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ACC 410B Final Exam MCQs
Talbot Corporation purchased a
parcel of land Answer
ACC 410B Final Exam MCQs Talbot Corporation purchased a parcel of land Answer
ACC 410B Final Exam MCQs Talbot Corporation purchased a parcel of land Answer
ACC 410B Final Exam MCQs Talbot Corporation purchased a parcel of land
Answer
1. On January 15, 2013, Talbot Corporation purchased a parcel of land as a
factory site for $450,000. An old building on the property was demolished, and
construction began on a new building which was completed on November 31,
2013. Salvaged materials resulting from the demolition were sold for $12,000.
Costs incurred during this period included: Demolition of old building, $35,000,
Architects fees, $15,000, Legal fees for title investigation and purchase
contract, $7,000, and Construction costs, $1,000,000. Talbot should record the
cost of the land and new building, respectively, as
______ $450,000 and $1,000,000
______ $450,000 and $1,015,000
______ $480,000 and $1,015,000
______ $485,000 and $1,003,000
______ $15,467
______ $16,500
______ $17,600
7. Volmer Corporation owns machinery with a book value of $400,000. It is
estimated that the machinery will generate future cash flows of $375,000. The
machinery has a fair value of $325,000. Volmer should recognize a loss on
impairment of
______ $ -0______ $25,000
______ $50,000
______ $75,000
8. Plymouth Mining Corporation acquired, for $5,500,000, a tract of land
containing an extractable natural resource. Geological surveys estimate that the
recoverable reserves will be 1,000,000 tons. Plymouth is required by its
purchase contract to restore the land at an estimated cost of $750,000. The land
is expected to have a value of $1,250,000 after restoration. Plymouth maintains
no inventories of extracted materials. What is the amount of depletion per ton?
______ $4.25
______ $5.00
______ $5.50
______ $6.25
9. Titan Corporation acquired a patent on September 28, 2013. Titan paid cash
of $65,000 to the seller. Legal fees of $2,000 were paid related to the
acquisition. At what amount should Titan record the patent on its books?
______ $2,000
______ $63,000
______ $65,000
______ $67,000
10. Hodgson Companys December 31, 2014 balance sheet reports assets of
$8,500,000 and liabilities of $4,500,000. All of Hodgsons book values
approximate their fair value, except for land, which has a fair value that is
$500,000 greater than its book value. On December 31, 3014, Motley
Corporation paid $10,500,000 to acquire Hodgson. What amount of goodwill
should Motley record as a result of this purchase?
______ $6,000,000
______ $4,500,000
______ $2,000,000
______ $ -011. Innovative Technologies, Inc. incurred research and development costs of
$150,000 and legal fees of $42,000 to acquire a patent. The patent has a legal
life of 20 years and a useful life of 10 years. What amount should Innovative
On July 1, 2014, several years before their maturity, Goodly retired the bonds at
103. The interest payment on June 30, 2014 was made as scheduled. The loss on
retirement, ignoring taxes, is
______ $40,000
______ $28,000
______ $20,000
______ $ -018. On January 1, 2013, Martin Corporation signed a ten-year noncancelable
lease for machinery. The terms of the lease called for Martin to make annual
payments of $250,000 at the end of each year for ten years with title to pass to
Martin at the end of this period. The machinery has an estimated useful life of 20
years and no salvage value. Martin uses the straight-line method of depreciation
for all of its fixed assets. Martin accounted for this lease transaction as a capital
lease. The lease payments were determined to have a present value of
$1,840,023 at an effective interest rate of 6%. With respect to this capitalized
lease, Martin should record for 2013:
______ Depreciation expense of $184,002 and interest expense of $150,000.
______ Depreciation expense of $92,001 and interest expense of $110,401.
______ Depreciation expense of 184,002 and interest expense of $110,401.
______ Lease expense of $250,000.
19. On December 31, 2014, Pacific Rail Corporation leased a train car from
Southern Transportation Company for a ten year period expiring December 30,
2024. Equal annual payments of $160,000 are due on December 31 of each
year, beginning with December 31, 2014. The lease is properly classified as a
capital lease on Pacific Rails books. The present value at December 31, 2014 of
the ten lease payments over the lease term discounted at 8% is $1,159,502.
Assuming the first payment is made on time, the amount that should be
reported by Pacific Rail Corporation as the lease liability on its December 31,
2014 balance sheet is
______ $1,440,000
______ $1,159,502
______ $1,066,742
______ $999,502
20. Colfax Corporation enters into an agreement with Reynolds Rentals on
January 1, 2014 for the purpose of leasing a machine to be used in its
manufacturing operations. The term of the noncancelable lease is 4 years with
no renewal option. Payments of $200,000 are due on December 31 of each year.
The fair value of the machine on January 1, 2014, is $700,000. The machine has
a remaining economic life of 10 years, with no salvage value. The machine
reverts to the lessor upon termination of the lease. Colfax Corporations
incremental borrowing rate is 8% per year. Colfax does not have knowledge of
the 6% implicit rate used by Reynolds. The factor for the present value of an
ordinary annuity of 1, for 4 periods at 8% is 3.31213. The factor for the present
______ $500,000
______ $160,000
______ $340,000
26. Weston Corporation owned 80,000 shares of Brandt Corporation, purchased
in 2008 for $320,000. On December 20, 2013, Weston declared a property
dividend of all of its Brandt Corporation shares on the basis of one share of
Brandt for every 10 shares of Weston common stock held by its shareholders.
The property dividend was distributed on January 10, 2014. On the declaration
date, the aggregate market price of the Brandt Corporation shares held by
Weston was $610,000. The entry to record the declaration of the dividend would
include a debit to Retained Earnings (property dividends declared) of
______ $320,000
______ $610,000
______ $290,000
______ $ -027. Harping Corporation declared an $800,000 dividend, $200,000 of which was
liquidating. How would this distribution affect Retained Earnings and Additional
Paid-in Capital, respectively?
(Answer is shown with Retained Earning listed first, Additional Paid-in Capital
listed second. )
______ No effect; $800,000 Decrease
______ $800,000 Decrease; No effect
______ $600,000 Decrease; $200,000 Decrease
______ No effect; No effect
28. After several profitable years, Pear Corporations stock price had increased
by 10-fold. Management prefers the stock price to be within range of the
majority of potential investors, and on June 30, 2013, split its stock 2-for-1. Prior
to the split, Pears stockholders equity section showed: Common Stock, 2,000
shares at $100 par. After the split, Pears stockholders equity section showed:
______ Common stock, 4,000 shares at $50 par
______ Common stock, 2,000 shares at $200 par
______ Common stock, 1,000 shares at $200 par
______ Common stock, 4,000 shares at $100 par
34. Jollys Corner Market made credit sales during the month of October of
$225,000. The sales are subject to a 6% sales tax that was also collected. Which
of the following would be included in the summary journal entry to reflect the
sale transactions?
______ Debit Accounts Receivable for $238,500
______ Credit Sales Taxes Payable for $12,736
______ Credit Sales Revenue for $212,264
______ Debit Sales Taxes Payable for $13,500
40. Monroe Company owes $1 million that is due on January 15. The company
borrows $600,000 on January 8 (5-year note) and uses the proceeds to pay down
the $1 million note and uses other cash to pay the balance. How much of the $1
million note is classified as long-term in the December 31 financial statements.
______ $1,000,000
______ $0
______ $600,000
______ $400,000