Question: Samtech Manufacturing purchased land and building

> Why are time-based depreciation methods used more frequently than activity-based methods?

> Briefly differentiate between the straight-line depreciation method and accelerated depreciation methods.

> Briefly differentiate between activity-based and time-based allocation methods.

> What is meant by depreciable base? How is it determined?

> Goddard Company has used the FIFO method of inventory valuation since it began operations in 2015. Goddard decided to change to the average cost method for determining inventory costs at the beginning of 2018. The following schedule shows year-end invent

> Target Corporation prepares its financial statements according to U.S. GAAP. Target’s financial statements and disclosure notes for the year ended January 30, 2016, are available in Connect. This material is also available under the Investor Relations li

> Air France–KLM (AF), a Franco-Dutch company, prepares its financial statements according to International Financial Reporting Standards. AF’s financial statements and disclosure notes for the year ended December 31, 2015, are available in Connect. This m

> Norfolk Southern Corporation, one of the nation’s premier transportation companies, reported the following amounts in the asset section of its balance sheets for the years ended December 31, 2015 and 2014: In addition, information fro

> Accounting for acquired goodwill has been a controversial issue for many years. In the United States, the amount of acquired goodwill is capitalized and not amortized. Globally, the treatment of goodwill varies significantly, with some countries not reco

> Litton Industries uses a perpetual inventory system. The company began its fiscal year with inventory of $267,000. Purchases of merchandise on account during the year totaled $845,000. Merchandise costing $902,000 was sold on account for $1,420,000. Prep

> GAAP provides guidelines for the inclusion of interest in the initial cost of a self-constructed asset. Required: 1. What assets qualify for interest capitalization? What assets do not qualify for interest capitalization? 2. Over what period should inte

> Chilton Peripherals manufactures printers, scanners, and other computer peripheral equipment. In the past, the company purchased equipment used in manufacturing from an outside vendor. In March 2018, Chilton decided to design and build equipment to repla

> Your client, Hazelton Mining, recently entered into an agreement to obtain the rights to operate a coal mine in West Virginia for $15 million. Hazelton incurred development costs of $6 million in preparing the mine for extraction, which began on July 1,

> A company may acquire property, plant, and equipment and intangible assets for cash, in exchange for a deferred payment contract, by exchanging other assets, or by a combination of these methods. Required: 1. Identify six types of costs that should be c

> EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system, performs automated collection, validation, indexing, and forwarding of submissions by companies and others who are required by law to file forms with the U.S. Securities and Exchange C

> In 2018, CPS Company changed its method of valuing inventory from the FIFO method to the average cost method. At December 31, 2017, CPS’s inventories were $32 million (FIFO). CPS’s records indicated that the inventories would have totaled $23.8 million a

> The Elegant Software Company recently completed the development and testing of a new software program that provides the ability to transfer data from among a variety of operating systems. The company believes this product will be quite successful and cap

> Pier 1 Imports, Inc., is a leading retailer of domestic merchandise and home furnishings. The company’s 2016 fixed-asset turnover ratio, using the average book value of property, plant, and equipment (PP&E) as the denominator, was approximately 8.97. Add

> Siemens AG, a German company, is Europe’s largest engineering and electronics company. The company prepares its financial statements according to IFRS. Required: How does the company account for research and development expenditures? Does this policy di

> Mayer Biotechnical, Inc., develops, manufactures, and sells pharmaceuticals. Significant research and development (R&D) expenditures are made for the development of new drugs and the improvement of existing drugs. During 2018, $220 million was spent on R

> Thomas Plastics is in the process of developing a revolutionary new plastic valve. A new division of the company was formed to develop, manufacture, and market this new product. As of year-end (December 31, 2018), the new product has not been manufacture

> A company began its fiscal year with inventory of $186,000. Purchases and cost of goods sold for the year were $945,000 and $982,000, respectively. What was the amount of ending inventory?

> Clonal, Inc., a biotechnology company, developed and patented a diagnostic product called Trouver. Clonal purchased some research equipment to be used exclusively for Trouver and subsequent research projects. Clonal defeated a legal challenge to its Trou

> Prior to 1974, accepted practice was for companies to either expense or capitalize R&D costs. In 1974, the FASB issued a Standard that requires all research and development costs to be charged to expense when incurred. This was a controversial standard,

> Athena Paper Corporation acquired for cash 100% of the outstanding common stock of Georgia, Inc., a supplier of wood pulp. The $4,500,000 amount paid was significantly higher than the book value of Georgia’s net assets (assets less liabilities) of $2,800

> Consider each of the transactions below. All of the expenditures were made in cash. 1. The Edison Company spent $12,000 during the year for experimental purposes in connection with the development of a new product. 2. In April, the Marshall Company lost

