Question 1 -Determine the initial cost of land
Fresh veggies, Inc. (FVI), purchases land and a warehouse for $580.000. In addition to the purchase price, FVI makes the following expenditures related to the acquisition: brokers commission, $38,000; title insurance, $2,800; and miscellaneous closing costs, $7,600. The warehouse is immediately demolished at a cost of $38,000 in anticipation of building a new warehouse.
Determine the amount FVI should record as the east of the land.
Question 2 - Determine the initial cost of equipment
Whole Grain Bakery purchases an industrial bread machine for $24,500. In addition to the purchase price, the company makes the following expenditures: freight, $1,450; installation, $2,900: tasting, $950: and property tax on the machine for the first year, $490.
What is the initial cost of the bread machine?
Question 3 - Calculate goodwill
Kosher Pickle Company acquires all the outstanding stock of Midwest Produce for $12.0 million. The fair value of Midwest's assets is $8.2 million. The fair value of Midwest's liabilities is $1.2 million.
Calculate the amount paid for goodwill.
Question 4 - Account for the exchange of long-term assets
China Inn and Midwest Chicken exchanged assets. China Inn received a delivery truck and gave equipment. The fair value and book value of the equipment were $17,500 and $10,200 (original cost of $36,000 less accumulated depreciation of $25,800), respectively. To equalize market values of the exchanged assets, China Inn paid $8,100 in cash to Midwest Chicken.
1. At what amount did China Inn record the delivery truck?
2. How much gain or loss did China Inn recognize on the exchange?