301 Chap 10

Which method in oil and gas accounting requires the cost of unsuccessful wells be expensed in the current period? Multiple choice question. Full-cost method Accretion method Completed contract method Successful efforts method

Successful efforts method

When assets are exchanged and the transaction lacks commercial substance, which of the following occurs? (Select all that apply.) Multiple choice question. The asset received is valued at the book value of the asset given. A gain is recognized for the difference in fair value of the assets. A gain or loss is recognized for the difference between the fair value of the two assets.

The asset received is valued at the book value of the asset given.

Which method in oil and gas accounting allows all costs to be capitalized as assets, and then expensed in the future as oil and gas are extracted? Multiple choice question. completed contract method successful efforts method accretion method full-cost method

full-cost method

An asset, other than financial assets, that has no physical substance is called a(n) _____________ asset

intangible

An asset, other than financial assets, that has no physical substance is referred to as a(n) Multiple choice question. intangible asset. finite asset. depreciable asset. current asset.

intangible asset.

The two important accounting issues related to self-constructed assets are Multiple choice question. historical cost and useful life. allocation of overhead and depreciation rates. interest charges and allocation of overhead. interest charges and date placed in service.

interest charges and allocation of overhead.

Which of the following costs should be capitalized in the costs of acquiring a building? (Select all that apply.) Multiple select question. current year property taxes realtor commissions legal fees to obtain title remodeling building insurance on the building

realtor commissions legal fees to obtain title remodeling building

Berner Mining Company estimates that after it completes extraction of valuable metals from a tract of land, $245,000 will be necessary to return the land to its original condition. This cost is considered a(n) Multiple choice question. restoration cost residual value operating expense overhead cost

restoration cost

In a lump-sum purchase of assets, the cost must be allocated to the individual assets because Multiple choice question. the assets have different useful lives. goodwill must be expensed immediately. intangible assets must be identified and expensed.

the assets have different useful lives.

Which of the following are classified as natural resources? (Select all that apply.) Multiple select question. land and land improvements building timber tracts mineral deposits

timber tracts mineral deposits

Ayesha Corp. purchases equipment to be used in manufacturing. Given the following expenditures during the year, calculate the amount capitalized as the cost of equipment.

$57,400

_________ is an exclusive right of protection given to a creator of a published work, such as a song, film, painting, photograph, or book. (Enter only one word.)

copyright

Indicate which costs would be capitalized as part of the cost of manufacturing equipment. (Select all that apply.) Multiple select question. freight-in insurance during transit depreciation for the first month set-up cost training of equipment operator

freight-in insurance during transit set-up cost

The interest capitalization period begins with the first expenditure and ends when which of the following occur? (Select all that apply.) Multiple select question. interest costs are no longer being incurred the construction project is subcontracted to another party the loan is paid off at the end of the asset's life the asset is substantially complete and ready for use

interest costs are no longer being incurred the asset is substantially complete and ready for use

Sarah purchases land to be used for a new storage facility. Which of the following items are capitalized in the cost of land? (Select all that apply.) Multiple select question. legal fees to secure title current year's property taxes real estate agent commissions costs to remove an old building

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

The costs included in the natural resource account includes (Select all that apply.) Multiple select question. restoration costs. exploration costs. development costs. acquisition costs. equipment costs.

restoration costs. exploration costs. development costs. acquisition costs.

Polly Corporation purchases land for $200,000. Polly incurs the following costs associated with the land acquisition:

$224,000

Which items qualify for interest capitalization? (Select all that apply.) Multiple select question. Assets built for a company's own use Assets built as discrete projects for sale or lease Inventories routinely manufactured in large quantities Franchise agreements Purchased assets

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

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

Blank 1: fair, market, appraised, or appraisal

Computer software purchased for internal use should be Multiple choice question. expensed immediately. capitalized and amortized over its useful life. capitalized as part of the computer hardware.

capitalized and amortized over its useful life.

Expenditures needed to get land ready for its intended use should be: Multiple choice question. expensed as incurred capitalized as part of the cost of land capitalized as part of the cost of a related building

capitalized as part of the cost of land

A(n) Blank______ is protected by law and gives the creator of a published work the exclusive rights to reproduce and sell the work for the life of the creator plus 70 years. Multiple choice question. franchise copyright patent trademark

copyright

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

depreciated

If natural resources are developed by a company, the initial valuation should include (Select all that apply.) Multiple select question. exploration costs. development costs. acquisition cost. equipment costs. restoration costs.

exploration costs. development costs. acquisition cost. restoration costs.

