Answered: What cost should be assigned to the…

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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21.

The Oscar Corporation acquired land, buildings, and equipment from a bankrupt company at a lump-sum price of $180,000. At the time of acquisition, Oscar paid $12,000 to have the assets appraised. The appraisal disclosed the following values:

Land ..................................................	$120,000
Buildings .............................................	80,000
Equipment .............................................	40,000

What cost should be assigned to the land, buildings, and equipment, respectively?

a.	$64,000, $64,000, and $64,000
b.	$90,000, $60,000, and $30,000
c.	$96,000, $64,000, and $32,000
d.	$120,000, $80,000, and $40,000

22.

Peterson, Inc. purchased a machine under a deferred payment contract on December 31, 2001. Under the terms of the contract, Peterson is required to make eight annual payments of $140,000 each beginning December 31, 2002. The appropriate interest rate is 8 percent. The purchase price of the machine is

a.	$1,389,190.
b.	$1,120,000.
c.	$868,900.
d.	$804,520.

23.

One of the four general criteria for a capital lease is that the present value at the beginning of the lease term of the minimum lease payments equals or exceeds

a.	the property's fair market value.
b.	90 percent of the property's fair market value.
c.	75 percent of the property's fair market value.
d.	50 percent of the property's fair market value.

24.

Equal monthly rental payments for a particular lease should be charged to Rental Expense by the lessee for which of the following?

Capital Lease	Operating Lease

a.	Yes No
b.	Yes Yes
c.	No No
d.	No Yes

25.

On December 1, 2002, Blake Inc. signed an operating lease for a warehouse for ten years at $24,000 per year. Upon execution of the lease, Blake paid $48,000 covering rent for the first two years. How much should be shown in Blake's income statement for the year ended December 31, 2002, as rent expense?

a.	$0
b.	$2,000
c.	$24,000
d.	$48,000

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