximum period allowable under GAAP.
How much amortization should Mackay record for the year ended December 31, 2003?
A. $750 C. $6,000
B. $3,600 D. $30,000
14. Which of the following reasons provides the best theoretical support for accelerated depreciation?
A. Assets are more efficient in early years and initially generate more revenue.
B. Expenses should be allocated in a manner that “smooths” earnings.
C. Repairs and maintenance costs will probably increase in later periods, so
depreciation should decline.
D. Accelerated depreciation provides easier replacement because of the time
value of money.
15. Eagle Company owns a tract of land that it purchased in 2000 for $200,000. The land is held as a future plant site and has a fair market value of $280,000 on July 1, 2003. Hall Company also owns a tract of land held as a future plant site. Hall paid $360,000 for the land in 2002 and the land has a fair market value of $380,000 on July 1, 2003. On this date, Eagle exchanged its land and paid $100,000 cash for the land owned by Hall.
At what amount should Eagle record the land acquired in the exchange?
A. $280,000 C. $320,000
B. $300,000 D. $380,000
16. On January 1, 2000, Carson Company purchased equipment at a cost of $420,000. The equipment was estimated to have a useful life of five years and a salvage value of $60,000.
Carson uses the sum-of-the-years’-digits method of depreciation. What should the accumulated depreciation be at December 31, 2002?
A. $240,000 C. $336,000
B. $288,000 D. $360,000
17. On October 1, Takei, Inc. exchanged 8,000 shares of its $25 par value common stock
for a parcel of land to be held for a future plant site. Takei’s common stock had a fair market value of $80 per share on the exchange date. Takei received $36,000 from the sale of scrap when an existing building on the site was razed. The land should be carried at
A. $200,000. C. $604,000.
B. $236,000. D. $640,000.
18. The Oscar Corporation acquired land, buildings, and equipment from a bankrupt company at a lump-sum price of $180,000. At the time of acquisition, Oscar paid $12,000 to have the assets appraised. The appraisal disclosed the following values:
Land $120,000
Buildings 80,000
Equipment 40,000
What cost should be assigned to the land, buildings, and equipment, respectively?
A. $64,000, $64,000, and $64,000 C. $96,000, $64,000, and $32,000
B. $90,000, $60,000, and $30,000 D. $120,000, $80,000, and $40,000
19. A company owns a piece of land that originally cost $10,000 and has a fair market value of $8,000. It is exchanged along with $5,000 cash for another piece of land having a fair value of $13,000. What is the proper journal entry to record this transaction?
A. Land (new) $15,000
Land (old) $10,000
Cash 5,000
B. Land (new) $13,000
Loss on Exchange 2,000
Land $10,000
Cash 5,000
C. Land (new) $18,000
Land (old) $10,000
Cash 5,000
Gain on Exchange 3,000
D. Land (new) $13,000
Retained Earnings 2,000
Land (old) $10,000
Cash 5,000
20. In January 2003, Vance Mining Corporation purchased a mineral mine for $7,200,000 with removable ore estimated by geological surveys at 4,320,000 tons. The property has an estimated value of $720,000 after the ore has been extracted. Vance incurred $2,160,000
of development costs preparing the property for the extraction of ore. During 2003, 540,000 tons were removed and 480,000 tons were sold. For the year ended December 31, 2003, Vance should include what amount of depletion in its cost of goods sold?
A. $720,000 C. $960,000
B. $810,000 D. $1,080,000