Acct 3100 Chp 10

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Accounting for land improvements

requires that the land improvements are capitalized and then depreciated or expensed over the periods benefited by their use, and are capitalized

When the expected cash flow approach is used to measure an asset retirement obligation at fair value, what assumptions or estimates must be made by the accountant?

the expected cash flows the probabilities of cash flows

Interest capitalization on a self-constructed asset begins when

the first expenditure is made.

When an asset retirement obligation is recorded as a liability

the offsetting journal entry is a debit to a related-asset.

When an asset retirement obligation is recorded as a liability, the offsetting journal entry is a debit to

the related asset.

items are capitalized in the cost of land

title Insurance, Costs to remove an old building, Grading the land, Legal fees to secure title

Natural Resources

physically diminished as minerals and materials

natural resources are developed by a company, the initial valuation should include

Restoration costs, development costs, exploration costs, acquisition costs.

Which costs would be capitalized as part of the cost of manufacturing equipment?

Set-up Cost, Insurance, Freight-In, Purchase price, Special Platform, Trial runs, installation, concrete pad for equipment

expected net realizable value of the asset

The amount used to measure the fair value of an asset retirement obligation

Restoration Costs

The costs to return land or other property to its original condition after extracting natural resources.

Development Costs

Costs incurred after a natural resource has been discovered but before production begins.

Marlin purchases land and the rights to explore for $200,000. The estimated cost of restoration, calculated as the present value of expected cash outflows, is $40,000. The journal entry to record the acquisition of the mine will include which of the following entries?

Credit to asset retirement liability of $40,000.

When calculating the fair value of an asset retirement obligation, what rate is used to calculate the expected cash flows?

Credit-adjusted risk-free rate

Cost of Natural Resources includes

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

Asset retirement obligations are recorded as a liability and measured at

Fair Value

Internally Developed Patent:

Filing fees and legal fees

Property Tax

Property taxes on the land for the period after acquisition are not part of acquisition cost. They are expensed in the period incurred.

Smith Company has several current product lines. In the past, the company applied the lower of cost and net realizable value method to individual inventory items. The company wants to make the process less time consuming and is exploring alternatives. What alternatives does the company have? (Select all that apply.)

apply the lower of cost and net realizable rule to its entire inventory. ower of cost and net realizable value rule to each product line.

Expenditures

are needed to get land ready for its intended use should be

Asset Retirement

bligations associated w/ disposition of property, plant, equipment, and natural resources. Measure at Fair Value. It is appropriate to recognize a liability for an asset retirement: over the asset's life as incurred and at the inception of the asset's life if a legal obligation exists. Rate that this is calculated at is Credit- Adjusted risk-free- rate

When a company acquires assets by issuing debt or equity securities, the first indicator of fair value is the

fair value of the debt or equity securities given.

capitalized in the cost of equipment includes?

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

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

insurance during transit set-up cost freight-in

The initial valuation of purchased intangible assets requires that the intangible asset is recorded at

original cost.


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