Fixed Assets Paper 2


May Co. and Sty Co. exchanged nonmonetary assets. The exchange did not result in the expected cash flows of the assets being significantly different for either May or Sty. May paid cash to Sty in connection with the exchange. To the extent that the amount of cash exceeds a proportionate share of the carrying amount of the asset surrendered, a realized gain on the exchange should be recognized by


Vik Auto and King Clothier exchanged goods, held for resale, with equal fair values. Each will use the other’s goods to promote their own products. The retail price of the car that Vik gave up is less than the retail price of the clothes received. Assuming the transaction has commercial substance, what profit should Vik recognize for the nonmonetary exchange?


An entity disposes of a nonmonetary asset in a nonreciprocal transfer. A gain or loss should be recognized on the disposition of the asset when the fair value of the asset transferred is determinable and the nonreciprocal transfer is to
Another entity
A stockholder of the entity


On July 1, year 4, one of Rudd Co.’s delivery vans was destroyed in an accident. On that date, the van’s carrying value was $2,500. On July 15, year 4, Rudd received and recorded a $700 invoice for a new engine installed in the van in May year 4, and another $500 invoice for various repairs. In August, Rudd received $3,500 under its insurance policy on the van, which it plans to use to replace the van. What amount should Rudd report as gain (loss) on disposal of the van in its year 4 income statement?


During year 4, King Company made the following expenditures relating to its plant building:
Continuing and frequent repairs $40,000
Repainted the plant building 10,000
Major improvements to the electrical wiring system 32,000
Partial replacement of roof tiles 14,000
How much should be charged to repair and maintenance expense in year 4?


On June 18, year 4, Dell Printing Co. incurred the following costs for one of its printing presses:
Purchase of collating and stapling attachment $84,000
Installation of attachment 36,000
Replacement parts for overhaul of press 26,000
Labor and overhead in connection with overhaul 14,000
The overhaul resulted in a significant increase in production. Neither the attachment nor the overhaul increased the estimated useful life of the press. What amount of the above costs should be capitalized?


A building suffered uninsured fire damage. The damaged portion of the building was refurbished with higher quality materials. The cost and related accumulated depreciation of the damaged portion are identifiable. To account for these events, the owner should


Derby Co. incurred costs to modify its building and to rearrange its production line. As a result, an overall reduction in production costs is expected. However, the modifications did not increase the building’s market value, and the rearrangement did not extend the production line’s life. Should the building modification costs and the production line rearrangement costs be capitalized?
Building modification costs
Production line rearrangement costs


Rago Company takes a full year’s depreciation expense in the year of an asset’s acquisition, and no depreciation expense in the year of disposition. Data relating to one of Rago’s depreciable assets at December 31, year 5, are as follows:
Acquisition year Year 2
Cost $110,000
Residual value 20,000
Accumulated depreciation 72,000
Estimated useful life 5 years
Using the same depreciation method as used in year 2, year 3, and year 4, how much depreciation expense should Rago record in year 5 for this asset?


On January 2, year 1, Union Co. purchased a machine for $264,000 and depreciated it by the straight-line method using an estimated useful life of eight years with no salvage value. On January 2, year 4, Union determined that the machine had a useful life of six years from the date of acquisition and will have a salvage value of $24,000. An accounting change was made in year 4 to reflect the additional data. The accumulated depreciation for this machine should have a balance at December 31, year 4, of


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