Clark Co. and Keys Inc. exchange equipment. Information related to this exchange follows. Clark Co. Keys Inc. Equipment given up: Equipment (original cost) $60,000 $70,000 Accumulated depreciation 20,000 24,000 Fair value 36,000 48,000 Cash exchanged (12,000) 12,000 Required a. Record the exchange for Clark Co. assuming the transaction has commercial substance. b. Record the exchange for Keys Inc. assuming the transaction has commercial substance. c. Record the exchange for Clark Co. assuming the transaction lacks commercial substance. d. Record the exchange for Keys Inc. assuming the transaction lacks commercial substance. a. Exchange has Commercial Substance a. Record the exchange for Clark Co. assuming the transaction has commercial substance. b. Record the exchange for Keys Inc. assuming the transaction has commercial substance. b. Account Name To record acquisition of equipment. Exchange Lacks Commercial Substance To record acquisition of equipment. Dr. Cr.

Clark Co. and Keys Inc. exchange equipment. Information related to this exchange follows. Clark Co. Keys Inc. Equipment given up: Equipment (original cost) $60,000 $70,000 Accumulated depreciation 20,000 24,000 Fair value 36,000 48,000 Cash exchanged (12,000) 12,000 Required a. Record the exchange for Clark Co. assuming the transaction has commercial substance. b. Record the exchange for Keys Inc. assuming the transaction has commercial substance. c. Record the exchange for Clark Co. assuming the transaction lacks commercial substance. d. Record the exchange for Keys Inc. assuming the transaction lacks commercial substance. a. Exchange has Commercial Substance a. Record the exchange for Clark Co. assuming the transaction has commercial substance. b. Record the exchange for Keys Inc. assuming the transaction has commercial substance. b. Account Name To record acquisition of equipment. Exchange Lacks Commercial Substance To record acquisition of equipment. Dr. Cr.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Which statements are correct concerning measurement of cost of property, plant and equipment?I. The purchase price of an item of property, plant and equipment is the cash price equivalent at the date of recognitionII. If payment is deferred beyond normal credit terms, the difference between the cash price equivalent and total payment is recognized as interest expense over the life of the asset.III. If an item of property, plant and equipment is acquired in exchange for a nonmonetary asset or a combination of monetary and nonmonetary asset, the cost of such item is measured at fair value unless the exchange transaction lacks commercial substance or fair value of either asset received or given up is not reliably determinable.IV. If an entity is able to determine reliably the fair value of both the asset given up and asset received in an exchange, the fair value of the asset given up is used to measure the cost of asset received in exchange.
When nonmonetary assets are exchanged, a company records the cost of the nonmonetary asset acquired at: a.The fair value of the nonmonetary asset surrendered minus cash paid. b.The book value of the asset received minus cash paid. c.The fair value of the nonmonetary asset surrendered plus cash paid. d.The fair value of the nonmonetary asset surrendered plus cash received.
Which of the following statements are correct? I. IAS 16 Property, plant and equipment requires entities to disclose the purchase date of each asset II. The carrying amount of a non-current asset is the cost or valuation of that asset less accumulated depreciation III. IAS 16 Property, plant and equipment permits entities to make a transfer from the revaluation surplus to retained earnings for excess depreciation on revalue assets IV. Once decided, the useful life of a non-current asset should not be changed
When nonmonetary assets are exchanged, a company records the cost of the nonmonetary asset acquired at:
Which of the following statement is incorrect as to acquisition of Property, Plant and Equipment on a cash basis?. a. The cost of an item of property, plant and equipment is the cash price equivalent at the recognition date. b. Directly attributable cost to be capitalized includes freight, installation cost and other cost necessary in bringing the asset to the location and condition for the intended use. c. The cost of asset acquired on a cash basis simply includes the cash paid plus directly attributable cost d. When several assets are acquired at a “basket price” or “lump sum price”, it is necessary to apportion the single price to the assets acquired on the basis of relative carrying value.
1. When an item of asset is transferred to and from the classification investment property, carried using the cost model, the measurement basis at the date of transfer is the a. original cost. b. fair value. c. carrying amount. d. recoverable amount.2. What could be a valid reason for transfers from investment property to property, plant and equipment? a. When there is a change in use b. based on the accountant's discretion c. When the entity adopts the fair value model d. when there is change in asset's life3. An entity has an investment property that is held for rental income. The entity uses the fair value model for reporting the investment property. Which of the following statement is true? a. changes in fair value are reported in profit or loss in the current period b. changes in fair value are reported as an extraordinary gain c. changes in fair value are reported in other comprehensive income for the period d. changes in fair value are…
The cost of intangible asset acquired in business combination is recognized by entity in its book at: a. Cost of acquisition date b. Either at cost or fair value at acquisition date c. Fair value at acquisition date d. Fair value at end of the reporting period
A fixed asset with a cost of $21,296 and accumulated depreciation of $19,166 is traded for a similar asset priced at $68,841 (fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $4,779, at what cost will the new equipment be recorded in the books? a.$68,841 b.$64,062 c.$66,192 d.$70,971A fixed asset with a cost of $21,296 and accumulated depreciation of $19,166 is traded for a similar asset priced at $68,841 (fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $4,779, at what cost will the new equipment be recorded in the books? a.$68,841 b.$64,062 c.$66,192 d.$70,971A fixed asset with a cost of $21,296 and accumulated depreciation of $19,166 is traded for a similar asset priced at $68,841 (fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $4,779, at what cost will the new equipment be recorded in the books? a.$68,841 b.$64,062 c.$66,192 d.$70,971A…
Under IFRS, a company that acquires an intangible asset may use the revaluation model for subsequent measurement only if a. The useful life of the intangible asset can be readily determined. b. An active market exists for the intangible asset. c. The cost of the intangible asset can be measured reliably. d. The intangible asset is a monetary asset.
The value of "Property, Plant, & Equipment, net" reported on the balance sheet represents: A) The allocated cost of using the asset for the year. B) The fair market value of the assets. C) The historical cost of the assets D) The cost of the assets not yet expensed on the income statement. The gain or loss from selling an asset reported on the income statement is computed as: A) The difference in the cash received and the historical cost of the assets B) The difference in the fair market value of the asset and the historical cost of the asset. C) The difference in the amount of cash received for the asset less the cost to sell the D) The difference in the book value o f the asset and the cash received for the asset
Item 22 Below is information relative to an exchange of similar assets by a company. Assume the exchange has commercial substance. Old Equipment Cash Book Value Fair Value Paid $ 49,700 $ 60,500 $ 14,100 The company would record the new equipment at:
An entity that acquires an intangible asset may use the revaluation modelfor subsequent measurement only if A. The useful life of the intangible asset can be reliably determined.B. An active market exists for the intangible asset.C. The cost of the intangible asset can be measured reliably.D. The intangible asset is a monetary asset.