ACC 308 2-2 Homework Chapter 10

1)

Freitas Corporation was organized early in 2013. The following expenditures were made during the first few months of the year:

 

 

  Attorneys’ fees in connection with the organization of the corporation $ 13,000  

  State filing fees and other incorporation costs 3,500  

  Purchase of a patent 21,000  

  Legal and other fees for transfer of the patent 2,500  

  Purchase of furniture 31,000  

  Pre-opening salaries 41,000  

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     Total 112,000  

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Required:

Prepare a summary journal entry to record the $112,000 in cash expenditures. (If no entry is required for an event, select "No journal entry required" in the first account field.)

 

2)

Teradene Corporation purchased land as a factory site and contracted with Maxtor Construction to construct a factory. Teradene made the following expenditures related to the acquisition of the land, building, and machinery to equip the factory (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.):

 

  

  

  Purchase price of the land $ 1,330,000  

  Demolition and removal of old building 93,000  

  Clearing and grading the land before construction 215,000  

  Various closing costs in connection with acquiring the land 55,000  

  Architect's fee for the plans for the new building 63,000  

  Payments to Maxtor for building construction 3,380,000  

  Machinery purchased 925,000  

  Freight charges on machinery 45,000  

  Trees, plants, and other landscaping 58,000  

  Installation of a sprinkler system for the landscaping 6,300  

  Cost to build special platforms and install wiring for the machinery 25,000  

  Cost of trial runs to ensure proper installation of the machinery 8,300  

  Fire and theft insurance on the factory for the first year of use 37,000  

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In addition to the above expenditures, Teradene purchased four forklifts from Caterpillar. In payment, Teradene paid $29,000 cash and signed a noninterest-bearing note requiring the payment of $83,000 in one year. An interest rate of 6% properly reflects the time value of money for this type of loan.

  

Required:

Determine the initial valuation of each of the assets Teradene acquired in the above transactions.

 

3)

On February 1, 2013, the Xilon Corporation issued 42,000 shares of its nopar common stock in exchange for five acres of land located in the city of Monrovia. On the date of the acquisition, Xilon’s common stock had a fair value of $17 per share. An office building was constructed on the site by an independent contractor. The building was completed on November 2, 2013, at a cost of $6,300,000. Xilon paid $4,150,000 in cash and the remainder was paid by the city of Monrovia.

 

Required:

Prepare the necessary journal entries to record the acquisition of the land and the building. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)

 

4)

Cedric Company recently traded in an older model computer for a new model. The old model’s book value was $200,000 (original cost of $440,000 less $240,000 in accumulated depreciation) and its fair value was $240,000. Cedric paid $64,000 to complete the exchange which has commercial substance.

 

Required:

Prepare the journal entry to record the exchange. (If no entry is required for an event, select "No journal entry required" in the first account field.)

 

5)

Early in 2013, the Excalibur Company began developing a new software package to be marketed. The project was completed in December 2013 at a cost of $15 million. Of this amount, $9 million was spent before technological feasibility was established. Excalibur expects a useful life of five years for the new product with total revenues of $20 million. During 2014, revenue of $5 million was recognized.

  

Required:

1. Prepare a journal entry to record the 2013 development costs. (Enter your answers in whole dollars. If no entry is required for an event, select "No journal entry required" in the first account field.)

    

 

2. Calculate the required amortization for 2014. (Enter your answers in whole dollars.)

 

3. At what amount should the computer software costs be reported in the December 31, 2014, balance sheet? (Enter your answers in whole dollars.)

 

 

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ACC----------- 30-----------8 -----------2-2----------- Ho-----------mew-----------ork----------- Ch-----------apt-----------er -----------10-----------

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