Question :
51. Clarion RealtyClarion Realty has decided to construct its own office : 1245668
51. Clarion Realty
Clarion Realty has decided to construct its own office building. The construction will be partially financed through a construction loan and any remainder will be financed from internally generated funds. The internal accountants have collected the following information concerning the construction.
Average Balance
Construction
Other
Year
Construction Account
Debt @ 6%
Debt @ 10%
1
$2,000,000
$1,000,000
$500,000
2
$4,000,000
$1,000,000
$250,000
3
$3,000,000
$800,000
$200,000
The amount, if any, of capitalized interest cost for Year 2 is
A. $0
B. $50,000
C. $60,000
D. $180,000
E. $230,000
52. Focus Company decided to construct its own manufacturing building. Focus Company should capitalize which of the following interest costs?
A. Building interest costs incurred prior to construction while occupying another building.
B. Building interest costs incurred during construction.
C. Building interest costs incurred after construction.
D. All interest costs incurred.
E. No interest costs incurred.
53. The Perma Company spent $300,000 on research and development during Year 8 to generate new product lines. One of the three projects looks like it will ultimately be technologically feasible while the other two projects resulted in unsuccessful efforts. For the project which may become technologically feasible, a total of $125,000 was incurred during Year 8. Under U. S. GAAP, how much of the $300,000 should be recognized as an expense in Year 8?
A. $300,000
B. $225,000
C. $175,000
D. $50,000
E. $0
54. Firms that incur research and development costs to develop a patented product:
A. must expense the costs as incurred.
B. must capitalize the costs and only reduce such costs if the patent becomes impaired.
C. must capitalize the costs and then amortize the costs over the expected economic life of the patent.
D. have a choice either to expense the costs as incurred or capitalize the costs and amortize the costs over the legal life of the patent.
E. have a choice either to expense the costs as incurred or capitalize the costs and amortize the costs over the expected economic life of the patent.
55. In a corporate acquisition the:
A. purchase price measures the fair value of the acquired enterprise.
B. goodwill reflects the fair value of assets that cannot be separately identify.
C. goodwill is an asset because it is part of the fair value of the acquired firm.
D. all of the above
E. none of the above
56. Firms generally treat expenditures to develop intangibles internally as
A. expenses when incurred.
B. expenses over the useful life.
C. assets.
D. liabilities.
E. goodwill.
57. Firms treat expenditures to develop intangibles internally as assets under U.S. GAAP when _____ the point of technological feasibility; and under IFRS when _____ the point of technological feasibility.
A. software development costs are incurred after; development costs are incurred generally after
B. software development costs are incurred after; development costs are incurred generally before
C. software development costs are incurred before; development costs are incurred generally before
D. software development costs are incurred before; development costs are incurred generally after
E. none of the above.
58. Firms recognize expenditures to acquire intangibles externally from third parties as _____ if the intangibles are either separable or arise from contractual or other legal rights.
A. assets
B. liabilities
C. retained earnings
D. revenue
E. expenses
59. Springfield Company purchases new factory equipment. Per the terms of the contract, Springfield must pay the freight charges, will receive a manufacturer’s discount off the invoice price on the equipment, and will have some setup expenses to pay. As a result, the acquisition cost of equipment recorded on Springfield’s books will be the sum of the invoice price
A. less any discounts, plus transportation costs, installation charges, and any other costs incurred before the equipment is ready for use.
B. less any discounts and transportation costs, plus installation charges and any other costs incurred after the equipment is ready for use.
C. plus transportation costs, installation charges, and any other costs incurred before the equipment is ready for use.
D. less transportation costs, installation charges, and any other costs incurred after the equipment is ready for use.
E. less any discounts and installation charges, plus transportation charges and any other costs incurred after the equipment is ready for use.
60. Firms sometimes acquire assets by exchanging an asset other than cash or by issuing common stock. In these cases, acquisition cost is
A. the fair value of the asset received, only.
B. the fair value of the consideration given, only.
C. either the fair value of the consideration given or the fair value of the asset received, depending on which amount is lower.
D. either the fair value of the consideration given or the fair value of the asset received, depending on which the firms can more reliably measure.
E. either the fair value of the consideration given or the fair value of the asset received, depending on which amount is higher.
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