Help with Chapter 10 Homework (1)

# Help with Chapter 10 Homework (1) - BriefExercise101...

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Help with Chapter 10 Homework  Brief Exercise 10–1 Capitalized cost of the machine: Purchase price \$35,000 Freight 1,500 Installation 3,000 Testing 2 ,000 Total cost \$41 ,500 Note: Personal property taxes on the machine for the period after acquisition are not part of acquisition cost. They are expensed in the period incurred. Brief Exercise 10–2 Capitalized cost of land: Purchase price \$600,000 Broker’s commission 30,000 Title insurance 3,000 Miscellaneous closing costs 6,000 Demolition of old building 18 ,000 Total cost \$657 ,000 All of the expenditures, including the costs to demolish the old building, are included in the initial cost of the land. 1

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Brief Exercise 10–3 Cost of land and building: Purchase price \$600,000 Broker’s commission 30,000 Title insurance 3,000 Miscellaneous closing costs 6 ,000 Total cost \$639 ,000 The total must be allocated to the land and building based on their relative fair values: Asset Fair Value Percent of Total Fair Value Initial Valuation (Percent x \$639,000) Land \$420,000 60% \$383,400 Building 280 ,000 40 255 ,600 \$700 ,000 100% \$639 ,000 Brief Exercise 10–4 Cost of silver mine: Acquisition, exploration, and development \$5,600,000 Restoration costs 429 ,675 \$6 ,029,675 \$500,000 x 20% = \$100,000 550,000 x 45% = 247,500 650,000 x 35% = 227 ,500 \$575,000 x .74726* = \$429,675 *Present value of \$1, n = 5, i = 6% (from Table 2) 2
Brief Exercise 10–5 After one year, the liability will increase to \$455,456 . (\$429,675 + (\$429,675 x 6%) = \$455,456) \$500,000 x 20% = \$100,000 550,000 x 45% = 247,500 650,000 x 35% = 227 ,500 \$575,000 x .74726* = \$429,675 *Present value of \$1, n = 5, i = 6% (from Table 2) Actual restoration costs \$596,000 Less: Asset retirement liability (575 ,000 ) Loss on retirement \$ (21,000) Brief Exercise 10–6 Calculation of goodwill: Consideration exchanged \$14,000,000 Less fair value of net assets: Book value of assets \$8,300,000

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