【正文】 set exchanged Asset received Boot FMV 2 + Boot given 53 D. Purchase of Group Assets 54 D Purchase of Group Assets Formula Costs of all assets acquired * Market Value of A Market Value of all assets acquired Example: Asset 1 Asset 2 Asset 3 Total FMV $ 60,000 120,000 20,000 200,000 FMV Relative FMV 60/200 120/200 20/200 Total cash cost $ 150,000 150,000 150,000 (known) X X X Allocated cost $ 45,000 90,000 15,000 Asset 1 Asset 2 Asset 3 $ 45,000 90,000 15,000 Cash $ 150,000 Dr. Cr. 55 E. Capital amp。 Acc DEP, $3,000) is traded for land with a FMV of $6,000 Answer: Since FMV of machine is not determinable, use FMV of land instead Recognized loss since FMV of land NBV of machine Record Land (received) FMV of Land Asset exchanged Asset received Dr. Land $6,000 Dr. ACC DEP 3,000 Dr. Loss 1,000 Cr. Machine $10,000 FMV (land) Less: NBV (machine) Loss $6,000 (7,000) $1,000 To record land (received) on B/S To calculate loss FMV 2 + No boot 35 C Nonmoary Exchange 8. Situation 5: a) Conditions ? Record asset received FMV of asset received ? G/L calculation is determined by the difference ? FMV exchanged is not determinable but FMV received determinable ? The transaction has mercial substance and is not to facilitate sale ? Boot given b) Accounting treatment FMV 2 + Boot given FMV received Less: NBV exchanged Less: Boot given G/L 36 C Nonmoary Exchange 8. Situation 5 Example: A machine (cost, $10,000。 Impairment of Value (P239240) H: Depletion (P240240) I: Insurance (P240240) J: Goodwill amp。 Federal exercise taxes + Interest construction Cost of Equipment (B/S) Capitalization of interest 6 A Acquisition Cost 5. Cost of Land a) Formula Stated price Proceeds from sales of existing buildings, standing timber, etc., + Broker’s missions + Title and recording fees + Legal fees + Draining of swamps + Clearing of brush and trees + Costs of tearing down an old building + Site development Cost of Land (B/S) 7 A Acquisition Cost 6. Cost of Building a) Formula Stated price + All repair charges neglected by the previous owner + Alterations and improvements + Architect’s fees Cost of Building (B/S) b) Basket purchase of both land and building ? Allocate the purchase price based on the ratio of appraised values of individual items 8 Question Time… 1. Merry Co. purchased a machine costing $125,000 for its manufacturing operations and paid shipping costs of $20,000. Merry spent an additional $10,000 testing and preparing the machine for use. What amount should Merry record as the cost of the machine? a) $155,000 b) $145,000 c) $135,000 d) $125,000 9 Question Time… 1. Answer: Answer: a) Stated price Add: Shipping cost Add: Test and preparation Machine cost $125,000 20,000 10,000 $155,000 10 Question Time… Boyd should report a balance in the land account of a) $464,000 b) $460,000 c) $442,000 d) $422,000 Demolition of old building Legal fees for purchase contract Title guarantee insurance Proceeds from sale of salvaged materials $50,000 10,000 12,000 8,000 2. On 12/01/08, Boyd Co. purchased a $400,000 tract of land for a factory site. Boyd incurred additional costs and realized salvage proceeds during Dec 2020 as follows: 11 Question Time… Answer: a) Stated price Add: Demolition of old building Add: Legal fees for purchase contract Add: Title guarantee insurance Less: Proceeds from sale of salvaged materials Cost of Land $400,000 50,000 10,000 12,000 8,000 $464,000 2. Answer: 12 B. Capitalization of Interest Costs 13 B Capitalization of Interest Costs 1. Definition a) Capitalize interest as part of the cost of certain assets Dr. Interest Expense Cr. Cash Dr. Asset Cr. Interest expense ( part of fixed assets cost) 14 B Capitalization of Interest Costs 2. Qualifying Assets a) Assets which require a period of time to be prepared for use b) Nonqualifying assets include: ? Assets not being used nor being readied for use (ex. idle equipment, idle land) ? Routinely produced inventories ? Assets ready for their intended use when acquired Building purchased by an entity Interest associated with the purchase loan cannot be capitalized Building constructed over a period of time by an entity or outside constructors BUT: Interest associated with the construction loan could be capitalized 15 B Capitalization of Interest Costs 3. When to Capitalize Interest (all three must be met) a) Expenditures for asset have been made b) Activities intended to get asset ready are in progress c) Interest cost is being incurred 4. When interest capitalization period ends a) When the asset is substantially plete b) Normal interruptions and delays do not suspend capitalization c) Intended interruptions and delays do suspend capitalization Construction begins Construction ends Expense interest Capitalize interest Expense interest 16 B Capitalization of Interest Costs 5. How Much Interest Cost is Capitalized Avoidable interest = Weightedavg acc. exp X Interest rate X Construction period ① ② ③ ① Weightedavg expenditure = ∑ (ACC EXP X % of periods) ② Interest rate Explicit rate Avg rate = a) Formula ③ Construction period Int Exp for loan 1 + Int Exp for loan 2 + … Loan 1 + Loan 2 + … = construction begins to construction substantially pleted If more loans with different rate used b) Capitalized interest ca