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Question 9
Cart Co. purchased an office building and the land on which it is located
for $750,000 cash and an existing $250,000 mortgage. For realty tax
purposes, the property is assessed at $960,000, 60% of which is
allocated to the building. At what amount should Cart record the
building?
Question 10
Up Company owns 60% of SideCo, and Down Company owns the other
40% of SideCo. Up Company and Down Company are competitors in
the same market. Which one of the following sets reflects the most likely
level of influence each company has over SideCo?
Question 11
On July 1, 2005, Casa Development Co. purchased a tract of land for
$1,200,000. Casa incurred additional costs of $300,000 during the
remainder of 2005 in preparing the land for sale. The tract was
subdivided into residential lots as follows: Using the relative sales value
method, what amount of costs should be allocated to the Class A lots?
Question 12
On January 2 of the current year, Cruises, Inc. borrowed $3 million at a
rate of 10% for three years and began construction of a cruise ship. The
note states that annual payments of principal and interest in the amount
of $1.3 million are due every December 31. Cruises used all proceeds as
a down payment for construction of a new cruise ship that is to be
delivered two years after the start of construction. What should Cruise
report as interest expense related to the note in its income statement for
the second year?