> Bosco Company adopted the dollar-value LIFO retail method at the beginning of 2018. Information for 2018 and 2019 is as follows, with certain data intentionally omitted: Required: Determine the missing data. Inventory Retail Price Cost-to-Retail Da

> The Horstmeyer Corporation commenced operations early in 2018. A number of expenditures were made during 2018 that were debited to one account called intangible asset. A recap of the $144,000 balance in this account at the end of 2018 is as follows: Re

> The plant asset and accumulated depreciation accounts of Pell Corporation had the following balances at December 31, 2017: Transactions during 2018 were as follows: a. On January 2, 2018, machinery and equipment were purchased at a total invoice cost o

> On January 1, 2018, the Blackstone Corporation purchased a tract of land (site number 11) with a building for $600,000. Additionally, Blackstone paid a real estate broker’s commission of $36,000, legal fees of $6,000, and title insurance of $18,000. The

> Tristar Production Company began operations on September 1, 2018. Listed below are a number of transactions that occurred during its first four months of operations. 1. On September 1, the company acquired five acres of land with a building that will be

> Early in its fiscal year ending December 31, 2018, San Antonio Outfitters finalized plans to expand operations. The first stage was completed on March 28 with the purchase of a tract of land on the outskirts of the city. The land and existing building we

> In 2018, Starsearch Corporation began work on three research and development projects. One of the projects was completed and commercial production of the developed product began in December. The company’s fiscal yearend is December 31. All of the followi

> At the beginning of 2018, a company adopts the dollar-value LIFO inventory method for its one inventory pool. The pool’s value on that date was $1,400,000. The 2018 ending inventory valued at year-end costs was $1,664,000 and the year-end cost index was

> [This is a variation of the previous problem, modified to focus on the weighted-average interest method.] Previous Problem On January 1, 2018, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The bu

> On January 1, 2018, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2019. Expenditures on the project were as follows: January 1, 2018 ………………………… $1,000,0

> Case A. Kapono Farms exchanged an old tractor for a newer model. The old tractor had a book value of $12,000 (original cost of $28,000 less accumulated depreciation of $16,000) and a fair value of $9,000. Kapono paid $20,000 cash to complete the exchange

> Lance-Hefner Specialty Shoppes decided to use the dollar-value LIFO retail method to value its inventory. Accounting records provide the following information: Related retail price indexes are as follows: January 1, 2018 …â&#1

> On September 3, 2018, the Robers Company exchanged equipment with Phifer Corporation. The facts of the exchange are as follows: To equalize the exchange, Phifer paid Robers $5,000 in cash. Required: Record the exchange for both Robers and Phifer. The

> Southern Company owns a building that it leases to others. The building’s fair value is $1,400,000 and its book value is $800,000 (original cost of $2,000,000 less accumulated depreciation of $1,200,000). Southern exchanges this for a building owned by t

> Teradene Corporation purchased land as a factory site and contracted with Maxtor Construction to construct a factory. Teradene made the following expenditures related to the acquisition of the land, building, and equipment for the factory: Purchase price

> On January 1, 2018, Byner Company purchased a used tractor. Byner paid $5,000 down and signed a noninterest-bearing note requiring $25,000 to be paid on December 31, 2020. The fair value of the tractor is not determinable. An interest rate of 10% properl

> Pinewood Company purchased two buildings on four acres of land. The lump-sum purchase price was $900,000. According to independent appraisals, the fair values were $450,000 (building A) and $250,000 (building B) for the buildings and $300,000 for the lan

> Johnson Corporation acquired all of the outstanding common stock of Smith Corporation for $11,000,000 in cash. The book value of Smith’s net assets (assets minus liabilities) was $7,800,000. The fair values of all of Smithâ€&

> On March 31, 2018, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $17,000,000 in cash. The book values and fair values of Barney’s assets and liabilities were as follows: Required: Calculate

> Selected financial statement data for Schmitzer Inc. is shown below: What was the amount of net sales for 2018? 2018 2017 Balance sheet: Inventories 60,000 48,000 Ratios: Gross profit ratio for 2018 Inventory turnover ratio for 2018 40%

> In 2018, Bratten Fitness Company made the following cash purchases: 1. The exclusive right to manufacture and sell the X-Core workout machine from Symmetry Corporation for $200,000. Symmetry created the unique design for the machine. Bratten also paid an

> Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,000,000 in 2018 for the mining site and spent an additional $600,000 to prepare the mine for extraction of the copper. After the copper is extracted in approximately fo

> Canova Corporation adopted the dollar-value LIFO retail method on January 1, 2018. On that date, the cost of the inventory on hand was $15,000 and its retail value was $18,750. Information for 2018 and 2019 is as follows: Required: 1. What is the cost-

> Oaktree Company purchased new equipment and made the following expenditures: Purchase price …………………………………………………………. $45,000 Sales tax ……………………………………………………………………… 2,200 Freight charges for shipment of equipment ……………………… 700 Insurance on the equipment for

