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Exam 10: Property, Plant, and Equipment and Intangible Assets: Acquisition and Disposition

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Question 71

Multiple Choice

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Average accumulated expenditures for 2013 was:

A) $300,000.
B) $350,000.
C) $500,000.
D) $400,000.

E) A) and C)
F) None of the above

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Question 72

Multiple Choice

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The basic principle used to value an asset acquired in a nonmonetary exchange is to value it at:

A) Fair value of the asset(s) given up.
B) The book value of the asset given plus any cash or other monetary consideration received.
C) Fair value or book value, whichever is smaller.
D) Book value of the asset given.

E) B) and D)
F) All of the above

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Question 73

True/False

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Property, plant, and equipment and intangible assets are long-term, revenue producing assets.

Assuming that the exchange has commercial substance, Horton would record land-new and a gain/(loss) of:

Cromartie Ltd. prepares its financial statements according to International Financial Reporting Standards. During 2013 the company incurred $1,245,000 in research expenditures to develop a new product. An additional $756,000 in development expenditures were incurred after technological and commercial feasibility was established and after the future economic benefits were deemed probable. The project was successfully completed and the new product was patented before the end of the 2013 fiscal year. Sale of the product began in 2012. What amount of the above expenditures would Cromartie expense in its 2013 income statement?

It's not unusual for one company to buy another company in order to obtain technology that the acquired company has developed or is in the process of developing. Required: Explain the accounting treatment of purchased technology.

During the current year, Compton Crate Corporation purchased all of the outstanding common stock of Little Lacy Ltd. (LLL), paying $60 million in cash. Compton recorded the assets acquired as follows: The book value of LLL's assets and owners' equity before the acquisition were $50 million and $30 million, respectively. Required: Compute the fair value of LLL's liabilities that Compton assumed in the acquisition.

What disclosures are required relative to interest costs incurred during the year?