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Property, plant, and equipment and intangible assets are long-term, revenue producing assets. |
T |
|
Sales tax paid on equipment acquired for use in the business is not capitalized. |
F |
|
Demolition costs to remove an old building from land purchased as a site for a new building are considered part of the cost of the new building. |
F |
|
The initial cost of property, plant, and equipment includes all the identifiable expenditures necessary to bring the asset to its desired condition and location for use. |
T |
|
A distinguishing characteristic of intangible assets is the degree of uncertainty about when or if they will provide future benefits. |
T |
|
Costs incurred after discovery of a natural resource but before production begins are reported as expenses of the period in which the expenditures are made. |
F |
|
The relative fair values are used to determine the valuation of individual assets acquired in a lump-sum purchase. |
T |
|
The fair value of the asset, debt, or equity securities given in a noncash acquisition should determine the value of the consideration received. |
T |
|
Under current GAAP, fair value is used to measure the components of all nonmonetary exchanges. |
F |
|
The interest capitalization period for a self-constructed asset ends either when the asset is substantially complete and ready for use or when interest costs no longer are being incurred. |
T |
|
The FASB’s required accounting treatment for research and development costs often understates both net income and assets |
T |
|
According to International Financial Reporting Standards, all research and development expenditures are expensed in the period incurred. |
F |
|
A company that prepares its financial statements according to International Financial Reporting Standards must calculate amortization of capitalized software development costs in the same way as under U.S. GAAP. |
F |
|
A company that prepares its financial statements according to International Financial Reporting Standards accounts for a government grant by recognizing revenue for the amount of the grant. |
F |
|
The successful efforts method of accounting for oil and gas exploration costs allows costs incurred in searching for oil and gas within a large geographical area to be capitalized. |
F |
|
Property, plant, and equipment and intangible assets are: B. All assets except cash and cash equivalents. C. Current and long-term assets used in the production of either goods or services. D. Long-term revenue-producing assets. |
D |
|
The acquisition costs of property, plant, and equipment do not include: A. The ordinary and necessary costs to bring the asset to its desired condition and location for use. B. The net invoice price. C. Legal fees, delivery charges, installation, and any applicable sales tax. D. Maintenance costs during the first 30 days of use. |
D |
|
Goodwill is: A. Amortized over the greater of its estimated life or 40 years. B. Only recorded by the seller of a business. C. The excess of the fair value of a business over the fair value of all net identifiable assets. D. None of the above. |
C |
|
Productive assets that are physically consumed in operations are: A. Equipment. B. Land. C. Land improvements. D. Natural resources. |
D |
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An exclusive 20-year right to manufacture a product or use a process is a: A. Patent. B. Copyright. C. Trademark. D. Franchise. |
A |
|
The exclusive right to benefit from a creative work, such as a film, is a: A. Patent. B. Copyright. C. Trademark. D. Franchise. |
B |
|
The exclusive right to display a symbol of product identification is a: A. Patent. B. Copyright. C. Trademark. D. Franchise. |
C |
|
The capitalized cost of equipment excludes: A. Maintenance. B. Sales tax. C. Shipping. D. Installation. |
A |
|
Asset retirement obligations: A. Increase the balance in the related asset account. B. Are measured at fair value in the balance sheet. C. Are liabilities associated with the restoration of a long-term asset. D. All of the above are correct. |
D |
|
If a company incurs disposition obligations as a result of acquiring an asset: A. The company recognizes the obligation at fair value when the asset is acquired. B. The company recognizes the obligation at fair value when the asset is disposed. C. The company records the difference between the fair value of the asset and the obligation when the asset is acquired. D. None of the above. |
A |
|
When selling property, plant, and equipment for cash: A. The seller recognizes a gain or loss for the difference between the cash received and the fair value of the asset sold. B. The seller recognizes a gain or loss for the difference between the cash received and the book value of the asset sold. C. The seller recognizes losses, but not gains. D. None of the above. |
B |
|
Which of the following does not pertain to accounting for asset retirement obligations? A. They accrete (increase over time) at the company’s credit-adjusted risk-free rate. B. They must be recognized according to GAAP. C. Statement of Financial Accounting Concepts No. 7 is applied when adjusting cash flow obligations for uncertainty. D. All of the above pertain to accounting for asset retirement obligations. |
D |
|
Assets acquired under multi-year deferred payment contracts are: A. Valued at their fair value on the date of the final payment. B. Valued at the present value of the payments required by the contract. C. Valued at the sum of the payments required by the contract. D. None of the above. |
B |
|
Assets acquired by the issuance of equity securities are valued based on: A. Their fair values. B. The fair value of the equity securities. C. A or B, whichever is more reasonably determinable. D. A or B, whichever is smaller. |
C |
|
Donated assets are recorded at: A. Zero (memo entry only). B. The donor’s book value. C. The donee’s stated value. D. Fair value. |
