1, The term capitalize means to record an expenditure as an expense. True or False.
2, Cash received from the sale of salvaged materials increase the total recorded cost of the land. T or F
3, Most if the costs associated with internally developed intangible assets are recorded as intangible assets on the balance sheet. T or F
4, Goodwill is recorded as an intangible asset on the balance sheet only when it is purchased as part of the acquisition cost of another company. T or F
5, Book value is equal to the original cost of the asset less the toal balance in accumulated depreciation. T or F
6, Impairment occurs when the future cash flows geerated for a long-term asset fall below its fair value. T or F
7, Circle Co purchased a piece of equipment by paying $10,000 cash. There was a shipping cost of $1,200 and a renovation cost of $3,200 to the building to get the space ready for the installation. There was also an installation cost of $1,000. What should be the recorded cost of this piece of equipment?
1, The term capitalize means to record an expenditure as an expense. True or False.
2, Cash received from the sale of salvaged materials increase the total recorded cost of the land. T or F
3, Most if the costs associated with internally developed intangible assets are recorded as intangible assets on the balance sheet. T or F
4, Goodwill is recorded as an intangible asset on the balance sheet only when it is purchased as part of the acquisition cost of another company. T or F
5, Book value is equal to the original cost of the asset less the toal balance in accumulated depreciation. T or F
6, Impairment occurs when the future cash flows geerated for a long-term asset fall below its fair value. T or F
7, Circle Co purchased a piece of equipment by paying $10,000 cash. There was a shipping cost of $1,200 and a renovation cost of $3,200 to the building to get the space ready for the installation. There was also an installation cost of $1,000. What should be the recorded cost of this piece of equipment?
Related questions
A company had three intangible assets at the end of the currentyear: |
| a. | A patent purchased this year from the company on January 1 for acash cost of $8,400. When purchased, the patent had an estimatedlife of 14 years. |
| b. | A trademark was registered with the federal government for$7,000. Management estimated that the trademark could be worth asmuch as $180,000 because it has an indefinite life. |
| c. | Computer licensing rights were purchased this year on January 1for $52,000. The rights are expected to have a four-year usefullife to the company. |
| 1.Compute the acquisition cost of each intangible asset.
2. Compute the amortization of each intangible for the currentyear ended December 31.
3. Show how these assets and any related expenses should bereported on the balance sheet and income statement for the currentyear
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The condensed balance sheets for Rice & Associates and Rachel Company as of December 30, 2016 are shown in Exhibit 1. On December 31, 2016, Rice & Associates purchased 80.0 percent of Rachel Company for $140,000 by issuing 50,000 shares of its previously authorized common stock. As of December 31, 2016, the fair values of Rachel Companyâs assets and liabilities are shown below, including customer lists, an intangible asset identified during the acquisition:
Cash $10,000
Accounts receivable 40,000
Inventory 70,000
Property, plant and equipment 120,000
Customer lists 10,000
Accounts payable 15,000
Long-term liabilities 65,000
Required:
a. Prepare a consolidated balance sheet immediately after the acquisition on December 31, 2016.
b. Will an account called âinvestment in Rachel Companyâ appear as an asset in Rice & Associateâs un-consolidated balance sheet? (circle one) Yes or No? Explain.
c. Will an account called âinvestment in Rachel Companyâ appear as an asset in Rice & Associateâs consolidated balance sheet? (circle one) Yes or No? Explain.
d. Will an account called âgoodwillâ appear as an asset in Rice & Associates un-consolidated balance sheet? (circle one) Yes or No? Explain.
e. Will an account called âgoodwillâ appear as an asset in Rachel Companyâs un-consolidated balance sheet? (circle one) Yes or No? Explain.
| EXHIBIT 1 | ||||||
| RICE & ASSOCIATES AND RACHEL | ||||||
| BALANCE SHEETS | ||||||
| Before Acquisition of Rachel | ||||||
| Rice Before | ||||||
| Issue Stock | ||||||
| Assets | for Rachel | Rachel | ||||
| Cash | $56,000 | $10,000 | ||||
| Accounts receivable | 150,000 | 40,000 | ||||
| Inventory | 300,000 | 40,000 | ||||
| Property, plant & equipment | 400,000 | 130,000 | ||||
| Total assets | $906,000 | $220,000 | ||||
| Liabilities & Stockholder's Equity | ||||||
| Accounts payable | $80,000 | $20,000 | ||||
| Long-term liabilities | 300,000 | 50,000 | ||||
| Common stock, par value $1 | 350,000 | 90,000 | ||||
| Capital paid in excess of par value | 50,000 | 10,000 | ||||
| Retained earnings | 126,000 | 50,000 | ||||
| Total liabilities & stockholder's equity | $906,000 | $220,000 | ||||
Cougar Plastics Company has been operating for three years. At December 31 of last year, the accounting records reflected the following:
| Cash | $ | 28,000 | Accounts payable | $ | 20,000 | |
| Investments (short-term) | 2,000 | Accrued liabilities payable | 3,400 | |||
| Accounts receivable | 3,200 | Notes payable (short-term) | 6,200 | |||
| Inventory | 29,000 | Notes payable (long-term) | 45,000 | |||
| Notes receivable (long-term) | 2,500 | Common stock | 10,600 | |||
| Equipment | 51,000 | Additional paid-in capital | 95,400 | |||
| Factory building | 104,000 | Retained earnings | 43,600 | |||
| Intangibles | 4,500 | |||||
During the current year, the company had the following summarized activities:
Purchased short-term investments for $7,300 cash.
Lent $5,400 to a supplier who signed a two-year note.
Purchased equipment that cost $25,000; paid $4,300 cash and signed a one-year note for the balance.
Hired a new president at the end of the year. The contract was for $84,000 per year plus options to purchase company stock at a set price based on company performance.
Issued an additional 2,500 shares of $0.50 par value common stock for $16,000 cash.
Borrowed $11,000 cash from a local bank, payable in three months.
Purchased a patent (an intangible asset) for $1,600 cash.
Built an addition to the factory for $25,000; paid $8,700 in cash and signed a three-year note for the balance.
Returned defective equipment to the manufacturer, receiving a cash refund of $1,800.
5. Prepare a classified balance sheet at December 31 of the current year.
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