Question

erest t Expe C. Is the process of allocating the cost of natural resources to periods when they are consumél. D. Is an accelerated form of expensing an asset's cost. E. SBUUIU Tax E 14. Amortization: Expen e of t B. Is the process of allocating to expense the cost of a plant asset to tle use. E. Is the same as depletion. 15. Liabilities: A. Must be certain. B. Must sometimes be estimated. C Must be fora specific amount. D. Must always have a definite date for payment. E. Must involve an outflow of cash. PART 2 - PROBLEMS (Worth 52 points) Please neatly write your answer in the spaces provided. Do not show calculations in the space provided for 16. (12 Points) A company paid $500,000 cash for property that included land appraised at $133,750; land improvements appraised at $80,250; and a building appraised at $321,000. The plan is to use the building as a manufacturing plant. Determine the amounts that should be recorded as: answers Cost Appraised Value 133/750 80,250 321000 S3S.000 Percent Asset (a) Land (b) Land improvements 0.06 0.06 48.15 9z6 (c) Building Total Please write answers only in this chart - use scratch paper at the back of this exam for calculations. Continue to next page

Answer 1

Assets	Appraised Value	Computation of Percentage	Percentage to allocate cost	Cost allocated
Land	$1,33,750	$133,750/535,000	25.00%	$1,25,000	($500,000*25%)
Land Improvements	$80,250	$80,250/535,000	15.00%	$75,000	($500,000*15%)
Building	$3,21,000	$321,000/535,000	60.00%	$3,00,000	($500,000*60%)
Total	$5,35,000			$5,00,000