> On March 1, 2018, Beldon Corporation purchased land as a factory site for $60,000. An old building on the property was demolished, and construction began on a new building that was completed on December 15, 2018. Costs incurred during this period are lis

> The Manguino Oil Company incurred exploration costs in 2018 searching and drilling for oil as follows: Well 101 ………………………………….. $ 50,000 Well 102 ……………………………………. 60,000 Well 103 ……………………………………. 80,000 Wells 104–108 ………………………… 260,000 Total ……………………………………

> Freitas Corporation was organized early in 2018. The following expenditures were made during the first few months of the year: Attorneys’ fees in connection with the organization of the corporation …………….. $ 12,000 State filing fees and other incorporati

> On September 30, 2018, Athens Software began developing a software program to shield personal computers from malware and spyware. Technological feasibility was established on February 28, 2019, and the program was available for release on April 30, 2019.

> Early in 2018, the Excalibur Company began developing a new software package to be marketed. The project was completed in December 2018 at a cost of $6 million. Of this amount, $4 million was spent before technological feasibility was established. Excali

> Listed below are several terms and phrases associated with property, plant, and equipment and intangible assets. Pair each item from List A with the item from List B (by letter) that is most appropriately associated with it. List A List B 1. Propert

> Walgreens Boots Alliance, Inc. reported inventories of $8,678 million and $6,076 million in its August 31, 2015, and August 31, 2014, balance sheets, respectively. Cost of goods sold for the year ended August 31, 2015, was $76,520 million. The company us

> NXS Semiconductor prepares its financial statements according to International Financial Reporting Standards. The company incurred the following expenditures during 2018 related to the development of a chip to be used in mobile devices: Salaries and wage

> On January 1, 2018, the Brunswick Hat Company adopted the dollar-value LIFO retail method. The following data are available for 2018: Required: Calculate the estimated ending inventory and cost of goods sold for 2018. Cost Retail $ 71,280 $ 132,000

> Janson Pharmaceuticals incurred the following costs in 2018 related to a new cancer drug: Research for new formulas …………………………………………………. $2,425,000 Development of a new formula …………………………………………….. 1,600,000 Legal and filing fees for a patent for the new

> Delaware Company incurred the following research and development costs during 2018: Salaries and wages for lab research …………………………………………………………………. $ 400,000 Materials used in R&D projects ………………………………………………………………….………. 200,000 Purchase of equipment ……………

> In 2018, Space Technology Company modified its model Z2 satellite to incorporate a new communication device. The company made the following expenditures: Basic research to develop the technology …………………………………………………………… $2,000,000 Engineering design work

> Thornton Industries began construction of a warehouse on July 1, 2018. The project was completed on March 31, 2019. No new loans were required to fund construction. Thornton does have the following two interest-bearing liabilities that were outstanding t

> On January 1, 2018, the Highlands Company began construction on a new manufacturing facility for its own use. The building was completed in 2019. The company borrowed $1,500,000 at 8% on January 1 to help finance the construction. In addition to the cons

> On January 1, 2018, the Shagri Company began construction on a new manufacturing facility for its own use. The building was completed in 2019. The only interest-bearing debt the company had outstanding during 2018 was long-term bonds with a book value of

> On January 1, 2018, the Marjlee Company began construction of an office building to be used as its corporate headquarters. The building was completed early in 2019. Construction expenditures for 2018, which were incurred evenly throughout the year, total

> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Determine the specific citation for each of the following items: 1. The disclosure requirements in the notes to the financial statements for depreciation on property, p

> The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally accepted accounting principles. Required: 1. Obtain the relevant authoritative literature on nonmonetary exchanges using the FASB Accounting Standard

> Refer to the situation described in BE 8–8. Assuming an income tax rate of 40%, what is LIFO liquidation profit or loss that the company would report in a disclosure note accompanying its financial statements? In BE 8–8 Esquire Inc. uses the LIFO method

> Adams Corporation uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost of goods sold. The following data are available for the month of September 2018: The company used the average cost flow method and e

> Connors Corporation acquired manufacturing equipment for use in its assembly line. Below are four independent situations relating to the acquisition of the equipment. 1. The equipment was purchased on account for $25,000. Credit terms were 2/10, n/30. Pa

> The Tinsley Company exchanged land that it had been holding for future plant expansion for a more suitable parcel located farther from residential areas. Tinsley carried the land at its original cost of $30,000. According to an independent appraisal, the

> [This is a variation of the previous exercise.] Previous Exercise The Bronco Corporation exchanged land for equipment. The land had a book value of $120,000 and a fair value of $150,000. Bronco paid the owner of the equipment $10,000 to complete the exc

