CHAP010 - Chapter 10 Operational Assets Acquisition and...

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Chapter 10 Operational Assets: Acquisition and Disposition True/False Questions 1. Operational assets is a term used to describe assets created by the normal operation of the business, including inventories and receivables. Answer: False Learning Objective: 1 Level of Learning: 1 2. Sales tax paid on equipment used in the business is not capitalized or depreciated. Answer: False Learning Objective: 1 Level of Learning: 1 3. Demolition costs to remove an old building from land purchased as a site for a new building are considered part of the cost of the new building. Answer: False Learning Objective: 1 Level of Learning: 1 4. The initial cost of an operational asset includes all the identifiable expenditures necessary to bring the asset to its desired condition and location for use. Answer: True Learning Objective: 1 Level of Learning: 1 5. A distinguishing characteristic of intangible assets is the degree of uncertainty about when or if they will provide future benefits. Answer: True Learning Objective: 1 Level of Learning: 1 6. Costs incurred after discovery of a natural resource but before production begins are reported as expenses of the period in which the expenditures are made. Answer: False Learning Objective: 1 Level of Learning: 2 7. The relative fair market values are used to determine the valuation of individual assets acquired in a lump-sum purchase. Answer: True Learning Objective: 2 Level of Learning: 1 8. The fair value of the asset, debt or equity securities given in a noncash acquisition should determine the value of the consideration received. Answer: True Learning Objective: 6 Level of Learning: 1 9. Under current GAAP, fair value is used to measure the components of all nonmonetary exchanges. Answer: False Learning Objective: 6 Level of Learning: 2 10. When nonmonetary exchanges lack commercial substance, the asset(s) acquired are valued at the book value of the asset(s) given up plus (or minus) any cash exchanged. Answer: True Learning Objective: 6 Level of Learning: 1 Spiceland/Sepe/Tomassini, Intermediate Accounting, Fourth Edition 119
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Chapter 10 Operational Assets: Acquisition and Disposition 11. The capitalization period for a self-constructed asset ends either when the asset is substantially complete and ready for use or when interest costs no longer are being incurred. Answer: True Learning Objective: 7 Level of Learning: 1
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