Chapter 10 Multiple Choice Questions and Solutions

Chapter 10 Multiple Choice Questions and Solutions -...

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Chapter 10 Multiple Choice Questions and Questions 1. Which of the following statements is true regarding capitalization of interest? a. 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. b. The amount of interest cost capitalized during the period should not exceed the actual interest cost incurred. c. 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. d. 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. 2. Which of the following is the recommended approach to handling interest incurred in financing the construction of property, plant and equipment? a. Capitalize only the actual interest costs incurred during construction. b. Charge construction with all costs of funds employed, whether identifiable or not. c. Capitalize no interest during construction. d. Capitalize interest costs equal to the prime interest rate times the estimated cost of the asset being constructed. 3. Ringler Corporation exchanges one plant asset for a similar plant asset and gives cash in the exchange. The exchange is not expected to cause a material change in the future cash flows for either entity. If a gain on the disposal of the old asset is indicated, the gain will a. be reported in the Other Revenues and Gains section of the income statement. b. effectively reduce the amount to be recorded as the cost of the new asset. c.
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This note was uploaded on 12/03/2009 for the course ACG 3131 taught by Professor Rotella during the Spring '08 term at University of Central Florida.

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Chapter 10 Multiple Choice Questions and Solutions -...

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