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# Component of land cost, like kind exchange, interest, R&D

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1.
Simons Company purchased land to build a new factory. The following expenditures were made in conjunction with the land purchase:

Purchase price of land \$150,000
Real estate commission of 7% of the purchase price
Land survey \$5,000
Back Taxes \$5,000

What is the value of the land?

a) \$160,000
b) \$160,500
c) \$165,500
d) \$170,500

2.
During 2011, Burr Co made the following expenditures related to the acquisition of land and the construction of a building:

Purchase price of land \$60,000
Legal fees for contracts to purchase land \$ 2,000
Architect's fees \$ 8,000
Demolition of old building on site \$ 5,000
Sale of scrap from old building \$3,000
Construction cost of new building (fully completed) \$350,000

What amounts should be recorded as the initial values of the land and building?

Land Building
a) \$60,000 \$360,000
b) \$62,000 \$360,000
c) \$64,000 \$358,000
d) \$65,000 \$362,000

4.
Amble Inc exchanged a truck with a book value of \$12,000 and a fair value of \$20,000 for a truck and \$5,000 cash. The exchange has commercial substance. At what amount Amble record the truck received?

a) 12,000
b) 15,000
c) 20,000
d) 25,000

6.
Cole Co began constructing a building for its own use in January 2011. During 2011, 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 2011 was \$40,000. What amount of interest should Cole capitalize?

a) \$20,000
b) \$40,000
c) \$50,000
d) \$70,000

8.
During the current year Orr Company incurred the following costs:
Research and development services
Performed by Key Corp for Orr \$150,000
Design, construction and testing of preproduction
Prototypes and models \$200,000
Testing in search for new products or process alternatives \$175,000

In its income statement for the current year, what amount should Orr report as research and development expense?
a) \$150,000
b) \$200,000
c) \$350,000
d) \$525,000