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Chapter 10: Acquisition and Disposition of Property, Plant, and Equipment

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Intermediate Accounting (Kieso)
Pages: 502 - 551

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87 Questions for Chapter 10: Acquisition and Disposition of Property, Plant, and Equipment

  1. (Capitalization of Interest) The following three situations involve the capitalization of interest

    Found on Page 536
  2. (Purchases by Deferred Payment, Lump-Sum, and Nonmonetary Exchanges) Klamath Company, a manufacturer of ballet shoes, is experiencing a period of sustained growth. In an effort to expand its production capacity to meet the increased demand for its product, the company recently made several acquisitions of plant and equipment. Rob Joffrey, newly hired in the position of fixed-asset accountant, requested that Danny Nolte, Klamath’s controller, review the following transactions.

    Found on Page 545
  3. Question: Stan Ott is evaluating two recent transactions involving exchanges of equipment. In one case, the exchange has commercial substance. In the second situation, the exchange lacks commercial substance. Explain to Stan the differences in accounting for these two situations.

    Found on Page 531
  4. Crowe Company purchased a heavy-duty truck on July 1, 2014, for $30,000. It was estimated that it would have a useful life of 10 years and then would have a trade-in value of $6,000. The company uses the straight-line method. It was traded on August 1, 2018, for a similar truck costing $42,000; $16,000 was allowed as trade-in value (also fair value) on the old truck and $26,000 was paid in cash. A comparison of expected cash flows for the trucks indicates the exchange lacks commercial substance. What is the entry to record the trade-in?

    Found on Page 502
  5. What accounting treatment is normally given to the following items in accounting for plant assets? (a) Additions. (b) Major repairs. (c) Improvements and replacements.

    Found on Page 531
  6. Garcia Corporation purchased a truck by issuing an $80,000, 4-year, zero-interest-bearing note to Equinox Inc. The market rate of interest for obligations of this nature is 10%. Prepare the journal entry to record the purchase of this truck.

    Found on Page 502
  7. New machinery, which replaced a number of employees, was installed and put in operation in the last month of the fiscal year. The employees had been dismissed after payment of an extra month’s wages, and this amount was added to the cost of the machinery. Discuss the propriety of the charge. If it was improper, describe the proper treatment.

    Found on Page 502
  8. Neville Enterprises has a number of fully depreciated assets that are still being used in the main operations of the business. Because the assets are fully depreciated, the president of the company decides not to show them on the balance sheet or disclose this information in the notes. Evaluate this procedure

    Found on Page 502
  9. What are the general rules for how gains or losses on retirement of plant assets should be reported in income?

    Found on Page 532
  10. Hanson Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,800,000 on March 1, $1,200,000 on June 1, and $3,000,000 on December 31. Compute Hanson’s weighted-average accumulated expenditures for interest capitalization purposes.

    Found on Page 502

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