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Like-kind Exchanges, Assets Purchased on Credit, and MACRS

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22. On January 2, 2007, Speedy Company traded in an old delivery truck for a newer model. The exchange lacked commercial substance. Data specific to the old and new trucks follow:
Old Truck
Original cost $24,000
Accumulated depreciation as of January 2, 2007 16,000
Average published retail value 7,000
New Truck
List price $40,000
Cash price without trade-in 36,000
Cash paid with trade-in 30,000

What should be the cost of the new truck for financial accounting purposes?
a. $30,000.
b. $36,000.
c. $38,000.
d. $40,000.

23. How should plant assets purchased on long term credit contracts be account for:
a. the total value of the future payments.
b. the present value of the future payments..
c. the future amount of the future payments.
d. none of these.

29. Biden Co. acquired a patent from Landmark Corp. on January 1, 2008, for $300,000. An independent consultant retained by Biden estimated that the remaining useful life is 30 years. Its unamortized cost on Landmark's accounting records was $150,000; the patent had been amortized for 5 years by Landmark. How much should be amortized for the year ended December 31, 2008?
a. $0.
b. $5,000.
c. $10,000.
d. $20,000
.

What is a major objective of MACRS tax depreciation?
a. reduce the amount of depreciation deduction on business firms' tax returns.
b. help companies achieve a faster write-off of their capital assets.
c. assure that the amount of depreciation for tax and book purposes will be the same.
d. require companies to use the actual economic lives of assets in calculating tax depreciation

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22. On January 2, 2007, Speedy Company traded in an old delivery truck for a newer model. The exchange lacked commercial substance. Data specific to the old and new trucks follow:
Old Truck
Original cost $24,000
Accumulated depreciation as of January 2, 2007 16,000
Average published retail value 7,000
New Truck
List price $40,000
Cash price without trade-in 36,000
Cash paid with trade-in ...

Solution Summary

22. On January 2, 2007, Speedy Company traded in an old delivery truck for a newer model. The exchange lacked commercial substance. Data specific to the old and new trucks follow:
Old Truck
Original cost $24,000
Accumulated depreciation as of January 2, 2007 16,000
Average published retail value 7,000
New Truck
List price $40,000
Cash price without trade-in 36,000
Cash paid with trade-in 30,000

What should be the cost of the new truck for financial accounting purposes?
a. $30,000.
b. $36,000.
c. $38,000.
d. $40,000.

23. How should plant assets purchased on long term credit contracts be account for:
a. the total value of the future payments.
b. the present value of the future payments..
c. the future amount of the future payments.
d. none of these.

29. Biden Co. acquired a patent from Landmark Corp. on January 1, 2008, for $300,000. An independent consultant retained by Biden estimated that the remaining useful life is 30 years. Its unamortized cost on Landmark's accounting records was $150,000; the patent had been amortized for 5 years by Landmark. How much should be amortized for the year ended December 31, 2008?
a. $0.
b. $5,000.
c. $10,000.
d. $20,000
.

What is a major objective of MACRS tax depreciation?
a. reduce the amount of depreciation deduction on business firms' tax returns.
b. help companies achieve a faster write-off of their capital assets.
c. assure that the amount of depreciation for tax and book purposes will be the same.
d. require companies to use the actual economic lives of assets in calculating tax depreciation

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