INTERMEDIATE ACCOUNTING.

Bloomington Inc. exchanged land for equipment and $3,800 in cash. The book value and the fair value of the land were $104,200 and $89,700, respectively.

Bloomington would record equipment and a gain/(loss) of:

 

	Equipment	Gain/(loss)
	$85,900	$3,800.

 

$104,200	$(3,800).
$85,900	$(14,500).

 

All of these answer choices are incorrect.

 

During 2016, Prospect Oil Corporation incurred $4,900,000 in exploration costs for each of 20 oil wells drilled in 2016. Of the 20 wells drilled, 10 were dry holes. Prospect uses the successful efforts method of accounting. Assuming that Prospect depletes 25% of the oil discovered in 2016, what amount of these exploration costs would remain in its 12/31/16 balance sheet?

$51.95 million

$31.15 million

$49.00 million

$36.75 million

 

Cutter Enterprises purchased equipment for $75,000 on January 1, 2016. The equipment is expected to have a five-year life and a residual value of $4,500.

Using the double-declining balance method, depreciation for 2017 would be:

$30,000.

$16,920.

$18,000.

None of these answer choices are correct.

 

On March 31, 2016, M. Belotti purchased the right to remove gravel from an old rock quarry. The gravel is to be sold as roadbed for highway construction. The cost of the quarry rights was $316,000, with estimated salable rock of 40,000 tons. During 2016, Belotti loaded and sold 5,900 tons of rock and estimated that 34,100 tons remained at December 31, 2016. At January 1, 2017, Belotti estimated that 17,700 tons still remained. During 2017, Belotti loaded and sold 11,800 tons.    Belotti would record depletion in 2017 of (Round cost per ton to two decimal places.):

$179,596.

$181,796.

$182,876.

$192,716.

 

Granite Enterprises acquired a patent from Southern Research Corporation on January 1, 2016 for $4.2 million. The patent will be used for 5 years, even though its legal life is 20 years. Rocky Corporation has made a commitment to purchase the patent from Granite for $210,000 at the end of five years. Compute Granite’s patent amortization for 2016, assuming the straight-line method is used.

$420,000.

$798,000.

$840,000.

$399,000.

 

In January of 2016, Vega Corporation purchased a patent at a cost of $211,000. Legal and filing fees of $59,000 were paid to acquire the patent. The company estimated a 10-year useful life for the patent and uses the straight-line amortization method for all intangible assets. In January 2019, Vega spent $24,000 in legal fees for an unsuccessful defense of the patent and the patent is no longer usable. The amount charged to income (expense and loss) in 2019 related to the patent should be:

$ 24,000.

$213,000.

$ 51,000.

$211,000.

 

Fellingham Corporation purchased equipment on January 1, 2014, for $232,000. The company estimated the equipment would have a useful life of 10 years with a $20,800 residual value. Fellingham uses the straight-line depreciation method. Early in 2016, Fellingham reassessed the equipment’s condition and determined that its total useful life would be only six years in total and that it would have no salvage value. How much would Fellingham report as depreciation on this equipment for 2016?

$31,627.

$42,240.

$44,440.

$47,440.

 

Broadway Ltd. purchased equipment on January 1, 2014, for $820,000, estimating a 5-year useful life and no residual value. In 2014 and 2015, Broadway depreciated the asset using the straight-line method. In 2016, Broadway changed to sum-of-years’-digits depreciation for this equipment. What depreciation would Broadway record for the year 2016 on this equipment? (Do not round your depreciation rate.)

 

$123,000.

$164,000.

$328,000.

$246,000.

 

 

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