Financial Reporting and Analysis
4. A company has recently purchased a warehouse property and related equipment for €20 million, which has been valued by an appraiser as follows: land, €6 million; buildings, €9 million; and equipment, €8 million.
In the course of putting the warehouse into operation, the company incurred the following additional costs:
€300,000 for remodeling the internal layout to meet its needs
€1 million for repairs to the building’s roof and windows, which will extend the building’s lifespan
€0.2 million for orientation and training of employees to familiarize them with the facility.
The costs capitalized for accounting purposes to the building account (in millions of euros) are closest to:
A. EUR 20.0.
B. EUR 21.3.
C. EUR 24.5.
5. Larson Inc. manufactures consumer goods and operates a series of separate outlets through contractual agreements.
One of the companies with which it enters into contractual agreements is GoTo, and all merchandise sold through these outlets is at Larson’s risk with respect to inventory and credit risk; Larson pays GoTo a commission. Prices are determined by Larson Inc.
During 2019, Larson Inc. has the following information:
The total sales price of merchandise sold by Larson through GoTo during 2019 was $4,750,000.
Larson paid GoTo commissions totaling $800,000 for these items during 2019.
Which of the following statements is most likely to be true regarding the information above?
A. GoTo should report USD4,750,000 revenue on its 2019 income statement.
B. GoTo should report USD800,000 revenue on its 2019 income statement.
C. GoTo should report USD3,950,000 revenue on its 2019 income statement.
6. The most appropriate way to account for assets that have been selected for spin-off prior to distribution is to categorize them into:
A. held for sale with no depreciation taken.
B. held for use until disposal with no deprecation taken.
C. held for use until disposal with depreciation continuing to be taken.