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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

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