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Exam 10: Operational Assets: Acquisition and Disposition

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Question 51

Multiple Choice

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Operational assets are:

A) Created by the normal operation of the business and include accounts receivable.
B) All assets except cash and cash equivalents.
C) Current and long-term assets used in the production of either goods or services.
D) Long-term revenue-producing assets.

E) All of the above
F) A) and C)

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Question 52

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Interest is eligible to be capitalized as part of an asset's cost, rather than being expensed immediately, when:

A) The interest is incurred during the construction period of the asset.
B) The asset is a discrete construction project for sale or lease.
C) The asset is self-constructed, rather than acquired.
D) All of these are correct.

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

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Question 53

Multiple Choice

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Axcel Software began a new development project in 2008. The project reached technological feasibility on June 30, 2009 and was available for release to customers at the beginning of 2010. Development costs incurred prior to June 30, 2009 were $3,200,000 and costs incurred from June 30 to the product release date were $1,400,000. 2010 revenues from the sale of the new software were $4,000,000 and the company anticipates additional revenues of $6,000,000. The economic life of the software is estimated at four years. 2010 amortization of the software development costs would be:

If a company incurs disposition obligations as a result of acquiring an asset:

The exclusive right to display a symbol of product identification is a:

Interest is not capitalized for:

Under current GAAP, fair value is used to measure the components of all nonmonetary exchanges.

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

Juliana Corporation purchased all of the outstanding stock of Caldwell Inc., paying $2,700,000 cash. Juliana assumed all of the liabilities of Caldwell. Book values and fair values of acquired assets and liabilities were: Juliana would record goodwill of:

Research and development expense for a given period includes:

Kerry, Inc. exchanged land and cash of $8,000 for equipment. The land had a book value of $55,000 and a fair value of $60,000. Required: Prepare the journal entry to record the exchange. Assume the exchange has commercial substance.

Software development costs are capitalized if they are incurred:

In Case A, Pensacola would record the new equipment at:

Goodwill is:

The acquisition costs of tangible operational assets do not include:

A distinguishing characteristic of intangible assets is the degree of uncertainty about when or if they will provide future benefits.

Watson Company purchased assets of Holmes Ltd. at auction for $1,300,000. An independent appraisal of the fair value of the assets acquired is listed below: Required: Prepare the journal entry to record the purchase of the assets. $\begin{array} { l r } \text { Land } & \$ 214,500 \\\text { Building } & 357,500 \\\text { Equipment } & 572,000 \\\text { Inventories } & 286,000\end{array}$

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.

Assuming that the exchange has commercial substance, Alamos would record a gain/(loss) of:

McLean Mfg. Company sold a three-speed lathe for $24,000 cash. The lathe cost $66,200 and had a book value of $23,200. Required: Prepare the journal entry to record the sale.