Intermediate Accounting - Chapter 10 LearnSmart

An asset is acquired by signing a note payable. The note does not indicated an interest rate, and the fair value of the asset cannot be reliably determined. At what amount should the asset be recorded?

Present value of the note payable discounted at the market rate

Which of the following should be included in the cost of buildings?

Real estate commissions relating to purchase of building.

Which of the following is true regarding a nonmonetary exchange of assets?

The gain or loss is recognized for the difference between the fair value and the book value of the asset given up.

True or false: The initial cost of property, plant, and equipment includes the purchase price and all expenditures necessary to bring the asset to its desired condition and location for use.

True

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

a gain is recorded.

A company issues its equity securities to purchase land. The common stock is not publicly traded. The best indicator of fair value is the

appraised value of the land.

The purchase price and all costs to bring an asset to its desired condition and location for use should be ___________________________.

capitalized

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

capitalized as part of the cost of land

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

capitalized, depreciated or amortized over the periods benefited.

Larry purchases land to be used for a new corporate headquarters. Which of the following items are capitalized in the cost of land?

cost to remove an old building, title insurance, legal fees to secure title, grading the land

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

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

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

depreciated

The basic principle for valuing assets in a nonmonetary exchange is to value the asset received at

fair value.

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

fair, market, appraised, or appraisal

A ratio used to measure how effectively a manager is using plant, property, and equipment is the _____________________ ratio.

fixed-asset turnover

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

freight-in, insurance during transit, set-up cost

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

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

An asset, other than financial assets, that has not physical substance is referred to as a(n)

intangible asset.

The distinction between land and land improvements is that:

land has an indefinite life

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

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

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

long-lived, revenue-producing

The fixed-asset turnover ratio is calculated as ___________________ divided by average fixed assets.

net sales

Which of the following are intangible assets?

patent, trademark, copyright, goodwill

When an asset is acquired by signing a noninterest-bearing note payable, and the estimated fair value of the asset is not known, the asset should be recorded at the fair value of the note, which is the

present value fo the note discounted at the market rate.

When an asset is acquired by signing a noninterest-bearing note payable, and the estimated fair value of the asset is known, the asset should be recorded at the fair value of the note, which is the

present value of the note discounted at the market rate.

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

property, plant, and equipment; intangible assets

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

realtor commissions, remodeling building, legal fees to obtain title

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

sales

A company issues its equity securities to purchase land. The common stock is publicly traded, and both the value of the stock and the land is known. The best indicator of fair value is the value of the

stock.