Question

Question 12 (1 point) The capitalized cost of land excludes: The purchase price of the land. Title insurance paid at the time of purchase. Real estate commissions associated with the sale. Property taxes for the first year owned. Question 13 (1 point) An exclusive 20-year right to manufacture a product or use a process is a: Patent Copyright. Trademark. Franchise Question 14 (1 point) The cost of constructing a new parking lot at the company's office building would be recorded as: Land. Land improvement. Building, Equipment Question 15 (1 point) Lake Incorporated purchased all of the outstanding stock of Huron Company paying $950.000 cash, Lake assumed all of the liabilities of Huron Book values and fair values of acquired assets and liabilities were: Current assets (net) Property, plant, equip. (net) Liabilities Back Value Fair Value 5130,000 $125,000 600,000 750,000 150,000 175.000 Lake would record goodwill of: $0 $75,000 $445,000 $250,000

Answer 1

12.

Answer: 4^th year

The amount of taxes should not be considered here. Apart from this all of the land related expenses are capitalized cost – such as purchase price, insurance, and estate commission.

13.

Answer: 1^st option

This is called patent. It is operational rights given by the government through licence and it is for long term purpose.

14.

Answer: 2^nd option

This is known as land improvement, because a parking lot is the meaningful way of using a land. This is not a building but an extension of a building.

15.

Answer: 4^th option

Goodwill is $250,000.

This is the fair value of accounting.

Goodwill = (Cash payments + Liabilities) – (current assets + Property)

                = (950,000 + 175,000) – (125,000 + 750,000)

                = 1,125,000 – 875,000

                = 250,000