Assets that do not qualify for interest capitalization are Multiple choice question. assets built for a company's own use. inventories routinely manufactured. assets constructed as a discrete project for sale or lease.

inventories routinely manufactured.

What are the cost components for self-constructed assets? (Select all that apply.) Multiple select question. operating expenses manufacturing overhead direct material direct labor

manufacturing overhead direct material direct labor

For self-constructed assets, the costs incurred include labor, materials, and Multiple choice question. operating costs. depreciation expense. research and development. overhead.

overhead.

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 Multiple choice question. land. stock.

stock.

The two important accounting issues related to self-constructed assets are Multiple select question. date placed in service. treatment of interest charges. residual value. allocation of overhead.

treatment of interest charges. allocation of overhead.

For capitalization of interest on self-constructed assets, the average accumulated expenditures is the Multiple choice question. the total expected cost of the construction project. the weighted average of all assets purchased during the period. average total assets during the period. weighted-average expenditures during the construction period.

weighted-average expenditures during the construction period.

Collin Corp. purchases equipment to be used in manufacturing. Given the following expenditures during the year, calculate the amount capitalized as the cost of equipment.

$114,000

Which of the following is true regarding a nonmonetary exchange of assets? Multiple choice question. The new asset is recorded at the book value of the old asset plus the cash paid. The new asset is recorded at the book value of the old asset. The gain or loss recognized is the difference between the historical cost of the asset given up and the fair value of the new asset received. A gain or loss is recognized for the difference between the fair value and the book value of the asset given up.

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

When is it appropriate to recognize a liability for an asset retirement obligation? (Select all that apply.) Multiple select question. When the asset is impaired and the cost is not recoverable. At the asset's retirement date. At the inception of the asset's life if a legal obligation exists. Over the asset's life as incurred.

At the inception of the asset's life if a legal obligation exists. Over the asset's life as incurred.

Mega Mines acquires a new mine for $1,000,000. Mega Mines determines at the date of acquisition that it will cost $140,000 to restore the land when the mining process is complete in 5 years. Mega Mines has a legal obligation to remove the equipment upon completion of the mining activities. Which of the following are acceptable choices for determining when to recognize an asset retirement obligation? (Select all that apply.) Multiple select question. At the inception of the asset's life. At the asset's retirement date. Over the asset's life as incurred.

At the inception of the asset's life. Over the asset's life as incurred.

______________ is the exclusive right to manufacture a product or use a process granted for a period of __________ years

Blank 1: patent Blank 2: twenty or 20

_____________ is an exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company, product, or service. (Select all that apply.)

Blank 1: trademark or tradename

An asset is exchanged for another asset and cash is received in the transaction. The fair value of the assets are not determinable. At what amount should the new asset be recorded? Multiple choice question. Book value of the asset received less the cash received. Book value of the asset given up less the cash received. Historical cost of the asset given up less the cash received. Cash received plus the book value of the asset given up.

Book value of the asset given up less the cash received.

An asset is exchanged for another asset and cash is received in the transaction. The fair value of the assets are not determinable. At what amount should the new asset be recorded? Multiple choice question. Cash received plus the book value of the asset given up. Historical cost of the asset given up less the cash received. Book value of the asset given up less the cash received. Book value of the asset received less the cash received.

Book value of the asset given up less the cash received.

An asset is exchanged for another asset and no cash is exchanged in the transaction. The fair value of the assets are not determinable. At what amount should the new asset be recorded? Multiple choice question. Book value of the asset given. Book value of the asset received. Historical cost of the asset given. The difference between the book values of the two assets.

Book value of the asset given.

Donated assets should be recorded on the balance sheet at what amount? Multiple choice question. Zero Fair value Book value of the donor Net realizable value

Fair value

True or false: If a company has no borrowings, interest costs can be imputed on self-constructed assets. True false question. True False

False

______ Blank______ are physically diminished as minerals and other materials are extracted from the ground and are sold or used in the production process, whereas equipment, land, and buildings have physical characteristics that remain unchanged. Multiple choice question. Intangible assets Natural resources Fixed assets Operating assets

Natural resources

Which of the following should be included in the cost of buildings? Multiple choice question. Fire insurance premiums relating to building Real estate commissions relating to purchase of building Cost of paving parking lot in front of building Cost of clearing land adjacent to building

Real estate commissions relating to purchase of building

The cost of natural resources includes which of the following? (Select all that apply.) Multiple select question. Employee salaries during production. Extractive and drilling equipment. Restoration costs at the end of extraction. Exploration costs before production begins. Acquisition cost for the use of land.

