Question : 121.Total stockholders’ equity of Tucker Company $4,000,000. The fair market : 1237688

 

121.Total stockholders’ equity of Tucker Company is $4,000,000. The fair market value of Tucker’s net identifiable assets (assets less liabilities) is $5,000,000. Empire Corporation makes an offer to purchase Tucker’s entire business for $5,800,000. In this situation:   

A. Tucker Company should report goodwill of $800,000 in its balance sheet.

 

B. Tucker Company should report goodwill of $1,800,000 in its balance sheet.

 

C. Empire Corporation is willing to pay $1,800,000 for goodwill generated by Tucker, and Empire will report this goodwill in its balance sheet if the purchase is finalized.

 

D. Empire Corporation is willing to pay $800,000 for goodwill generated by Tucker, and Empire will report this goodwill in its balance sheet if the purchase is finalized.

 

 

 

 

122.Early in the current year, Tokay Co. purchased the Silverton Mine at a cost of $20,000,000. The mine was estimated to contain 200,000 tons of ore and to have a residual value of $5,000,000 after mining operations are completed. During the year, 105,000 tons of ore were removed from the mine. At year-end, the book value of the mine (cost minus accumulated depletion) is:   

A. $15,000,000.

 

B. $12,125,000.

 

C. $7,875,000.

 

D. Less than $10,000,000.

($20,000,000 – $5,000,000)/200,000 = $75 × 105,000 = $7,875,000; $20,000,000 – $7,875,000 = $12,125,000

 

 

 

123.In February 2015, Brilliant Industries purchased the Topaz Mine at a cost of $10,000,000. The mine is estimated to contain 500,000 carats of stone and to have a residual value of $500,000 after mining operations are completed. During 2015, 50,000 carats of stone were removed from the mine and sold. In this situation:   

A. The book value of the mine is $9,000,000 at the end of 2015.

 

B. The amount of depletion deducted from revenue during 2015 is $950,000.

 

C. The amount of depletion deducted from revenue during 2015 is $1,000,000.

 

D. The mine is classified as an intangible asset and amortized over a period not to exceed 40 years.

($10,000,000 – $500,000)/500,000 = $19 × 50,000 = $950,000

 

 

 

124.Early in the current year, Amazon Co. purchased the Rio Silver Mine at a cost of $30,000,000. The mine was estimated to contain 400,000 tons of ore and to have a residual value of $7,500,000 after mining operations are completed. During the year, 115,000 tons of ore were removed from the mine. At year-end, the book value of the mine is:   

A. $22,500,000.

 

B. $6,468,750.

 

C. $23,531,250.

 

D. $30,000,000.

($30,000,000 – $7,500,000)/400,000 = $56.25 × 115,000 = $6,468,750; $30,000,000 – $6,468,750 = $23,531,250

 

 

 

125.In February 2015, Gemstone Industries purchased the Opal Mine at a cost of $20,000,000. The mine is estimated to contain 500,000 carats of stone and to have a residual value of $1,000,000 after mining operations are completed. During 2015, 50,000 carats of stone were removed from the mine and sold. In this situation:   

A. The book value of the mine is $19,000,000 at the end of 2015.

 

B. The amount of depletion deducted from revenue during 2015 is $1,900,000.

 

C. The amount of depletion deducted from revenue during 2015 is $1,000,000.

 

D. The mine is classified as an intangible asset and amortized over a period not to exceed 40 years.

($20,000,000 – $1,000,000)/500,000 = $38 × 50,000 = $1,900,000

 

 

 

126.Wilbur Company purchased $10,000 of equipment on December 20, 2015 on terms 2/15, net 30. Wilbur paid for the equipment on the 15th day following purchase and took advantage of the discount. Which of the following statements is correct?   

A. Wilbur will record a cash outflow from operating activities of $10,000 in its 2015 financial statements.

 

B. Wilbur will record a cash outflow from operating activities of $9,800 in its 2015 financial statements.

 

C. Wilbur will record a cash outflow from operating activities of $10,000 in its 2016 financial statements.

 

D. Wilbur will record a cash outflow from operating activities of $9,800 in its 2016 financial statements.

$10,000 – (2% * $10,000) = $9,800.

 

 

 

127.Wilbur Company purchased $10,000 of equipment on January 20, 2014. Wilbur uses the straight-line method to depreciate the equipment. The equipment has a 5-year useful life with no salvage value. Which of the following statements is correct?   

A. Wilbur will record a cash inflow from operating activities of $2,000 in its 2015 financial statements.

 

B. Wilbur will record a cash outflow from operating activities of $2,000 in its 2015 financial statements.

 

C. Wilbur will record a cash outflow from investing activities of $2,000 in its 2015 financial statements.

 

D. Wilbur will record no cash flows related to this asset on its 2015 statement of cash flows.

 

 

 

 

128.Wanda Company sold an asset for $10,000 on September 6, 2015. The historical cost of the asset was $22,000, and the asset’s accumulated depreciation at the date of sale was $14,500. Which of the following statements is correct?   

A. Wanda will record a cash inflow from operating activities of $10,000 in its 2015 financial statements.

 

B. Wanda will record a cash inflow from investing activities of $10,000 in its 2015 financial statements.

 

C. Wanda will record a cash inflow from investing activities of $2,500 in its 2015 financial statements.

 

D. Wanda will record no cash flows related to this asset on its 2015 statement of cash flows.

 

 

 

 

 

 

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