1.Calaveras Tire exchanged equ
1.Calaveras Tire exchanged equipment for two pickup trucks. Thebook value and fair value of the equipment given up were $36,000(original cost of $89,000 less accumulated depreciation of $53,000)and $48,000, respectively. Assume Calaveras paid $7,000 in cash andthe exchange lacks commercial substance.
At what amount will Calaveras value the pickup trucks? How muchgain or loss will the company recognize on the exchange?
Value of Pick Up Trucks=
Gain/Loss=
2.Calaveras Tire exchanged equipment for two pickup trucks. Thebook value and fair value of the equipment given up were $31,000(original cost of $81,500 less accumulated depreciation of $50,500)and $22,500, respectively. Assume Calaveras paid $8,500 in cash andthe exchange has commercial substance.
At what amount will Calaveras value the pickup trucks? How muchgain or loss will the company recognize on the exchange?
Value of Pick Up Trucks=
Gain/Loss=
3.Pro-tech Software acquired all of the outstanding stock ofReliable Software for $17 million. The book value of Reliable’s netassets (assets minus liabilities) was $8.6 million. The fair valuesof Reliable’s assets and liabilities equaled their book values withthe exception of certain intangible assets whose fair valuesexceeded book values by $2.8 million.Calculate the amount paid for goodwill.
4.Fullerton Waste Management purchased land and a warehouse for$610,000. In addition to the purchase price, Fullerton made thefollowing expenditures related to the acquisition: broker’scommission, $31,000; title insurance, $3,500; miscellaneous closingcosts, $6,500. The warehouse was immediately demolished at a costof $19,000 in anticipation of the building of a newwarehouse.Determine the amounts Fullerton should capitalize as the cost ofthe land and the building.
Capatalized Cost Of Land=
Capatalized Cost of Buidling =
5.
A company purchased land, a building, and equipment for oneprice of $1,550,000. The estimated fair values of the land,building, and equipment are $193,750, $1,356,250, and $387,500,respectively. At what amount would the company record the land?
-
$193,750
-
$155,000
-
$1,550,000
-
$165,000
Answer:
Answer (1):-
The value of pickup trucks is calculated as follows:
Value of pickup trucks=Fairvalueofmachinery+Cashpaid
=$48,000+$7,000
=$55,000
Therefore, value of pickup trucks is $55,000.
The Calaveras Company will value the pickup trucks at$55,000
The gain the Calaveras Company recognises on exchange iscalculated as follows:
Gain on exchange=Fair value of machinery−Book value ofmachinery
= $48,000 – $36,000
= $12,000
The Calaveras Company recognises a gain of $12,000 onthe exchange.
Answer (2):-
The value of pickup trucks is calculated as follows:
Value of pickup trucks=Fairvalueofmachinery+Cashpaid
=$22,500+$8,500
=$31,000
Therefore, value of pickup trucks is $31,000.
The Calaveras Company will value the pickup trucks at$31,000
The gain the Calaveras Company recognises on exchange iscalculated as follows:
Gain(Loss) on exchange=Fair value of machinery−Book value ofmachinery
= $22,500 – $31,000
= ($8,500)
The Calaveras Company recognises a loss of $8,500 on theexchange
Answer (3):-
Calculate the total value of net assets:
Book value of net assets $8,600,000
Add:- Excess of fair value over book value $2,800,000
of intangible assets
Total value of assets $11,400,000
Calculate the amount for goodwill:
Purchase Price $17,000,000
Less:- Total value of assets $11,400,000
Total value of goodwill $5,600,000
Answer (4):-
Capitalized cost of land:
| Purchase price | $610,000 |
| Broker’s commission | $31,000 |
| Title insurance | $3,500 |
| Miscellaneous closing costs | $6,500 |
| Demolition of old building | $19,000 |
| Total cost | $670,000 |
All of the expenditures, including the costs to demolish the oldbuilding, are included in the initial cost of the land.
Capitalized cost of land = $670,000
Capitalized cost of building = $0
Answer 5 :-
| Total Consideration:1,550,000 | |||||
| Assets | Fair value | % of Total | Consideration apportioned | ||
| Land | 193,750 | 10% | 155,000 | ||
| Building | 1,356,250 | 70% | 1,085,000 | ||
| Equipment | 387,500 | 20% | 310,000 | ||
| TOTAL | 1,937,500 | 100% | 1,550,000 | ||
| Land is recorded at $155,000. |
"Our Prices Start at $11.99. As Our First Client, Use Coupon Code GET15 to claim 15% Discount This Month!!"
