ACCT 326 Ch 10 Learnsmart

Which of the following are classified as natural resources?

timber tracts mineral deposits

Obligations associated with disposition of property, plant, equipment, or natural resources are called

Asset retirement obligations

Accounting for land improvements requires that the costs of land improvements are:

capitalized depreciated or amortized over the periods benefited

Costs incurred after technological feasibility is established but before the software is available to customers should be

capitalized as an intangible asset.

Expenditures needed to get land ready for its intended use should be

capitalized as part of the cost of land

PP&E typically include:

cars and trucks furniture machinery

A company acquires equipment by signing an interst-bearing note payable for $20,000. The interest rate is realistic so the company will record

debit machine $20,000 credit note payable $20,000

Accounting for land improvements requires that the land improvements are capitalized and then ______ over periods benefited by their use.

depreciated

Under IFRS, amortization of capitalized development costs begins when

development is complete the asset is ready for use

U.S. GAAP and IFRS treat research costs as a(n) _______ whereas IFRS, development costs are treated as a(n) _____.

expense; intangible asset

Expenditures relating to a search for natural resources are referred to as

exploration costs

Which of the following items are intangible assets?

goodwill trademarks

From a financial reporting perspective, property, plant, and equipment and intangible assets exhibit the following characteristics:

long-lived revenue producing

Superior mining Inc. purchases a large piece of land with rich mineral deposits and plants to start extracting the mineral-rich ore immediately. The cost of the piece of land should be reported in this category

natural resources

Capital budgeting decisions are made by estimating future cash flows and using which model?

net present value model

For capitalized interest on self-constructed assets, weighted-average expenditures is determined by weighting the individual expenditures by the

number of months from incurrence to the end of the construction period.

If the amount of interest calculated to be capitalized on a self-constructed asset is greater than the amount actually incurred, then

the interest capitalized is limited to the actual interest incurred

What is the GAAP disclosure requirement for research and development expenses?

A separate line item on the income statement or in a disclosure note.

The ________ approach for self-constructed assets advocates including only the additional overhead costs incurred in the construction of the asset, whereas the full-cost approach requires the allocation of overhead to self-constructed assets.

Incremental

The two important accounting issues related to self-constructed assets are

Interest charges and allocation of overhead

A(n) _____ is an exclusive right to display a word, slogan, symbol, or emblem that distinctively indentifies a company, product, or service.

Trademark

When does technological feasibility occur in software development?

When all planning, designing, coding, and testing activities are completed and the product meets design specifications.

When a company receives an asset from an unrelated party by donation, the assets are valued at _____ value.

appraisal

Which items qualify for interest capitalization?

assets built for a company's own use assets built as discrete projects for sale or lease

A(n) _____ is an exclusive right of protection given to a creator of a published work, such as a song, film, painting, photograph, or book.

Copyright

What are the cost components for self-constructed assets?

Direct labor Direct materials Manufacturing overhead

T/F: If a company has no borrowing, interest costs can be imputed on self-constructed assets.

False

T/F: U.S. GAAP and IFRS require the same amortization methods for amortization of computer software development costs.

False

Land, building, machinery, furniture, trucks, and natural resources typically are reported as part of

PP&E

Long-term assets are typically classified in one of these two categories:

PP&E Intangible Assets

A(n) ______ is the exclusive right to manufacture a product or use a process granted for a period of _____ years.

Patent 20 years

Interest capitalization on a self-constructed asset begins when

The first expenditure is made.

A contractual arrangement in which on entity grants the purchaser the exclusive right to use the trade name, formulas, and product rights within a specific geographic area for a specific period of time is called a

franchise

Indicate which costs would be capitalized as part of the cost of manufacturing equipment:

freight-in insurance during transit set-up cost

The rationale for capitalizing interest on a self-constructed asset is that

interest expense is incurred while getting the asset ready for its intended use and therefore, should be capitalized

The type of interest costs that can be treated as capitalized interest can pertain to borrowings that are:

specifically for the construction project other loans during the period of construction

The amortization of capitalized computer software development costs begins when

the product is available for release to customers

which of the following are required financial statement disclosures for capitalized interest?

the total amount of interest capitalized

for self-constructed assets, if no specific money is borrowed to construct the asset, but other debt is outstanding, the interest rate used to capitalize interest is

the weighted-average rate on all loans outstanding

When calculating the amount of interest to capitalize on a self-constructed asset, the critical inputs used are an interest rate and

weighted average accumulated expenditures

When a company is unable to associate specific debt with projects, they should use the ___________ to compute capitalized interest.

weighted-average interest rate on all interest-bearing debt, including construction loans.

The future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized are referred to as

Goodwill

Which of the following items should be capitalized in the cost of equipment?

purchase price freight to deliver the equipment to its location installation and testing of equipment insurance on equipment during shipping

Sarah purchases land to be used for a new storage facility. Which of the following items are capitalized in the cost of land?

real estate agent commissions costs to remove an old building legal fees to secure title

Which of the following costs should be capitalized in the costs of acquiring a building?

realtor commissions legal fees to obtain title remodeling building

Manfred Mining Company is required to restore a piece of land to its original condition after it completes extraction of precious metals. From a financial reporting perspective, the related obligation is referred to as an asset

retirement obligation

The fixed asset turnover ratio indicates the level of _____ generated by each dollar of fixed assets.

sales