Chapter 10 - Acquisition and Disposition of PPE - LO 3- Comput

Gabrielle Inc. and Lucci Company have an exchange with no commercial substance. The asset given up by Gabrielle has a book value of €120,000 and a fair value of €135,000. The asset given up by Lucci has a book value of €220,000 and a fair value of €200,000. Boot of €65,000 is received by Lucci.

 

            What amount should Gabrielle record for the asset received?

• €110,000

• €135,000

• €185,000

• €200,000

Gabrielle Inc. and Lucci Company have an exchange with no commercial substance. The asset given up by Gabrielle has a book value of €120,000 and a fair value of €135,000. The asset given up by Lucci has a book value of €220,000 and a fair value of €200,000. Boot of €65,000 is received by Lucci.

 

            The journal entry made by Lucci to record the exchange will include

• a debit to Gain on Exchange for €20,000.

• a credit to Cash for €65,000.

• a credit to Equipment for €200,000.

• a debit to Loss on Exchange for €20,000.

Lee Company received an HK$1,800,000 subsidy from the government to purchase manufacturing equipment on January, 2, 2021. The equipment has a cost of HK$3,000,000, a useful life of six years, and no salvage value. Lee depreciates the equipment on a straight-line basis.

 

            If Lee chooses to account for the grant as deferred revenue, the grant revenue recognized will be

• Zero in the first year of the grant's life.

• HK$300,000 per year for the years 2021-2026.

• HK$500,000 per year for the years 2021-2026.

• $HK1,800,000 in 2021.

Lee Company received an HK$1,800,000 subsidy from the government to purchase manufacturing equipment on January, 2, 2021. The equipment has a cost of HK$3,000,000, a useful life of six years, and no salvage value. Lee depreciates the equipment on a straight-line basis.

 

           If Lee chooses to account for the grant as deferred revenue, the amount of depreciation expense recorded in 2021 will be

• HK$0.

• HK$200,000.

• HK$300,000.

• $HK500,000.

Lee Company received an HK$1,800,000 subsidy from the government to purchase manufacturing equipment on January, 2, 2021. The equipment has a cost of HK$3,000,000, a useful life of six years, and no salvage value. Lee depreciates the equipment on a straight-line basis.

 

           If Lee chooses to account for the grant as an adjustment to the asset, the amount of depreciation expense recorded in 2021 will be

• HK$0.

• HK$200,000.

• HK$300,000.

• $HK500,000.

Lee Company received an HK$1,800,000 subsidy from the government to purchase manufacturing equipment on January, 2, 2021. The equipment has a cost of HK$3,000,000, a useful life of six years, and no salvage value. Lee depreciates the equipment on a straight-line basis.

 

           If Lee chooses to account for the grant as an adjustment to the asset, the book value of the asset on the 2022 statement of financial position will be

• HK$800,000.

• HK$1,200,000.

• HK$2,800,000.

• $HK2,400,000.

On January 1, 2022, in an effort to lure Tar-Mart, a major discount retail chain to the area, the city of Bordeaux agreed to provide the company with a €6,000,000 three-year, zero-interest bearing note. The prevailing rate of interest for a loan of this type is 10% and the present value of €6,000,000 at 10% for three years is €4,507,800. In recording the loan and grant, Tar-Mart will

• debit Discount on Notes Payable of €1,492,200.

• credit Deferred Grant Revenue €1,492,200.

• credit Note Payable €6,000,000.

• All of these answer choices are correct.

On January 1, 2022, in an effort to lure Tar-Mart, a major discount retail chain to the area, the city of Bordeaux agreed to provide the company with a €6,000,000 three-year, zero-interest bearing note. The prevailing rate of interest for a loan of this type is 10% and the present value of €6,000,000 at 10% for three years is €4,507,800. At the end of 2022, Tar-Mart will recognize

• interest expense of €149,220.

• grant revenue of €450,780.

• interest revenue of €149,220.

• None of these answer choices are correct.

On January 1, 2022, in an effort to lure Tar-Mart, a major discount retail chain to the area, the city of Bordeaux agreed to provide the company with a €6,000,000 three-year, zero-interest bearing note. The prevailing rate of interest for a loan of this type is 10% and the present value of €6,000,000 at 10% for three years is €4,507,800. At December 13, 2022, Tar-Mart will report Deferred Grant Revenue of

• €1,492,400.

• €1,041,420.

• €0.

• None of these answer choices are correct.

Glen Inc. and Armstrong Co. have an exchange with no commercial substance. The asset given up by Glen Inc. has a book value of €12,000 and a fair value of €15,000. The asset given up by Armstrong Co. has a book value of €20,000 and a fair value of €19,000. Boot of €4,000 is received by Armstrong Co. What amount should Glen Inc. record for the asset received?

• €15,000

• €16,000

• €19,000

• €20,000