ACCOUNTING 5110 EXAM ONE || 100% VERIFIED ANSWERS.
what are the major characteristics of property, plant, and equipment? correct answers they are
required for use in operations and not held for resale, long term in nature and usually
depreciated, possess physical substance
historical cost correct answers measures the cash or cash equivalent price of obtaining the asset
and bringing it to the location and condition necessary for its intended use
subsequent to acquisition, companies should ____ write up property, plant, and equipment, to
reflect fair value when it is above cost correct answers NOT
a long lived asset is not _____, if held for sale correct answers depreciated
land costs typically include correct answers 1. purchase price 2. closing costs, title to land,
attorney's fees and recording fees 3. costs incurred in getting the land in condition for its
intended use 4. assumption of any liens, mortgages, or encumbrances 5. any additional land
improvements that have an indefinite life
land held for speculation is classified as an correct answers investment
cost of buildings include correct answers materials, labor, and overhead costs incurred during
construction, and professional fees and building permits
if the allocated overhead in a self constructed asset exceeds the costs of an outside contractor, the
company should record the excess overhead as a _____ correct answers loss
within the capitalization of interest costs during construction, GAAP requires correct answers
capitalize actual interests costs during construction
, to qualify for interest capitalization, assets must correct answers require a period of time to get
them ready for their intended use
the three requirements of the capitalization period are correct answers 1. expenditures for the
asset have been made
2. activities that are necessary to get the asset ready for its intended use are in progress
3. interest cost is being incurred
avoidable interest correct answers the amount of interest cost during the period that a company
could theoretically avoid if it had not made expenditures for the asset
formula for weighted average accumulated expenditures correct answers amount of expenditure
x capitalization period
formula for weighted average interest rate for general debt correct answers total interest/ total
principal
formula for avoidable interest correct answers weighted average accumulated expenditures x
interest rate
in general companies should ____ net or offset interest revenue against interest cost correct
answers not
if a company takes a cash discount, the company should consider this discount a ____ of the
acquisition price correct answers reduction
to properly reflect cost, companies account for assets purchased on long term credit contracts at
the ____ ____ of the consideration exchanged between the contracting parties at the date of
transaction correct answers present value
what are the major characteristics of property, plant, and equipment? correct answers they are
required for use in operations and not held for resale, long term in nature and usually
depreciated, possess physical substance
historical cost correct answers measures the cash or cash equivalent price of obtaining the asset
and bringing it to the location and condition necessary for its intended use
subsequent to acquisition, companies should ____ write up property, plant, and equipment, to
reflect fair value when it is above cost correct answers NOT
a long lived asset is not _____, if held for sale correct answers depreciated
land costs typically include correct answers 1. purchase price 2. closing costs, title to land,
attorney's fees and recording fees 3. costs incurred in getting the land in condition for its
intended use 4. assumption of any liens, mortgages, or encumbrances 5. any additional land
improvements that have an indefinite life
land held for speculation is classified as an correct answers investment
cost of buildings include correct answers materials, labor, and overhead costs incurred during
construction, and professional fees and building permits
if the allocated overhead in a self constructed asset exceeds the costs of an outside contractor, the
company should record the excess overhead as a _____ correct answers loss
within the capitalization of interest costs during construction, GAAP requires correct answers
capitalize actual interests costs during construction
, to qualify for interest capitalization, assets must correct answers require a period of time to get
them ready for their intended use
the three requirements of the capitalization period are correct answers 1. expenditures for the
asset have been made
2. activities that are necessary to get the asset ready for its intended use are in progress
3. interest cost is being incurred
avoidable interest correct answers the amount of interest cost during the period that a company
could theoretically avoid if it had not made expenditures for the asset
formula for weighted average accumulated expenditures correct answers amount of expenditure
x capitalization period
formula for weighted average interest rate for general debt correct answers total interest/ total
principal
formula for avoidable interest correct answers weighted average accumulated expenditures x
interest rate
in general companies should ____ net or offset interest revenue against interest cost correct
answers not
if a company takes a cash discount, the company should consider this discount a ____ of the
acquisition price correct answers reduction
to properly reflect cost, companies account for assets purchased on long term credit contracts at
the ____ ____ of the consideration exchanged between the contracting parties at the date of
transaction correct answers present value
