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Question 13
On December 31, 2004, a building owned by Carr, Inc. was
destroyed by fire. Carr paid $12,000 for removal and cleanup
costs. The building had a book value of $250,000 and a fair value
of $280,000 on December 31, 2004. What amount should Carr use
to determine the gain or loss on this involuntary conversion?
Question 14
On July 1, 2005, Glen Corp. leased a new machine from Ryan
Corp. The lease contains the following information: No bargain
purchase option is provided, and the machine reverts to Ryan
when the lease expires. What amount should Glen record as a
capitalized leased asset at inception of the lease?
Question 15
Scott Co. exchanged nonmonetary assets with Dale Co. No cash
was exchanged. There is commercial substance to the exchange.
The carrying amount of the asset surrendered by Scott exceeded
both the fair value of the asset received and Dale's carrying
amount of that asset. Scott should recognize the difference
between the carrying amount of the asset it surrendered and
Question 16
Lease A does not contain a purchase option, but the lease term is
equal to 90 percent of the estimated economic life of the leased
property. Lease B does not transfer ownership of the property to
the lessee by the end of the lease term, but the lease term is equal
to 75 percent of the estimated economic life of the leased
property. How should the lessee classify these leases?
Question 17