26) Seeder Inc. made a lump-sum purchase of three pieces of machinery for \$130,000 from an unaffiliated company. At the time of acquisition, Seeder paid \$5,000 to determine the appraised value of the machinery. The appraisal disclosed the following values:

Machine A  \$70,000
Machine B  \$42,000
Machine C  \$28,000

What cost should be assigned to Machines A, B, and C, respectively?

A) A: \$70,000; B: \$42,000; C: \$28,000
B) A: \$67,500; B: \$40,500; C: \$27,000
C) A: \$65,000; B: \$39,000; C: \$26,000
D) A: \$45,000; B: \$45,000; C: \$45,000

Diff: 1
Objective:  11.1
IFRS/GAAP:  GAAP/IFRS
AACSB:  Analytical Thinking

27) Ballyhigh Company purchased equipment for \$20,000. Sales tax on the purchase was \$1,500. Other costs incurred were freight charges of \$400, repairs of \$350 for damage during installation, and installation costs of \$450. What is the capitalizable cost of the equipment?

A) \$21,500
B) \$21,850
C) \$22,350
D) \$22,700

Diff: 1
Objective:  11.1
IFRS/GAAP:  GAAP/IFRS
AACSB:  Analytical Thinking

The capitalized cost =20000+1500+400-350+450 =22350

28) Alzparker Company constructed a building at a total actual cost of \$24,000,000. Average accumulated expenditures during the construction period amounted to \$17,000,000. As a result of financing arrangements, actual interest was \$2,120,000, and avoidable interest was \$1,600,000. What is the capitalizable cost of the equipment?

A) \$19,120,000
B) \$25,600,000
C) \$26,120,000
D) \$27,720,000

The capitalized cost =24000000+1600000
=25600000

29) Emerson Enterprises is constructing a building. Construction began in 2016 and the building was completed December 31, 2016. Emerson made payments to the construction company of \$600,000 on July 1, \$1.800,000 on September 1, and \$2,400,000 on December 31. What is the amount of weighted-average accumulated expenditures that provides the basis for determining capitalizable interest?

A) \$900,000
B) \$1,100,000
C) \$1,200,000
D) \$1,600,000

Diff: 1
Objective:  11.1
IFRS/GAAP:  GAAP/IFRS
AACSB:  Analytical Thinking

Therefore the amount will be  ½*600+1/3*1800000 =900000

30) During 2016, Dosekis Co. incurred average accumulated expenditures of \$400,000 during construction of assets that qualified for capitalization of interest. The only debt outstanding during 2016 was a \$500,000, 10%, 5-year note payable dated January 1, 2013. What is the amount of interest that should be capitalized by Dosekis during 2016?

A) \$10,000
B) \$40,000
C) \$50,000
D) \$80,000

400000*10/100*1
=40000

23) Kaven Corporation purchased a truck at the beginning of 2016 for \$75,000 which will be depreciated using the units-of-output method. The truck is estimated to have a residual value of \$3,000 and a useful life of 4 years and 120,000 miles. It was driven 18,000 miles in 2016 and 32,000 miles in 2017. What is the depreciation expense for 2017?

A) \$18,750
B) \$19,200
C) \$20,000
D) \$32,000

Depreciable Base = Asset Cost – Salvage Value.
Depreciation per Unit = Depreciable Base / Total Units.
Depreciation for Period = Depreciation per Unit x Number of Units Produced in a Period.

Depreciable base =75000-3000 =72000
Depreciation per unit =72000/120000
=0.6*32000
=19200

24) Lunar Products purchased a computer for \$13,000 on July 1, 2016. The company intends to depreciate it over 4 years using the double-declining balance method. Residual value is \$1,000. What is depreciation for 2017?

A) \$3,000
B) \$3,250
C) \$4,500
D) \$4,875

Depreciation = (13000/4) =3250 +13000/8 =1625 +3250 =4875

16) Rommer Company purchases Daley Inc. for \$960,000 cash on January 1, 2017. The book value of Daley Company’s net assets, as reflected on its December 31, 2016 statement of financial position is \$740,000. An analysis by Rommer on December 31, 2016 indicates that the fair value of Daley’s tangible assets exceeded the book value by \$70,000, and the fair value of identifiable intangible assets exceeded book value by \$35,000. How much goodwill should be recognized by Rommer Company when recording the purchase of Daley Inc.?

A) \$70,000
B) \$115,000
C) \$150,000
D) \$220,000

Goodwill is the excess of 960000-740000  =220000
220000-70000-35000  -115000

17) Candalibra Company incurred the following costs during the year ended December 31, 2017:

Laboratory research aimed at discovery of new knowledge
\$300,000

Costs of testing prototype and design modifications (economic viability not achieved)
65,000

Quality control during commercial production, including routine testing of products
220,000

Construction of research facilities having an estimated useful life of 12 years but no alternative future use
410,000

What is the total amount to be classified and expensed as research and development in 2017?

A) \$285,000
B) \$685,000
C) \$775,000
D) \$995,000

Amount qualifying for research =65000+410000+220000 =695000
Lab research does not qualify
14) Kow-Pow Company purchased a limited-life intangible asset for \$150,000 on May 1, 2015. It has a useful life of 10 years. What total amount of amortization expense should have been recorded on the intangible asset by December 31, 2017?

A) \$0
B) \$30,000
C) \$40,000
D) \$45,000

150000/120
Mothly amortization = 1250
1250* 32 months =40000

15) Rinky-Dink Inc. incurred research and development costs of \$200,000 and legal fees of \$100,000 to acquire a patent. The patent has a legal life of 20 years and a useful life of 10 years. What amount should the company record as patent amortization expense in the first year?

A) \$10,000
B) \$15,000
C) \$20,000
D) \$30,000

Diff: 1
Objective:  11.7
IFRS/GAAP:  GAAP/IFRS
AACSB:  Application of Knowledge

The total amount of patent =3000000/30 = 10000

16) Rinky-Dink Inc. incurred research and development costs of \$200,000 and legal fees of \$100,000 to acquire a patent. The patent has a legal life of 20 years and a useful life of 10 years. What amount should the company record as patent amortization expense in the first year?

A) \$10,000
B) \$15,000
C) \$20,000
D) \$30,000

The total amount of patent =3000000/30 = 10000

11) Bakiponi Corp. provides the following data from its recent financial statements:

(Dollars in millions)
2016
2017

Beginning Gross Fixed Assets
\$2,340,000
\$2,460,000

Ending Gross Fixed Assets
2,460,000
2,580,000

Beginning Accumulated Depreciation
1,110,000
1,340,000

Current-year Depreciation Expense
230,000
280,000

Current -year Sales Revenue
3,450,000
4,320,000

What is the average age of the company’s fixed assets as of the end of 2017?

A) 4.4
B) 4.8
C) 5.8
D) 9.2

Average fixed asset =(2460000+2580000)/2 =2520000
((2340+2460)+(2460+2580) + depreciation (1110+1340)-rent dep (230+280))/2
=5.89

What is the average average remaining life of the company’s fixed assets as of the end of 2017?

A) 3.2
B) 3.4
C) 4.4
D) 5.8

Remaining life =  2520/280- 5.89 =3.29

What is the fixed asset turnover ratio for 2017?

A) 4.5
B) 4.2
C) 3.5
D) 1.7

22) In 2010, Mennora Corporation acquired production machinery at a cost of \$410,000, which now has a book value of \$190,000. The undiscounted cash flows from use of the machinery is \$175,000. and it’s fair value is \$135,000. What amount should Menorrah recognize as a loss on impairment?

A) \$15,000
B) \$40,000
C) \$55,000
D) -0-

23) In 2009, Cilla Company acquired production machinery at a cost of \$410,000, which now has a accumulated depreciation of \$240,000. The undiscounted cash flows from use of the machinery is \$190,000 and it’s fair value is \$145,000. What amount should Cilla recognize as a loss on impairment?

A) \$20,000
B) \$35,000
C) \$70,000
D) -0-

The amount to be recognized as impairment  the net book value must be lower than the recoverable amount in this case noimpairment loss

Diff: 2
Objective:  12.2
IFRS/GAAP:  GAAP/IFRS
AACSB:  Application of Knowledge

24) In 2011, ZeeTee Inc. acquired production machinery at a cost of \$630,000, which now has a accumulated depreciation of \$380,000. The undiscounted cash flows from use of the machinery is \$220,000. and it’s fair value is \$195,000. What amount should Condor recognize as a loss on impairment?

A) \$185,000
B) \$55,000
C) \$25,000
D) -0-

Diff: 2
Objective:  12.2
IFRS/GAAP:  GAAP/IFRS
AACSB:  Application of Knowledge

Undiscounted cash flows  220000-195000 =55000

25) In 2011, Yondoor Inc. Company acquired production machinery which now has a book value of \$740,000. The undiscounted cash flows from use of the machinery is \$365,000. and it’s fair value is \$305,000. Yondoor has determined that an impairment loss has occurred. What is the carrying value of the machinery after the journal entry to record the impairment loss has been recorded?