D |
|
The fixed-asset turnover ratio provides: A. The rate of decline in asset lives. B. The rate of replacement of fixed assets. C. The amount of sales generated per dollar of fixed assets. D. The decline in book value of fixed assets compared to capital expenditures. |
C |
|
The balance sheets of Davidson Corporation reported net fixed assets of $320,000 at the end of 2013. The fixed-asset turnover ratio for 2013 was 4.0, and sales for the year totaled $1,480,000. Net fixed assets at the end of 2012 were: A. $470,000. B. $370,000. C. $420,000. D. None of the above. |
C $1,480,000 ÷ Average fixed assets = 4.0 Average fixed assets = $370,000, therefore net fixed assets at the end of 2012 must be $420,000 [($320,000 + x) ÷ 2] = $370,000; $320,000 + x = $740,000; x = $420,000 |
|
The basic principle used to value an asset acquired in a nonmonetary exchange is to value it at: A. Fair value of the asset(s) given up. B. The book value of the asset given plus any cash or other monetary consideration received. C. Fair value or book value, whichever is smaller. D. Book value of the asset given. |
A |
|
In a nonmonetary exchange of equipment, if the exchange has commercial substance, a gain is recognized if: A. The fair value of the equipment received exceeds the book value of the equipment received. B. The book value of the equipment received exceeds the fair value of the equipment given up. C. The fair value of the equipment surrendered exceeds the book value of the equipment given up. D. None of the above is correct. |
C |
|
Interest may be capitalized: A. On routinely manufactured goods as well as self-constructed assets. B. On self-constructed assets from the date an entity formally adopts a plan to build a discrete project. C. Whether or not there is specific borrowing for the construction. D. Whether or not there are actual interest costs incurred. |
C |
|
Interest is eligible to be capitalized as part of an asset’s cost, rather than being expensed immediately, when: A. The interest is incurred during the construction period of the asset. B. The asset is a discrete construction project for sale or lease. C. The asset is self-constructed, rather than acquired. D. All of the above are correct. |
D |
|
In computing capitalized interest, average accumulated expenditures: A. Is the arithmetic mean of all construction expenditures. B. Is determined by time-weighting individual expenditures made during the asset construction period. C. Is multiplied by the company’s most recent financing rates. D. All of the above are correct. |
B |
|
Interest is not capitalized for: A. Assets that are constructed as discrete projects for sale or lease. B. Assets constructed for a company’s own use. C. Inventories routinely and repetitively produced in large quantities. D. Interest is capitalized for all of these items. |
C |
|
Average accumulated expenditures: A. Is an approximation of the average debt a firm would have outstanding if it financed all construction through debt. B. Is computed as a simple average if all construction expenditures are made at the end of the period. C. Are irrelevant if the company’s total outstanding debt is less than total costs of construction. D. All of the above are true statements. |
A |
|
The cost of self-constructed fixed assets should: A. Include allocated indirect costs just as they are for production of products. B. Include only incremental indirect costs. C. Include only specifically identifiable indirect costs. D. Not include indirect costs. |
A |
|
Research and development costs for projects other than software development should be: A. Expensed in the period incurred. B. Expensed in the period they are determined to be unsuccessful. C. Deferred pending determination of success. D. Expensed if unsuccessful, capitalized if successful. |
A |
|
Software development costs are capitalized if they are incurred: A. Prior to the point at which technological feasibility has been established. B. After commercial production has begun. C. After technological feasibility has been established but prior to the product availability date. D. None of the above is correct. |
C |
|
Research and development (R&D) costs: A. Generally pertain to activities that occur prior to the start of production. B. May be expensed or capitalized, at the option of the reporting entity. C. Must be capitalized and amortized. D. None of the above is correct. |
A |
|
Research and development expense for a given period includes: A. The full cost of newly acquired equipment that has an alternative future use. B. Depreciation on a research and development facility. C. Research and development conducted on a contract basis for another entity. D. Patent filing and legal costs. |
B |
|
Amortization of capitalized computer software costs is: A. Either the percentage-of-revenue method or the straight-line method at the company’s option. B. The greater of the percentage-of-revenue method or the straight-line method. C. The lesser of the percentage-of-revenue method or the straight-line method. D. Based on neither the percentage-of-revenue nor the straight-line method. |
B |
|
Under International Financial Reporting Standards, research expenditures are: A. Expensed in the period incurred. B. Expensed in the period they are determined to be unsuccessful. C. Capitalized if certain criteria are met. D. Expensed if unsuccessful, capitalized if successful. |
A |
|
Under International Financial Reporting Standards, development expenditures are: A. Expensed in the period incurred. B. Expensed in the period they are determined to be unsuccessful. C. Capitalized if certain criteria are met. D. None of the above is correct. |
C |
|
In accounting for oil and gas exploration costs, companies: A. May not use the full-cost method. B. May use the successful efforts method. C. May use the slippery slope method. D. All of the above are correct. |
B |
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