CHAP010 - Chapter 10 Operational Assets Acquisition and...

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Unformatted text preview: 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 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 12. The FASB's required accounting treatment for research and development costs often understates both net income and assets. Answer: True Learning Objective: 8 Level of Learning: 1 Matching Pair Questions Use the following to answer questions 13-17: 13-17. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase....
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This note was uploaded on 02/04/2011 for the course ACCT 3110 taught by Professor Holmes during the Spring '10 term at University of North Texas Health Science Center.

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CHAP010 - Chapter 10 Operational Assets Acquisition and...

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