Question 16. 16. During 2014, Cameo Co. incurred weighted-average accumulated expenditures of $800,000 during construction of assets that qualified for capitalization of interest. The only debt outstanding during 2014 was a $1,000,000, 10%, 5-year note payable dated January 1, 2012. What is the amount of interest that should be capitalized by Cameo during 2014? (Points : 4)
$0.
$20,000.
$80,000.
$100,000.
Question 17. 17. On May 1, 2014, Joiner Company began construction of a building. Expenditures of $360,000 were incurred monthly for 5 months beginning on May 1. The building was completed and ready for occupancy on September 1, 2014. For the purpose of determining the amount of interest cost to be capitalized, the weighted-average accumulated expenditures on the building during 2014 were (Points : 4)
$300,000.
$360,000.
$1,440,000.
$1,800,000.
Question 18. 18. Cash of $40,000, plus equipment that cost $220,000 and has accumulated depreciation of $100,000, is exchanged for equipment with a fair value of $200,000. The exchange lacked commercial substance. The new equipment should be recorded at (Points : 4)
$200,000.
$160,000.
$120,000.
$100,000.
Question 19. 19. In accounting for plant assets, which of the following outlays made subsequent to acquisition should be fully expensed in the period the expenditure is made? (Points : 4)
Expenditure made to increase the efficiency or effectiveness of an existing asset
Expenditure made to extend the useful life of an existing asset beyond the time frame originally anticipated
Expenditure made to add new asset services
Expenditure made to maintain an existing asset so that it can function in the manner intended
Question 20. 20. Of the following costs related to the development of natural resources, which one is not a part of depletion cost? (Points : 4)
Acquisition cost of the natural resource deposit
Exploration costs
Tangible equipment costs associated with machinery used to extract the natural resource
Intangible development costs such as drilling costs, tunnels, and shafts
Question 21. 21. On February 1, 2014, Tate Corporation purchased a parcel of land as a factory site for $280,000. An old building on the property was demolished, and construction began on a new building which was completed on November 1, 2014. Costs incurred during this period are listed below:
Demolition of old building $ 20,000
Architect's fees 35,000
Legal fees for title investigation & purchase contract 5,000
Construction costs 1,340,000
Salvaged materials from demolition were sold for $10,000.
Tate should record the cost of the land and new building, respectively, as
(Points : 4)
$305,000 and $1,365,000.
$290,000 and $1,380,000.
$290,000 and $1,375,000.
$295,000 and $1,375,000.
Question 22. 22. When computing the amount of interest cost to be capitalized, the concept of "avoidable interest" refers to (Points : 4)
the total interest cost actually incurred.
a cost of capital charge for stockholders' equity.
that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made.
that portion of weighted-average accumulated expenditures on which no interest cost was incurred.
Question 23. 23. Plant assets purchased on long-term credit contracts should be accounted for at (Points : 4)
the total value of the future payments.
the future amount of the future payments.
the present value of the future payments.
None of these answers are correct.
Question 24. 24. Pierce Resources Company acquired a tract of land containing an extractable natural resource. Pierce is required by its purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be 2,000,000 tons, and that the land will have a value of $1,000,000 after restoration. Relevant cost information follows:
Land $7,500,000
Estimated restoration costs 1,500,000
What is the amount of depletion per ton?
(Points : 4)
$3.25
$3.75
$4.00
$4.50
Question 25. 25. Stick Products purchased a machine for $39,000 on July 1, 2014. The company intends to depreciate it over 8 years using the double-declining balance method. Salvage value is $3,000. Depreciation for 2015 to the closest dollar is (Points : 4)
$19,500
$4,875
$8,531
$7,500
Finance MCQ 16-25
