Question

In: Accounting

QUESTION 1 Concerning current accounting for oil and gas properties, which statement is true? The successful-efforts...

QUESTION 1

Concerning current accounting for oil and gas properties, which statement is true?

		The successful-efforts method must be used.
		The reserve-recognition method must be used.
		Either the successful-efforts method or the full-cost method may be used.
		The full-cost method must be used.

QUESTION 2

Property acquired through donation is recorded at

		its book value
		its fair market value
		its cost
		zero

QUESTION 3

Which one of the following types of assets should not be classified as property, plant, and equipment?

		leasehold improvements
		fully-depreciated building (still in use)
		idle land and buildings
		long-lived tangible assets

QUESTION 4

Maxa Marina exchanged a boat with a cost of $80,000 (now 75% depreciated) for another boat with a current fair value of $27,000. No boot was paid or received. The new boat will perform the same function as the old boat, but is expected but cash flows are expected to last for 5 years longer than with the old boat. Maxa should record the new boat at

		$20,000
		$27,000
		$ 7,000
		$ 0

QUESTION 5

Bob’s Excavating purchased some equipment by issuing a three-year 6% note for $8,000 when the market rate for an obligation of this nature was 8%. The interest is payable annually. Actuarial information for three periods follows:

	6%	8%
Future amount of 1	1.191016	1.259712
Future amount of annuity of 1	3.183600	3.246400
Present value of 1	0.839619	0.793832
Present value of annuity of 1	2.673012	2.577097

At the date of purchase, what amount should be debited to Equipment?

		$7,587.66
		$6,716.96
		$6,350.66
		$6,633.70

Expert Solution

Question 1:

Ans

Either the successful-efforts method or the full-cost method may be used.

Question 2:

Ans

its fair market value

Question 3:

Ans:

idle land and buildings

Question 4:

Ans

Ans:$27,000

Carrying value of the asset given up = $80,000 - 60,000($80,000*75%) = $20,000

Fair value of the asset received = $27,000

Realized gain = Fair value of the asset received - Carrying value of the asset given up

= $27,000 - $20,000

= $7,000

New asset is recorded at fair value of the asset received as expected to last for 5 years longer than with the old boat.

New asset should be record at value of $27,000.

Question 5:

Ans:$7587.66

Interest on note at 7% = $8000*6% = $480

Present value of interest on note for three periods = $480*2.577097 = $1237

present value of rate of the equipment $8000*0.793832 = $6350.656

Amount should be debited to equipment : $1237 +$6350.656=$7587.656=$7587.66(rounded Off)

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