Question: Determine the response that best completes the following statements or questions.
1. On December 1, 2012, Bar S purchased a $500,000 tract of land for a factory site. Bar S removed an old building on the property and sold the materials it salvaged from the demolition. Bar S incurred additional costs and realized salvage proceeds during December 2012 as follows:
Demolition of old building $40,000
Legal fees for purchase contract and recording of ownership 13,000
Title guarantee insurance 8,000
Proceeds from sale of salvaged materials 3,000
In its December 31, 2012, balance sheet, Bar S should report a balance in the Land account of
a. $558,000.
b. $561,000.
c. $564,000.
d. $521,000.
2. On October 1, 2012, Manning Corp. purchased a machine for $126,000 that was placed in service on November 30, 2012. Manning incurred additional costs for this machine, as follows:
Shipping $3,000
Installation 4,000
Testing 5,000
In Manning's December 31, 2012, balance sheet, the machine's cost should be reported as:
a. $126,000.
b. $129,000.
c. $133,000.
d. $138,000.
3. Hanner Corp. bought Patent A for $40,000 and Patent B for $60,000. Hanner also paid acquisition costs of $5,000 for Patent A and $7,000 for Patent B. Both patents were challenged in legal actions. Hanner paid $20,000 in legal fees for a successful defense of Patent A and $30,000 in legal fees for an unsuccessful defense of Patent B. Due to the unsuccessful defense, Patent B was taken off the books. What amount should Hanner capitalize for patents?
a. $162,000.
b. $ 65,000.
c. $112,000.
d. $ 45,000.