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ACC 422 Week 2 CPA Solutions



ACC 422 Week 2 CPA Solutions On June 18, 2005, Dell Printing Co. incurred the following costs for one of its printing presses: Purchase of collating and stapling attachment $84,000 Installation of attachment 36,000 Replacement parts for overhaul of press 26,000 Labor and overhead in connection with overhaul 14,000 The overhaul resulted in a significant increase in production. Neither the attachment nor the overhaul increased the estimated useful life of the press. What amount of the above costs should be capitalized? $0 $84,000 $120,000 $160,000 The following two inventory items were purchased as a group in a liquidation sale for $1,000. Replacement Carrying Value Item Cost On Seller’s Books A $400 $390 B 700 755 The firm purchasing the inventory records item A at what amount? $341 $390 $364 $500 Which of the following statements are correct when a company applying the lower of cost or market method reports its inventory at replacement cost? The original cost is less than replacement cost. The net realizable value is greater than replacement cost. I only. II only. Both I and II. Neither I nor II. Immediately after a note payable was signed, its present value was $30,000. This note and $20,000 cash were used to acquire a used plant asset at the beginning of the current year. The interest rate implied in the note is 6%. Total interest payments due on the note over its term amount to $4,000. The term exceeds one year. No payments on the note are due during the current year. What amount of interest expense is recognized for the first year (current year) on this note, and what amount is capitalized to the plant asset account? Interest Expense Capitalized Amount $1,800 $50,000 $3,000 $50,000 $4,000 $30,000 $0 $50,000 Cole Co. began constructing a building for its own use in January 2004. During 2004, Cole incurred interest of $50,000 on specific construction debt and $20,000 on other borrowings. Interest computed on the weighted-average amount of accumulated expenditures for the building during 2004 was $40,000. What amount of interest cost should Cole capitalize? $20,000 $40,000 $50,000 $70,000 Many years after constructing a plant asset, management spent a significant sum on the asset. Which of the following types of expenditures should be capitalized in this instance: (1) an expenditure for routine maintenance that increases the useful life compared with deferring the maintenance, (2) an expenditure that increases the useful life of the asset compared with the original estimate assuming normal maintenance at the required intervals, (3) an expenditure that increases the utility of the asset. (1) (2) (3) Yes Yes Yes No Yes Yes No No Yes No Yes No Which of the following is a not requirement for an asset to be categorized as a plant asset. Have physical substance. Have a useful life of at least three years. Currently used in operations. Not held for investment purposes. Zahn Corp.’s comprehensive Balance Sheet at December 31, 2005 and 2004 reported accumulated depreciation balances of $800,000 and $600,000, respectively. Property with a cost of $50,000 and a carrying amount of $40,000 was the only property sold in 2005. Depreciation charged to operations in 2005 was: $190,000 $200,000 $210,000 $220,000 Talton Co. installed new assembly line production equipment at a cost of $185,000. Talton had to rearrange the assembly line and remove a wall to install the equipment. The rearrangement cost was $12,000 and the wall removal cost was $3,000. The rearrangement did not increase the life of the assembly line but it did make it more efficient. What amount of these costs sho


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