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Samtech Manufacturing purchased land and building for $5 million. In addition to the purchase price,
Samtech made the following expenditures in connection with the purchase of the land and building:
 

Title insurance	$	24,000
Legal fees for drawing the contract		9,000
Pro-rated property taxes for the period after acquisition		44,000
State transfer fees		4,800

 
An independent appraisal estimated the fair values of the land and building, if purchased separately, at $4.2 and $1.8 million, respectively.
Shortly after acquisition, Samtech spent $90,000 to construct a parking lot and $48,000 for landscaping.
 
Required:
1. Determine the initial valuation of each asset Samtech acquired in these transactions.
2. Determine the initial valuation of each asset, assuming that immediately after acquisition, Samtech demolished the building.
Demolition costs were $330,000 and the salvaged materials were sold for $5,000. In addition, Samtech spent $87,000 clearing
and grading the land in preparation for the construction of a new building.
 

Highsmith Rental Company purchased an apartment building early in 2021.
There are 15 apartments in the building and each is furnished with major kitchen appliances.
The company has decided to use the group depreciation method for the appliances. The following data are available:
 

Appliance	Cost			Residual Value			Service Life (in Years)
Stoves	$	41,000		$	8,000		6
Refrigerators		36,000			5,000		5
Dishwashers		34,000			4,000		4

 
In 2024, three new refrigerators costing $4,000 were purchased for cash. In that same year, the old refrigerators,
which originally cost $4,100, were sold for $1,500.
 
Required:
1. Calculate the group depreciation rate, group life, and depreciation for 2021.
2. Prepare the journal entries to record the purchase of the new refrigerators and the sale of the old refrigerators
 


   
On March 1, 2021, Beldon Corporation purchased land as a factory site for $79,000.
An old building on the property was demolished, and construction began on a new building that was completed on December 15, 2021.
Costs incurred during this period are listed below:
 

Demolition of old building	$	8,500
Architect’s fees (for new building)		18,000
Legal fees for title investigation of land		5,000
Property taxes on land (for period beginning March 1, 2021)		4,900
Construction costs		690,000
Interest on construction loan		9,500

 
Salvaged materials resulting from the demolition of the old building were sold for $3,900.
 
Required:
Determine the amounts that Beldon should capitalize as the cost of the land and the new building.
 


   
Van Frank Telecommunications has a patent on a cellular transmission process.
The company has amortized the patent on a straight-line basis since 2017, when it was acquired at a cost of $21.6 million at the beginning of that year.
Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a
total of six years rather than the nine-year life being used to amortize its cost. The decision was made at the beginning of 2021.
 
Required:
Prepare the year-end journal entry for patent amortization in 2021. No amortization was recorded during the year.
(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5)).
 

   
When selling property, plant, and equipment for cash:
The seller recognizes a gain or loss for the difference between the cash received and the book value of the asset sold.
   
During 2021, the Longhorn Oil Company incurred $5,000,000 in exploration costs for each of 20 oil wells drilled in 2021 in west Texas.
Of the 20 wells drilled, 14 were dry holes. Longhorn uses the successful efforts method of accounting.
Assuming that none of the oil found is depleted in 2021, what oil exploration expense would Longhorn charge for this activity in its 2021 income statement?
$70 million.
   
Activity-based methods of depreciation are appropriate for assets whose service life is a function of use rather than time.
Top of Form
True
   
Below is information relative to an exchange of similar assets by Grand Forks Corp.
Assume the exchange has commercial substance.
 

	Old Equipment								Cash
	Book Value				Fair Value				Paid
Case A	$	50,000			$	60,000			$	15,000
Case B	$	40,000			$	35,000			$	8,000

In Case A, Grand Forks would record the new equipment at:
$75,000
   
Accounting for a change in the estimated service life of equipment:
Is handled prospectively.
   
On March 31, 2021, M. Belotti purchased the right to remove gravel from an old rock quarry.
The gravel is to be sold as roadbed for highway construction.
The cost of the quarry rights was $266,000, with estimated salable rock of 35,000 tons.
During 2021, Belotti loaded and sold 5,400 tons of rock and estimated that 29,600 tons remained at December 31, 2021. At January 1, 2022,
Belotti estimated that 10,800 tons still remained. During 2022, Belotti loaded and sold 16,200 tons. Belotti uses the units-of-production method.
Belotti would record depletion in 2021 of:
(Do not round depletion rate per ton.)
 
