10-Long-Lived-Assets

10-Long-Lived-Assets - True-False 1. The method of...

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True-False 1. The method of measuring long-lived assets at their estimated value in an output market is the expected benefit approach. 2. Current cost is an example of the economic sacrifice approach for valu- ing long-lived assets. 3. A primary concern of auditors and analysts is that numbers on the fi- nancial statements be verifiable, which means that the numbers should arise from readily observable corroborable facts. 4. Expenditures included in the cost of a long-lived asset are capitalized. 5. Salvage value of material from razing a building is considered a reduc- tion in the cost of the building. 6. Capitalization of interest for the construction of long-lived assets is limited to interest arising from actual borrowings from third parties. 7. GAAP calls for capitalization of an expenditure on a long-lived asset when the capacity of the asset is decreased. 8. An expenditure that increases a long-lived asset’s useful life should be capitalized. 9. A relatively new asset base makes it difficult for financial analysts to use trend analysis. 10. The FASB requires that virtually all costs incurred for research and de- velopment of an internally generated patent be capitalized. 11. The balance sheet carrying value for internally generated intangibles is often below the value of the property rights. 12. For U. S. GAAP, software development costs are capitalized as intangi- ble assets once the technological feasibility of the product is established. 13. Research findings almost uniformly indicate that existing GAAP for both R&D and software development is too conservative. 14. United Kingdom accounting rules allow companies to write long-lived assets up to new carrying values when market value exceeds cost. 15. The method used to account for oil and gas exploration costs that capi- talizes all exploration costs is the successful efforts approach. 16. If a long-lived asset’s remaining expected future value falls below its net book value, the asset is considered to be an impaired asset. 17. An impairment loss is the difference between the carrying value of the asset and the future value of the asset. 18. Depreciation is the apportionment of the cost of a wasting asset to future periods under the matching principle. 19. Depreciation is not intended to track the asset’s declining market value. 20. The depreciation rate for the double declining balance method is dou- ble the straight line rate. 21. When firms dispose of a long-lived asset before the end of its useful life, the difference between the net book value of the asset and the sale pro- ceeds is a gain or loss from a discontinued item. 22. When the differences in useful lives of long-lived assets reflect real economic variables, the attempt on the part of financial analysts to undo the differences in useful lives may impede profit and loss comparisons. 23.
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10-Long-Lived-Assets - True-False 1. The method of...

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