ACT 311 CH. 10 QUIZ

Which of the following costs are capitalized for self-constructed assets?

***Materials, labor, and overhead Materials and labor only Labor and overhead only Materials and overhead only

Which of the following is not a major characteristic of a plant asset?

Acquired for resale

Interest revenue earned on borrowed funds during the construction of an asset to be used by a firm can be used to reduce the cost of interest to be capitalized.

False

Land held for speculative purposes is classified as Property, Plant and Equipment but is not depreciated.

False

Special assessments for local improvements, such as pavements, street lights, sewers, and drainage systems, are usually charged to what account?

Land

Which one of the following is not a characteristic of property, plant, and equipment?

They are acquired for use in operations. All of these answer choices are characteristics of property, plant, and equipment. ***They are long-term in nature and are always subject to depreciation. They possess physical substance.

A special assessment by the municipality for sidewalks and a drainage system would be included in the cost of land.

True

Costs incurred subsequent to the acquisition of an asset are capitalized if they provide future benefits.

True

The accounting for interest costs incurred during construction recommended under GAAP is to:

capitalize the lesser of actual interest cost for the period or the amount of interest cost incurred during the period that the company could have avoided if expenditures for the asset had not been made.

Property, plant, and equipment includes

land held for possible use as a future plant site. deposits on machinery not yet received. idle equipment awaiting sale. ***none of these answer choices would be classified as Property, plant, and equipment.

The only major characteristic of property, plant and equipment shown below is:

they lack physical substance. they are acquired for resale. they are always subject to depreciation. ***they are long-term in nature.

The period of time during which interest must be capitalized ends when

the asset is substantially complete and ready for its intended use.

If an asset is sold at a gain,

the fair value of the asset is greater than the proceeds received from the sale. ***the book value of the asset is less than the proceeds received from the sale. the cost of the asset is greater than its book value. the proceeds from the sale are greater than the asset's cost.