Reference no: EM1315928

Based on acquisition mode and market value accounting for land and other fixed assets acquired for business.

1.  Plant assets purchased on long-term credit contracts should be accounted for at

a.         the total value of the future payments.

b.        the future amount of the future payments.

c.         the present value of the future payments.

d.        none of these.

2.  Cotton Hotel Corporation recently purchased Holiday Hotel and the land on which it is located with the plan to tear down the Holiday Hotel and build a new luxury hotel on the site. The cost of the Holiday Hotel should be

a.         depreciated over the period from acquisition to the date the hotel is scheduled to be tom down.

b.        written off as an extraordinary loss in the year the hotel is torn down.

c.         capitalized as part of the cost of the land.

d.        capitalized as part of the cost of the new hotel.

3.  If a corporation purchases a lot and building and subsequently tears down the building and uses the property as a parking lot, the proper accounting treatment of the cost of the building would depend on

a.         the significance of the cost allocated to the building in relation to the combined cost of the lot and building.

b.        the length of time for which the building was held prior to its demolition

c.         the contemplated future use of the parking lot.

d.        the intention of management for the property when the building was acquired.

4.   The period of time during which interest must be capitalized ends when

a.         the asset is substantially complete and ready for its intended use.

b.        no further interest cost is being incurred.

c.         the asset is abandoned, sold, or fully depreciated.

d.        the activities that are necessary to get the asset ready for its intended use have begun.

5.  When a plant asset is acquired by issuance of common stock, the cost of the plant asset is properly measured by the

a.         par value of the stock.

b.        stated value of the stock.

c.         book value of the stock.

d.        market value of the stock.

6. The sale of a depreciable asset resulting in a loss indicates that the proceeds from the sale were

a.         less than current market value.

b.        greater than cost.

c.         greater than book value.

d.        less than book value.

7.  On December 1, Warner Corporation exchanged 3,000 shares of its $25 par value common stock held in treasury for a parcel of land to be held for a future plant site. The treasury shares were acquired by Warner at a cost of $40 per share, and on the exchange date the common shares of Warner had a fair market value of $50 per share. Warner received $9,000 for selling scrap when an existing building on the property was removed from the site. Based on these facts, the land should be capitalized at.

a.         $111,000.

b.        $120,000.

c.         $141,000.

d.        $150,000.

8.  The cost of the land that should be recorded by Pierce Co. is

a.         $520,240.

b.        $523,440.

c.         $524,940.

d.        $528,140.

9.  The cost of the building that should be recorded by Pierce Co. is

a.         $1,306,900.

b.        $1,307,420.

c.         $1,311,600.

d.        $1,312,120

10.  During 2003, Allen Corporation constructed assets costing $500,000. The weighted-average accumulated expenditures on these assets during 2003 was $300,000. To help pay for construction, $220,000 was borrowed at 10% on January 1, 2003, and funds not needed for construction were temporarily invested in short-term securities, yielding $4,500 in interest revenue. Other than the construction funds borrowed, the only other debt outstanding during the year was a $250,000, 10-year, 9% note payable dated January 1, 1997. What is the amount of interest that should be capitalized by Allen during 2003?

a.         $30,000.

b.        $15,000.

c.         $29,200.

d.        $47,200.