Multiple Choice Question 114
The following data concerning the retail inventory method are taken from the financial records of Carla Vista Company.
Cost
Retail
Beginning inventory
$ 183000
$ 287000
Purchases
890000
1210000
Freight-in
23000
—
Net markups
—
80300
Net markdowns
—
55100
Sales
—
1294000
The ending inventory at retail should be
$251200.
$306300.
$228200.
Multiple Choice Question 68
During self-construction of an asset by Crane Company, the following were among the costs incurred:
Fixed overhead for the year
$950000
Portion of $950000 fixed overhead that would
be allocated to asset if it were normal production
75000
Variable overhead attributable to self-construction
45000
What amount of overhead should be included in the cost of the self-constructed asset?
$120000
$ -0-
$75000
Multiple Choice Question 94
Crane Inc. and Wildhorse Co. have an exchange with no commercial substance. The asset given up by Crane Inc. has a book value of $56500 and a fair value of $91500. The asset given up by Wildhorse Co. has a book value of $121500 and a fair value of $106500. Boot of $26500 is received by Wildhorse Co.
What amount should Crane Inc. record for the asset received?
$83000
$106500
$91500
Multiple Choice Question 78
On September 19, 2017, Vaughn Manufacturing purchased machinery for $476000. Salvage value was estimated to be $27000. The machinery will be depreciated over eight years using the sum-of-the-years’-digits method. If depreciation is computed on the basis of the nearest full month, Vaughn should record depreciation expense for 2018 on this machinery of
$102472.
$96660.
$96896.
Multiple Choice Question 95
Crane Company bought a machine on January 1, 2008 for $804000. The machine had an expected life of 20 years and was expected to have a salvage value of $76000. On July 1, 2018, the company reviewed the potential of the machine and determined that its future net cash flows totaled $407000 and its fair value was $295000. If the company does not plan to dispose of it, what should Crane record as an impairment loss on July 1, 2018?
$40700
$126800
$0
Multiple Choice Question 107
Cullumber Company acquired a patent on an oil extraction technique on January 1, 2017 for $7550000. It was expected to have a 10 year life and no residual value. Cullumber uses straight-line amortization for patents. On December 31, 2018, the future cash flows expected from the patent were $915000 per year for the next 8 years. The present value of these cash flows, discounted at Cullumber’s market interest rate, is $4225000. At what amount should the patent be carried on the December 31, 2018 balance sheet?
$7550000.
$6040000.
$7320000.
Multiple Choice Question 121
January 2, 2015, Wildhorse, Inc. purchased a patent for a new consumer product for $770000. At the time of purchase, the patent was valid for 15 years; however, the patent’s useful life was estimated to be only 10 years due to the competitive nature of the product. On December 31, 2018, the product was permanently withdrawn from the market under governmental order because of a potential health hazard in the product. What amount should Wildhorse charge against income during 2018, assuming amortization is recorded at the end of each year?
$616000
$462000
$539000
Practice Question 39
Laboratory research aimed at discovery of new knowledge of $4,295,000 plus costs of testing prototype and design modifications of $712,500 totals $5,007,500. Quality control during commercial production, including routine testing of products is not an R&D activity and the purchase of research facilities having an estimated useful life of 20 years with alternative future use in other R&D projects would be capitalized. The company won’t account for depreciation expense as R&D in 2017.
Lumberyard Inc. incurred the following costs during the year ended December 31, 2017:
Laboratory research aimed at discovery of new knowledge
$ 4,295,000
Costs of testing prototype and design modifications
712,500
Quality control during commercial production, including routine testing of products
485,000
On December 31, 2017, purchase of research facilities having an estimated useful life of 20 years with alternative future use in other research & development projects
7,360,000
The total amount to be classified and expensed as research and development in 2017 is
$12,367,500.
$5,007,500.
$4,780,000.
