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Exam 10: Property, Plant, and Equipment and Intangible Assets: Acquisition

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Question 81

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During the current year, Compton Crate Corporation acquired all of the outstanding common stock of Little Lacy Ltd. (LLL), paying $60 million in cash. Compton recorded the assets acquired as follows: $\begin{array} { l l } \text { Accounts receivable } & \$ 5,500,000 \\\text { Inventory } & 18,000,000 \\\text { Property, plant, and equipment } & 45,500,000 \\\text { Goodwill } & 22,000,000\end{array}$ The book value of LLL's assets and owners' equity before the acquisition were $50 million and $30 million, respectively. Required: Compute the fair value of LLL's liabilities that Compton assumed in the acquisition.

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Fair value of assets - Fair va...

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Question 82

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Interest may be capitalized:

A) On routinely manufactured goods as well as self-constructed assets.
B) On self-constructed assets from the date an entity formally adopts a plan to build a discrete project.
C) Whether or not there is specific borrowing for the construction.
D) Whether or not there are actual interest costs incurred.

E) B) and D)
F) None of the above

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Question 83

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The cost of constructing a new parking lot at the company's office building would be recorded as:

Productive assets that are physically consumed in operations are:

Braxwell Corporation acquired the following assets associated with a manufacturing facility for a lump-sum price of $9,000,000. According to independent appraisals, the fair values were $4,000,000, $2,000,000, $3,000,000, and $1,000,000 for the building, patent, land, and equipment, respectively. The initial value of the patent would be:

Property, plant, and equipment and intangible assets are long-term, revenue producing assets.

A contractual arrangement under which one party grants another party the exclusive right to use a trademark or tradename is a:

Costs incurred after discovery of a natural resource but before production begins are reported as expenses of the period in which the expenditures are made.

Alamos Co. exchanged equipment and $18,000 cash for similar equipment. The book value and the fair value of the old equipment were $82,000 and $90,000, respectively. - Assuming that the exchange has commercial substance, Alamos would record a gain/(loss) of: