ACC301 Chp. 9 HW

the accounting for interest costs incurred during construction recommended under GAAP is to: -capitalize no interest charges during construction -capitalize a pro rata portion of all costs of funds employed -charge construction with all costs of funds employed, whether identifiable or not -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

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

Cotton Hotel Corporation recently purchase 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 -depreciated over the period from acquisition to the date the hotel is schedule to be torn down -capitalized as part of the cost of the land -capitalized as part of the cost of the new hotel -written off as a loss in the year the hotel is torn down

capitalized as part of the cost of the land

equipment that cost $168000 on January 1, 2025 was disposed of for $27000 in cash. the accumulated depreciation at the time of the sale was $145000. the entry to record the sale would include a -credit to gain on sale of plant assets of $4000 -credit to accumulated depreciation of $145000 -debit to loss on sale of plant assets of $23000 -credit to the equipment account of $23000

credit to Gain on Sale of Plant Assets of $4000

when an asset is sold in the middle of the fiscal year, -the gain or loss ill be deferred until the following year -the gain or loss is based on the asset's book value at the end of the last fiscal year -depreciation should be updated through the date of the scale -the gain or loss cannot be determined

depreciation should be updated through the date of the sale

in accounting for plant assets, which of the following outlays made after acquisition should be fully expensed in the period the expenditure is made? -expenditure made to increase the efficiency or effectiveness of an existing asset -expenditure made to maintain an existing asset so that it can function in the manner intended -expenditure made to add new asset services -expenditure made to extend the useful life of an existing asset beyond the time frame originally anticipated

expenditure made to maintain an existing asset so that it can function in the manner intended

which of the following is one of the conditions that must be present for the capitalization period of interest to begin? -activities necessary to get the asset ready for its intended use must be known -the construction period must occur in the current accounting period -expenditures for the asset must be budgeted -interest costs are being incurred

interest costs are being incurred (the three conditions required for the interest capitalization period to begin and continue are the expenditures for the asset have been made, the activities that are necessary to get the asset ready for its intended use are in progress, and the interest cost is being incurred)

fences and parking lots are reported on the balance sheet as -current assets -property, plant, and equipment -land improvements -land

land improvements

the interest rate(s) used in computing avoidable interest is the: -rate incurred on specific borrowings for the weighted-average expenditures equal to the specific borrowings and the weighted-average rate of other borrowings for the excess expenditures -lower of the rate incurred on specific borrowings or the weighted-average rate -rate incurred on specific borrowings -weighted-average rate incurred on all other outstanding debt

rate incurred on specific borrowings for the weighted-average expenditures equal to the specific borrowings and the weighted-average rate of other borrowings for the excess expenditures

which of the following statements is true regarding capitalization of interest? -interest cost capitalized in connection with the purchase of land to be used as a building site should be debited to the land account and not to the building account -when excess borrowed funds not immediately needed for construction are temporarily invested, any interest earned should be offset against interest cost incurred when determining the amount of interest cost to be capitalized -the minimum amount of interest to be capitalized is determined by multiplying a weighted average interest rate by the amount of average accumulated expenditures on qualifying assets during the period -the amount of interest cost capitalized during the period should not exceed the actual interest cost incurred

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

the period of time during which interest must be capitalized ends when -the asset is substantially complete and ready for its intended use -the activities that are necessary to get the asset ready for its intended use have begun -the asset is abandoned, sold, or fully depreciated -no further interest cost is being incurred

the asset is substantially complete and ready for its intended use

which of the following is a major characteristic of property, plant, and equipment? -they lack physical substance -they are acquired for resale -they are always subject to depreciation -they are long-term in nature

they are long-term in nature (property, plant, and equipment are considered long-term assets and as such yield services over a number of years)