Question 1. Simons Company purchased land to build a new factory. The following expenditures were made in conjunction with the land purchase:
Purchase price of land $150,000
Real estate commission of 7% of the purchase price
Land survey $5,000
Back Taxes $5,000
What is the value of the land?
Question 2. During 2011, Burr Co made the following expenditures related to the acquisition of land and the construction of a building:
Purchase price of land $60,000
Legal fees for contracts to purchase land $2,000
Architect's fees $8,000
Demolition of old building on site $5,000
Sale of scrap from old building $3,000
Construction cost of new building (fully completed) $350,000
What amounts should be recorded as the initial values of the land and building?
Land Building
a) $60,000 $360,000
b) $62,000 $360,000
c) $64,000 $358,000
d) $65,000 $362,000
Question 3: Amble Inc exchanged a truck with a book value of $12,000 and a fair value of $20,000 for a truck and $5,000 cash. The exchange has commercial substance. At what amount Amble record the truck received?
Question 4: Cole Co began constructing a building for its own use in January 2011. During 2011, Cole incurred interest of $50,000 on specific construction debt, and $20,000 on other borrowings. Interest computed on the weighted average amount of accumulated expenditures for the building during 2011 was $40,000. What amount of interest should Cole capitalize?
Question 5: During the current year Orr Company incurred the following costs:
Research and development services
Performed by Key Corp for Orr $150,000
Design, construction and testing of preproduction
Prototypes and models $200,000
Testing in search for new products or process alternatives $175,000
In its income statement for the current year, what amount should Orr report as research and development expense?