> The Bronco Corporation exchanged land for equipment. The land had a book value of $120,000 and a fair value of $150,000. Bronco paid the owner of the equipment $10,000 to complete the exchange which has commercial substance. Required: 1. What is the fai

> [This is a variation of the previous exercise.] Previous Exercise Cedric Company recently traded in an older model computer for a new model. The old model’s book value was $180,000 (original cost of $400,000 less $220,000 in accumulated depreciation) an

> Cedric Company recently traded in an older model computer for a new model. The old model’s book value was $180,000 (original cost of $400,000 less $220,000 in accumulated depreciation) and its fair value was $200,000. Cedric paid $60,000 to complete the

> Nvidia Corporation, a global technology company located in Santa Clara, California, reported the following information in its 2016 financial statements ($ in millions): Required: 1. Calculate the company’s 2016 fixed-asset turnover ra

> Cranston LTD. prepares its financial statements according to International Financial Reporting Standards. In October 2018, the company received a $2 million government grant. The grant represents 20% of the total cost of equipment that will be used to im

> On February 1, 2018, the Xilon Corporation issued 50,000 shares of its nopar common stock in exchange for five acres of land located in the city of Monrovia. On the date of the acquisition, Xilon’s common stock had a fair value of $18 per share. An offic

> On June 30, 2018, Kimberly Farms purchased custom-made harvesting equipment from a local producer. In payment, Kimberly signed a noninterest-bearing note requiring the payment of $60,000 in two years. The fair value of the equipment is not known, but an

> LeMay Department Store uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to one of its largest departments for the month of March 2018: Sales are recorded net of employee disc

> Esquire Inc. uses the LIFO method to value its inventory. Inventory at January 1, 2018, was $500,000 (20,000 units at $25 each). During 2018, 80,000 units were purchased, all at the same price of $30 per unit. 85,000 units were sold during 2018. Esquire

> What is the main difference between a perpetual inventory system and a periodic inventory system?

> Pro-tech Software acquired all of the outstanding stock of Reliable Software for $14 million. The book value of Reliable’s net assets (assets minus liabilities) was $8.3 million. The fair values of Reliable’s assets and liabilities equaled their book val

> Refer to the situation described in BE 10–4. What is the book value of the asset retirement liability at the end of one year? Assuming that the actual restoration costs incurred after extraction is completed are $596,000, what amount of gain or loss will

> Smithson Mining operates a silver mine in Nevada. Acquisition, exploration, and development costs totaled $5.6 million. After the silver is extracted in approximately five years, Smithson is obligated to restore the land to its original condition, includ

> Refer to the situation described in BE 10–2. Assume that Fullerton decides to use the warehouse rather than demolish it. An independent appraisal estimates the fair values of the land and warehouse at $420,000 and $280,000, respectively. Determine the am

> Fullerton Waste Management purchased land and a warehouse for $600,000. In addition to the purchase price, Fullerton made the following expenditures related to the acquisition: broker’s commission, $30,000; title insurance, $3,000; miscellaneous closing

> Beaverton Lumber purchased a milling machine for $35,000. In addition to the purchase price, Beaverton made the following expenditures: freight, $1,500; installation, $3,000; testing, $2,000; personal property tax on the machine for the first year, $500.

> In the current year, Big Burgers, Inc., expanded its fast food operations by opening several new stores in Texas. The company incurred the following costs in the current year: market appraisal ($50,000), consulting fees ($72,000), advertising ($47,000),

> Maltese Laboratories incurred the following research and developments costs related to its pharmaceutical business: Internal projects (salaries, supplies, overhead for R&D facilities) ……………………………..…………… $620,000 Payment to acquire R&D from a third party

> On February 26 a hurricane destroyed the entire inventory stored in a warehouse owned by the Rockford Corporation. The following information is available from the records of the company’s periodic inventory system: beginning inventory, $220,000; purchase

> This exercise is a continuation of BE 9–11. During 2019, purchases at cost and retail were $168,000 and $301,000, respectively. Net markups, net markdowns, and net sales for the year were $3,000, $4,000, and $280,000, respectively. The

> On January 1, 2018, Sanderson Variety Store adopted the dollar-value LIFO retail inventory method. Accounting records provided the following information: Estimate ending inventory using the dollar-value LIFO retail method. Cost Retail $ 40,800 $ 68

> Roberson Corporation uses a periodic inventory system and the retail inventory method. Accounting records provided the following information for the 2018 fiscal year: The company records sales to employees net of discounts. These discounts totaled $15,

> Explain why proponents of LIFO argue that it provides a better match of revenue and expenses. In what situation would it not provide a better match?

> Describe the three types of inventory of a manufacturing company.

> Why is the activity-based costing described in this chapter unacceptable for external financial reports?

> How can the activity rates (i.e., cost per activity) for the various activities be used to target process improvements?

> Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has been a long-simmering dispute between the company’s estimator and the work supervisors. The on-site supervisors