Restoration costs at the end of extraction. Exploration costs before production begins. Acquisition cost for the use of land.

Which of the following are included in research and development costs? (Select all that apply.) Multiple select question. Salaries of researchers Allocation of indirect costs related to research Materials used in the lab General and administrative expenses for the company

Salaries of researchers Allocation of indirect costs related to research Materials used in the lab

True or false: Start-up costs such as legal fees and state filings to incorporate should be expensed in the period incurred. True false question.TrueFalse

True

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 false question True False

True

Start-up costs such as legal fees and state filings to incorporate should be treated as Multiple choice question. an asset and amortized over 5 years. an expense in the period incurred. an extraordinary loss of the period. accumulated other comprehensive income.

an expense in the period incurred.

Because it is difficult to estimate the future value of research and development, FASB requires that research and development costs be treated as Multiple choice question. a contra asset on the balance sheet. a liability on the balance sheet. an expense on the income statement. an asset on the balance sheet.

an expense on the income statement.

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

appraised value of the land.

In a cloud computing arrangement, if the customer cannot run the software on its own, the costs Multiple choice question. are treated as internally generated goodwill. are treated as the purchase of intangible assets. are expensed as incurred. are expensed when the arrangement ends.

are expensed as incurred.

Obligations associated with disposition of property, plant, equipment, or natural resources are called Multiple choice question. asset retirement obligations. contra-asset-liabilities. nonrecurring fixed assets. accumulated depreciation.

asset retirement obligations.

When assets are exchanged and the transaction lacks commercial substance, the asset received is valued at the Multiple choice question. book value of the asset given up. fair value of the asset received. net present value of the asset given up. fair value of the asset given up.

book value of the asset given up.

Costs incurred after technological feasibility is established but before the software is available to customers should be Multiple choice question. treated as research and development expenses. capitalized as an intangible asset. expensed in the period incurred. treated as an ordinary loss in the period incurred.

capitalized as an intangible asset.

Accounting for land improvements requires that the costs of land improvements are (Select all that apply.) Multiple select question. expensed in the current period. capitalized. included in the cost of land. depreciated or amortized over the periods benefited.

capitalized. depreciated or amortized over the periods benefited.

Costs of an asset that produce future benefits are Blank______, but costs that produce benefits only in the current period are Blank______. Multiple choice question. capitalized; expensed operating activities; investing activities expensed; capitalized current assets; noncurrent assets

capitalized; expensed

The cost of a major improvement that extends the useful life of an asset would be Blank______; the cost of maintenance that does not increase the future benefits would be Blank______. Multiple choice question. expensed; capitalized expensed; expensed capitalized; expensed capitalized; capitalized

capitalized; expensed

Clarion purchases land and prepares it for use. Which of the following items should be capitalized as land improvements? (Select all that apply.) Multiple select question. legal fees to acquire land cost of lawn sprinkler system cost of land cost of driveways cost of sidewalks

cost of lawn sprinkler system cost of driveways cost of sidewalks

Which of the following items should be capitalized as land improvements? (Select all that apply.) Multiple select question. cost of parking lots cost of land cost of fences cost of sidewalks

cost of parking lots cost of fences cost of sidewalks

A company acquires equipment by signing an interest-bearing note payable for $20,000. The interest rate is realistic so the company will record (Select all that apply.) Multiple select question. debit machine $20,000 debit discount on note payable credit note payable $20,000 debit machine for an amount less than $20,000

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

The costs incurred after a natural resource has been discovered but before production begins are referred to as Multiple choice question. disposition costs. development costs. acquisition costs. exploration costs.

development costs.

When assets are acquired in a noncash transaction, if the fair value of the noncash items given is not clearly evident, then the Blank______ value of the assets received is used to record the assets. Multiple choice question. book net realizable fair estimated

fair

When a company acquires assets by issuing debt or equity securities, the first indicator of fair value is the Multiple choice question. fair value of the debt or equity securities given. fair value of the assets received. book value of the assets received. net present value of assets received.

fair value of the debt or equity securities given.

Asset retirement obligations are recorded as a liability and measured at Multiple choice question. historical cost. net realizable value. fair value. net present value.

fair value.

