Question Details

Huff Co. exchanged nonmonetary assets 



1.	On December 1, 2010, Hogan Co. purchased a tract of land as a factory site for $800,000. The old building on the property was razed, and salvaged materials resulting from demolition were sold. Additional costs incurred and salvage proceeds realized during December 2010 were as follows:
Cost to raze old building	$70,000
Legal fees for purchase contract and to record ownership	10,000
Title guarantee insurance	16,000
Proceeds from sale of salvaged materials	8,000
In Hogan 's December 31, 2010 balance sheet, what amount should be reported as land?
a.	$826,000.
b.	$862,000.
c.	$888,000.
d.	$896,000.

	2.	Land was purchased to be used as the site for the construction of a plant. A building on the property was sold and removed by the buyer so that construction on the plant could begin. The proceeds from the sale of the building should be
a.	classified as other income.
b.	deducted from the cost of the land. 
c.	netted against the costs to clear the land and expensed as incurred.
d.	netted against the costs to clear the land and amortized over the life of the plant.

	3.	A company is constructing an asset for its own use. Construction began in 2010. The asset is being financed entirely with a specific new borrowing. Construction expenditures were made in 2010 and 2011 at the end of each quarter. The total amount of interest cost capitalized in 2011 should be determined by applying the interest rate on the specific new borrowing to the
a.	total accumulated expenditures for the asset in 2010 and 2011.
b.	average accumulated expenditures for the asset in 2010 and 2011.
c.	average expenditures for the asset in 2011.
d.	total expenditures for the asset in 2011.

	4.	Colt Football Co. had a player contract with Watts that is recorded in its books at $3,600,000 on July 1, 2010. Day Football Co. had a player contract with Kurtz that is recorded in its books at $4,500,000 on July 1, 2010. On this date, Colt traded Watts to Day for Kurtz and paid a cash difference of $450,000. The fair value of the Kurtz contract was $5,400,000 on the exchange date. The exchange had no commercial substance. After the exchange, the Kurtz contract should be recorded in Colt's books at
a.	$4,050,000.
b.	$4,500,000.
c.	$4,950,000.
d.	$5,400,000.

5.	Huff Co. exchanged nonmonetary assets with Sayler Co. No cash was exchanged and the exchange had no commercial substance. The carrying amount of the asset surrendered by Huff exceeded both the fair value of the asset received and Sayler's carrying amount of that asset. Huff should recognize the difference between the carrying amount of the asset it surrendered and
a.	the fair value of the asset it received as a loss.
b.	the fair value of the asset it received as a gain.
c.	Sayler's carrying amount of the asset it received as a loss.
d.	Sayler's carrying amount of the asset it received as a gain.





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