A) \$445,000
B) \$375,000
C) \$365,000
D) \$305,000

Diff: 2

The fair value is 305000

12) Devo Co. has an indefinite-life intangible asset with a carrying value of \$782,000. The undiscounted cash flows expected to be realized from that asset total \$827,000; the discounted cash flows are \$574,000; and the fair value of the asset has been determined to be \$646,000. What is the amount of the impairment loss to be recorded, if any?

A) \$208,000
B) \$136,000
C) \$35,000
D) -0-

Diff: 1
Objective:  12.3
IFRS/GAAP:  GAAP
AACSB:  Application of Knowledge

13) Devo Co. has an indefinite-life intangible asset with a carrying value of \$782,000. The undiscounted cash flows expected to be realized from that asset total \$827,000; the discounted cash flows are \$574,000; and the fair value of the asset has been determined to be \$646,000. What is the new carrying value of the asset after impairment loss has been recorded?

A) \$827,000
B) \$646,000
C) \$574,000
D) \$136,000

The carrying value of the asset is equal to  is the fair value
12) Regular Corp. has four divisions. One of them, Zolo Products, was acquired on January 1, 2016, for \$400,000,000, and recorded goodwill of \$50,750,000 as a result of that purchase. At December 31, 2016, Zolo Products had a recoverable amount of \$375,000,000. The carrying value of the company’s net assets at December 31, 2016 was \$355,000,000 (including goodwill). What amount of loss on impairment of goodwill should Regular record in 2016?

A) \$45,000,000
B) \$25,000,000
C) \$20,000,000
D) -0-

Diff: 2
Objective:  12.4
IFRS/GAAP:  GAAP
AACSB:  Application of Knowledge

The amount of good will market value is more than the recoverable value hence 0

13) Regular Corp. has four divisions. One of them, Yulon Products, was acquired on January 1, 2016, for \$80,000,000, and recorded goodwill of \$9,000,000 as a result of that purchase. At December 31, 2017, Yulon Products had a fair value (including goodwill) of \$66,000,000. The book value of the company’s net assets (without goodwill) at December 31, 2017 was \$77,000,000. For 2017, Regular reported a loss on impairment of goodwill of \$7,000,000. What was the fair value of the company’s net assets (without goodwill) at December 31, 2017?

A) \$73,000,000
B) \$68,000,000
C) \$64,000,000
D) \$59,000,000

Diff: 2

Difference in good will =7000-9000 =-2000
66000-2000 =64000

Objective:  12.4fair value
IFRS/GAAP:  GAAP
AACSB:  Application of Knowledge
14) Regular Corp. has four divisions. One of them, Weeble Products, was acquired on January 1, 2016, for \$60,000,000, and recorded goodwill of \$6,000,000 as a result of that purchase. At December 31, 2017, Weeble Products had a fair value (including goodwill) of \$37,000,000. and the book value of the company’s net assets (without goodwill) was \$44,000,000. The fair value of Weeble’s net assets (without goodwill) at December 31, 2017 was \$33,000,000. What amount of loss on impairment of goodwill should Regular record in 2017?

A) -0-
B) \$2,000,000
C) \$4,000,000
D) \$11,000,000

60000-33000 =27000 net assets
60000-37000 =23000
Difference =(27000-23000)*1000 = 4000
The value of good will =6000-4000 =200000

17) In 2010, Bambung Corporation acquired production machinery at a cost of £410,000, which now has a book value of £190,000. The undiscounted cash flows from use of the machinery is £175,000. and it’s fair value in use is £155,000. What amount should Bambung recognize as a loss on impairment?

A) £35,000
B) £20,000
C) £15,000
D) -0-

Diff: 2
Objective:  12.5
IFRS/GAAP:  IFRS
AACSB:  Application of Knowledge
Impairment loss = cost-acc. Dep- fair value
410000-19000 =220000
41000-175000 =235000
Difference =235000-220000 =15000

18) In 2009, Heisenburg Company acquired production machinery at a cost of €620,000, which now has a accumulated depreciation of €340,000. The value in use of the asset is €290,000 and it’s fair value less cost to sell is €245,000. What amount should Condor recognize as a loss on impairment?

A) €50,000
B) €35,000
C) €10,000
D) -0-

Diff: 2

Impairment loss = cost-acc. Dep- fair value

620000-340000 =2800000
Fair value less cost to sell is less than the net value hence no impairment loss

19) In 2011, Bellding Inc. acquired production machinery at a cost of £630,000, which now has accumulated depreciation of £380,000. The value in use of the machinery is £195,000. and it’s fair value let cost to sell is £225,000. What amount should Condor recognize as a loss on impairment?

A) £155,000
B) £30,000
C) £25,000
D) -0-

Diff: 2
Objective:  12.5
IFRS/GAAP:  IFRS
AACSB:  Application of Knowledge

Impairment loss = cost-acc. Dep- fair value
630000-380000-225000
=25000

20) In 2011, DimDung Inc. Company acquired production machinery which now has a book value of ¥740,000. The undiscounted cash flows from use of the machinery is ¥365,000. and it’s fair value is ¥350,000. DimDung has determined that an impairment loss has occurred. What is the carrying value of the machinery after the journal entry to record the impairment loss has been recorded?

A) ¥390,000
B) ¥375,000
C) ¥365,000
D) ¥350,000

The amount to recognize the carrying cost is 365000

22) In 2010, TallyHo Farms acquired production machinery at a cost of £410,000. In 2013 when accumulated depreciation was £160,000, Banbung reported an impairment loss of £75,000. Now, in 2017 the machinery has a book value of £140,000. The recoverable amount of the machinery is £235,000. and its value in use is £210,000. During impairment testing, Bambung recognized the possibility of a reversal of the previous impairment loss. What amount, if any, should Bambung recognize as a reversal of impairment loss?

A) £95,000
B) £75,000
C) £40,000
D) £25,000

The amount to be recognized as impairment =75000

13) Deluxe Corp. has four international divisions. One of them, Pere Products, was acquired on January 1, 2016, for £400,000,000, and recorded goodwill of £50,000,000 as a result of that purchase. At December 31, 2016, Pere Products had a recoverable amount of £375,000,000. The total book value of Pere Products was £355,000,000 (including goodwill). What amount of loss on impairment of goodwill should Deluxe record in 2016?

A) \$45,000,000
B) \$25,000,000
C) \$20,000,000
D) -0-

Impairment loss since the recoverable amount is less than the book value, the amount to be recognized is nill

14) Deluxe Corp. has four international divisions. One of them, Qaram Corp., was acquired on January 1, 2016, for ₨600,000,000, and recorded goodwill of ₨70,000,000 as a result of that purchase. At December 31, 2016, Qaram had a book value (including goodwill) of ₨375,000,000. The total recoverable amount of Qaram was ₨355,000,000. What amount of loss on impairment of goodwill should Deluxe record in 2016?

A) \$45,000,000
B) \$25,000,000
C) \$20,000,000
D) -0-

Diff: 2
Objective:  12.6
IFRS/GAAP:  GAAP
AACSB:  Application of Knowledge

Bok value-total recoverable =37500000-35500000
=20000000

15) Deluxe Corp. has four international divisions. One of them, RohrSchockt Inc., was acquired on January 1, 2016, for €700,000,000, and recorded goodwill of €80,000,000 as a result of that purchase. At December 31, 2016, RohrSchockt had value in use of €635,000,000 and a book value (including goodwill) of €675,000,000. The total fair value of RohrSchockt was €650,000,000. What amount of loss on impairment of goodwill should Deluxe record in 2016?

A) \$40,000,000
B) \$25,000,000
C) \$15,000,000
D) -0-

The total fair value =65000000-635000000 =15000000

9) In early 2015, Plattsville Plastics recently decided to dispose of an extrusion machine. The original cost was \$460,000 and accumulated depreciation was \$310,000. At that time, the machine was retired from operations, the book value of the machine approximated its fair value. On December 31, 2016, the fair value of the machine was determined to be \$110,000. Which of the following would be included in a related adjusting entry on December 31, 2016.

A) debit Loss on Machine Held for Disposal for \$150,000
B) debit Loss on Machine Held for Disposal for \$40,000
C) credit Loss on Machine Held for Disposal for \$150,000
D) credit Loss on Machine Held for Disposal for \$40,000

Diff: 1
Objective:  12.8
IFRS/GAAP:  GAAP/IFRS
310000-110000 =15000

Fair value =110000
Net value =150000-110000

=40000

AACSB:  Application of Knowledge

10) In early 2015, Plattsville Plastics recently decided to dispose of an extrusion machine. The original cost was \$460,000 and accumulated depreciation was \$310,000. At that time, the machine was retired from operations, the book value of the machine approximated its fair value. On December 31, 2016, the fair value of the machine was determined to be \$110,000. On December 31, 2017, the fair value of the machine was determined to be \$160,000. Which of the following would be included in a related adjusting entry on December 31, 2017?

A) credit Gain on Machine Held for Disposal for \$160,000
B) credit Gain on Machine Held for Disposal for \$50,000
C) credit Gain on Machine Held for Disposal for \$40,000
D) No adjusting entry is required.

Credit gain on Machine held for disposal
1600000-110000 =50000