The basic principle for valuing assets in a nonmonetary exchange is to value the asset received at Multiple choice question. fair value. book value of the asset given up. book value plus the cash given. book value of the asset received plus cash received.

fair value.

___________ is a contractual arrangement in which one entity grants the purchaser the exclusive right to use the tradename, formulas, and product rights within a specific geographic area for a specific period of time. (Enter only one word.)

franchise

A contractual arrangement in which one entity grants the purchaser the exclusive right to use the tradename, formulas, and product rights within a specific geographic area for a specific period of time is called a Multiple choice question. franchise. trademark. patent. copyright.

franchise.

A company's reputation and clientele, its trained employees, and favorable business location may give rise to

goodwill

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 Multiple choice question. goodwill. unidentifiable assets. identified intangible assets. restricted intangible assets.

goodwill.

Which of the following items should be capitalized in the cost of equipment? (Select all that apply.) Multiple select question. insurance on equipment during shipping Purchase price installation and testing of equipment repair costs for first year of operations freight to deliver the equipment to its location

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

The FASB requires research and development costs to be expensed because Multiple choice question. the costs of research are greater than the benefits. research and development costs have no future value. it is difficult to objectively determine the future benefits.

it is difficult to objectively determine the future benefits.

Which of the following are included in research and development costs? (Select all that apply.) Multiple select question. labor costs of research personnel allocation of overhead for lab facilities sales commissions administrative expenses equipment in the lab

labor costs of research personnel allocation of overhead for lab facilities equipment in the lab

Margot Company purchases land, building and equipment for a single purchase price. Margot should account for the purchase as a Blank______ purchase. Multiple choice question. lump-sum bargain single-sum

lump-sum

For capitalized interest on self-constructed assets, weighted-average expenditures is determined by weighting the individual expenditures by the Multiple choice question. average interest rate for the period. number of months from incurrence to the end of the construction period. average risk-free rate for the period. weighted-average amount borrowed during the period.

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

The type of interest costs that can be treated as capitalized interest can pertain to borrowings that are (Select all that apply.) Multiple select question. other loans during the period of construction. imputed interest costs for those situations when the company is not incurring interest costs. specifically for the construction project.

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

The exclusive legal right to manufacture a product or to use a process is called a(n)

patent

A company acquires equipment by signing an interest-bearing note payable. If the interest rate is realistic, the company will record the equipment at the Multiple choice question. net present value of future cash flows of the equipment. present value of the note payable, which is the face amount of the note. future value of payments on the note payable. retail selling price of the equipment as indicated in the dealer's catalog.

present value of the note payable, which is the face amount of the note.

Which of the following are noncurrent tangible assets? (Select all that apply.) accounts receivable property equipment trademark copyright

property equipment

Land, building, machinery, furniture, and equipment are typically reported as part of: Multiple choice question. other assets property, plant, and equipment investment securities liabilities

property, plant, and equipment

Long-term assets are typically classified in one of these two categories: Multiple select question. investments property, plant, and equipment construction in progress intangible assets leasehold improvements

property, plant, and equipment intangible assets

In a cloud computing arrangement, if the customer has a contractual right to take possession of the software without significant penalty and the customer could run the software on its own, the costs are treated as Multiple choice question. goodwill. self-constructed assets. purchased intangibles. software development costs.

purchased intangibles.

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 Multiple choice question. exploration obligation. development cost. retirement obligation.

retirement obligation

When a company receives an asset from an unrelated party by a donation, the assets are valued at fair value and Multiple choice question. revenue is recorded. a gain is recorded. paid-in capital is increased. a liability is increased.

revenue is recorded.

From a financial reporting perspective, property, plant, and equipment and intangible assets exhibit the following characteristics (Select all that apply.) Multiple select question. valued at fair value revenue-producing long-lived short-lived

revenue-producing long-lived

Interest capitalization on a self-constructed asset begins when Multiple choice question. the asset is substantially complete. interest costs can be imputed. the first expenditure is made. the asset is placed in service.

the first expenditure is made.

When an asset retirement obligation is recorded as a liability, the offsetting journal entry is a debit to Multiple choice question. loss on asset obligation. the related asset. other comprehensive income. a contra-asset.

the related asset.

An exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company, product, or service is referred to as a Multiple choice question. copyright. franchise. patent. trademark.

trademark.

Norbert Company has an exclusive right to display a specific symbol and routinely uses it on its promotional materials, company letterhead, and other media to distinguish its company from other firms. This right is referred to as a Multiple choice question. property. franchise. copyright. trademark.

trademark.