Acct 3100 Chp 10
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.