Chapter 10 Quiz ACG3103

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Cotton Hotel Corporation recently purchased Emporia Hotel and the land on which it is located with the plan to tear down the Emporia Hotel and build a new luxury hotel on the site. The cost of the Emporia Hotel should be

Capitalized as part of the cost of the land

Which of the following statements is true regarding capitalization of interest?

The amount of interest cost capitalized during the period should not exceed the actual interest cost incurred

Which of the following assets do not qualify for capitalization of interest costs incurred during construction of the assets?

Which of the following assets do not qualify for capitalization of interest costs incurred during construction of the assets?

An improvement made to a machine increased its fair value and its production capacity by 25% without extending the machine's useful life. The cost of the improvement should be

capitalized in the machine account

Ringler Corporation exchanges one plant asset for a similar plant asset and gives cash in the exchange. The exchange is not expected to cause a material change in the future cash flows for either entity. If a gain on the disposal of the old asset is indicated, the gain will

effectively reduce the amount to be recorded as the new cost of the new asset

The boot is involved in an exchange having commercial substance

gains or losses are recognized in their entirety

The cost of a nonmonetary asset acquired in exchange for another nonmonetary asset when the exchange has commercial substance is usually recorded at

got wrong

A plant site donated by a township to a manufacturer that plans to open a new factory should be recorded on the manufacturer's books at

its fair value

Accounting recognition should be given to some or all of the gain realized on a nonmonetary exchange of plant assets except when the exchange has

no commercial substance and additional cash is paid

When computing the amount of interest cost to be capitalized, the concept of "avoidable interest" refers to

that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made


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