2005 Fall Accounting_011_Fall_2005___final_exam___answers

2005 Fall Accounting_011_Fall_2005___final_exam___answers -...

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Temple University Fox School of Business and Management Dr. Steven Balsam Accounting 011 Final Exam-Answers December 14, 2005 Instructions: You have 150 minutes. Answer the questions on the pages provided and please remember to show all work so that you may receive partial credit. Also please put your name on each page in case the pages get separated. Good luck!
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Name ________________________________ Multiple Choice – 2 points each 1. Plant assets purchased on long-term credit contracts should be accounted for at a. the total value of the future payments. b. the future amount of the future payments. c. the present value of the future payments . d. none of these 2. When computing the amount of interest cost to be capitalized, the concept of "avoidable interest" refers to a. the total interest cost actually incurred. b. a cost of capital charge for stockholders' equity. c. that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made . d. that portion of average accumulated expenditures on which no interest cost was incurred. 3. The period of time during which interest must be capitalized ends when a . the asset is substantially complete and ready for its intended use. b. no further interest cost is being incurred. c. the asset is abandoned, sold, or fully depreciated. d. the activities that are necessary to get the asset ready for its intended use have begun. 4. When a plant asset is acquired by issuance of common stock, the cost of the plant asset is properly measured by the a. par value of the stock. b. stated value of the stock. c. book value of the stock. d. market value of the stock. 5. 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 a. the nominal cost of taking title to it. b. its market value. c. one dollar (since the site cost nothing but should be included in the balance sheet). d. the value assigned to it by the company's directors. 2
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Name ________________________________ 6. Truman, Inc. purchased equipment in 2002 at a cost of $1,400,000. Two years later it became apparent to Truman, Inc. that this equipment had suffered an impairment of value. In early 2004, the book value of the asset is $840,000 and it is estimated that the fair value is now only $560,000. The entry to record the impairment is a. No entry is necessary as a write-off violates the historical cost principle. b. Retained Earnings . .......................................................... 280,000 Accumulated Depreciation—Equipment . ........... 280,000 c. Loss on Impairment of Equipment . ............................ 280,000 Accumulated Depreciation—Equipment . ....... 280,000 d. Retained Earnings . .......................................................... 280,000 Reserve for Loss on Impairment of Equipment . . 280,000 7. Under the effective interest method of bond discount or premium amortization, the periodic interest expense is equal to
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2005 Fall Accounting_011_Fall_2005___final_exam___answers -...

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