Multiple Choice 10 questions, 5 points each
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
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.
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?
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
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