$41,040  
According to International Financial Reporting Standards (IFRS), an impairment loss for property, plant, and equipment is required only when an asset's book value exceeds the undiscounted sum of the asset's estimated future cash flows.
False
   
Natural resources that have been harvested but not yet sold are accounted for as:
 
Inventory
   
The costs of research and development performed by the company for sale to others (but not yet sold) would be included in which of the following accounts?
 
Inventory
   
On January 1, 2021, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2022. Expenditures on the project were as follows:
 

January 1, 2021	$	300,000
September 1, 2021	$	450,000
December 31, 2021	$	450,000
March 31, 2022	$	450,000
September 30, 2022	$	300,000

Dreamworld had $5,000,000 in 12% bonds outstanding through both years.
Dreamworld's capitalized interest in 2021 was:
$54,000
   
The amount of impairment loss is the excess of book value over:
Fair value.
   
On January 1, 2021, Kendall Inc. began construction of an automated cattle feeder system.
The system was finished and ready for use on September 30, 2022. Expenditures on the project were as follows:
 

January 1, 2021	$	200,000
September 1, 2021	$	300,000
December 31, 2021	$	300,000
March 31, 2022	$	300,000
September 30, 2022	$	200,000

Kendall borrowed $750,000 on a construction loan at 12% interest on January 1, 2021.
This loan was outstanding throughout the construction period.
The company had $4,500,000 in 9% bonds payable outstanding in 2021 and 2022.
Interest (using the specific interest method) capitalized for 2021 was:
$36,000
   
Assets acquired under multi-year deferred payment contracts are:
Valued at the present value of the payments required by the contract.
   
On March 31, 2021, M. Belotti purchased the right to remove gravel from an old rock quarry.
The gravel is to be sold as roadbed for highway construction.
The cost of the quarry rights was $164,000, with estimated salable rock of 20,000 tons.
During 2021, Belotti loaded and sold 4,000 tons of rock and estimated that 16,000 tons remained at December 31, 2021.
At January 1, 2022, Belotti estimated that 20,000 tons still remained.
During 2022, Belotti loaded and sold 8,000 tons. Belotti uses the units-of-production method.

Belotti would record depletion in 2022 of:
 
$52,480
   
Cebrex Software began a new development project in 2020.
The project reached technological feasibility on June 30, 2021, and was available for release to customers at the beginning of 2022.
Development costs incurred prior to June 30, 2021, were $3,200,000 and costs incurred from June 30 to the product release date were $1,400,000.
The economic life of the software is estimated at four years. For what amount will software be capitalized in 2021?
$1,400,000.
   
Biological assets are valued at fair value less estimated costs to sell under International Financial Reporting Standards (IFRS).
 
True
   
Maltese is a privately-owned company. On September 3, Maltese exchanged 2,000 shares of its private common stock for equipment.
There is no readily available estimate of the stock’s fair value. The equipment currently is selling for $80,000.
The journal entry to record this transaction includes:
Debit: Equipment, $80,000.
   
A company has the following expenditures during the year.
 

Advertising	$	100,000
Employee training		80,000
Customer outreach and consultation		50,000

The company believes that these efforts have increased the fair value of the entire company by $325,000.
How much goodwill can the company recognize at the end of the year associated with these expenditures?
$0.
   
Goodwill is:
The excess of the fair value of a business over the fair value of all net identifiable assets.
   
Montgomery Industries spent $630,000 in 2020 on a construction project to build a library.
Montgomery also capitalized $31,500 of interest on the project in 2020. Montgomery financed 100% of the construction with a 10% construction loan.
The project was completed on September 30, 2021. Additional expenditures in 2021 were as follows:
 

Feb. 28	$	92,700
Apr. 30		182,700
Jul. 1		38,700
Sept. 30		66,700

Required:
Determine the completed cost of the library.
(Do not round intermediate calculations.)
 

   
Cutter Enterprises purchased equipment for $60,000 on January 1, 2021.
The equipment is expected to have a five-year life and a residual value of $8,700.
Using the double-declining-balance method, depreciation for 2021 and the book value at December 31, 2021, would be:
$24,000 and $36,000 respectively.