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Temple University Fox School of Business and Management Dr. Steven Balsam Accounting 011 Exam #3-Answer Key December 1/3, 2003 Instructions: You have 60 minutes. Answer the questions on the pages provided and please remember to show all work so that you may receive partial credit. Also please put your name on each page in case the pages get separated. Good luck!

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Multiple Choice 10 questions, 5 points each 1. Rich Co. exchanged merchandise that cost \$24,000 and normally sold for \$36,000 for a new delivery truck with a list price of \$40,000. The delivery truck should be recorded on Rich' books at a. \$24,000. b. \$30,000. c. \$36,000. d. \$40,000. Record the new truck at the fair value of the assets given up. In this case if the goods would normally sell for \$36,000 that would be their fair value. 2. During 2004, Bell Corporation constructed assets costing \$750,000. The weighted-average accumulated expenditures on these assets during 2004 was \$450,000. To help pay for construction, \$330,000 was borrowed at 10% on January 1, 2004, and funds not needed for construction were temporarily invested in short-term securities, yielding \$7,000 in interest revenue. Other than the construction funds borrowed, the only other debt outstanding during the year was a \$375,000, 10-year, 9% note payable dated January 1, 1998. What is the amount of interest that should be capitalized by Bell during 2004? a. \$45,000. b. \$22,500. c. \$43,800. d. \$70,800 Project specific financing of \$330,000 * rate of 10% = 33,000 Excess of Weighted Average Accumulated Expenditures over project specific financing 450,000-330,000 is multiplied by 9% rate = 10,800 33,000+10,800=43,800 3. Truman, Inc. purchased equipment in 2002 at a cost of \$1,400,000. Two years later it became apparent to Truman, Inc. that this equipment had suffered an impairment of value. In early 2004, the book value of the asset is \$840,000 and it is estimated that the fair value is now only \$560,000. The entry to record the
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