Accounting 252 - Exam 1 - Columbus State Flashcards

Terms Definitions
Assets of a durable nature are also known as?
 
a) Historical Cost
b) Additions
c) Fixed Assets
d) Property, Plant and Equipment (PP&E)
d) Property, Plant and Equipment (PP&E)
 
 
 
 
 
Ch 10.
What term(s) best describe the following characteristics?
Used in oprations and not for resale.
Long-term in nautre and usually depreciated.
Possess physical substance.
Property, Plant and Equpiment.  PP&E.
 
 
 
 
 
Ch 10
Select the appropriate term below.
The cash or cash equivalent price of obtaining the asset and bringing it to the location and condition necessary for its intended use:
a) Repairs
b) Fixed Assets
c) Historical Costs
d) PPE
c) Historical Costs
 
 
 
 
Ch 10 / Quiz
True or False: Companies shoud anticipate gains or losses and record them when an asset is acquired?
False.
Companies shoud NOT anticipate gains or losses and ONLY record them when an asset is sold.
 
 
Ch 10
True or False: Companies should record PP&E at the market value of what they give up or at the market value of the asset received, which ever is more clearly evident?
False. Companies should record PP&E at the fair value of what they give up or at the fair value of the asset received, which ever is more clearly evident.
 
 
 
Ch 10
True or False: Costs incurred to achieve greater future benefits should be captialized?
True.
 
 
 
 
Ch 10
Useful life of the asset must be increased.
Quantity of units porduced from asset must be increased.
Quality of units produced must be enhanced.
One of these 3 conditions must be present to _________ _________ ?
Capitalize costs.
 
 
 
Ch 10
What are some major types of expenditures as related to PP&E?
Additions, improvements & replacements, rearrangement & reinstallation and repairs.
 
 
 
 
Ch 10
Describe the accounting treatment for the following expenditure:
 
Additions.
Capitalize cost of addition to asset account.
 
 
 
 
Ch 10
Describe the accounting treatment for the following expenditure:
 
Improvements and replacements where the carrying value is known.
Remove cost and accumulated depreciation on old asset.
Recognize any gain or loss.
Capitalize cost of improvement/replacement.
 
 
Ch 10
Describe the accounting treatment for the following expenditure:Improvements and replacements where the carrying value is unknown.
If the asset's useful life is extended, debit accumulated depreciation for cost of improvement/replacement.

If the quantity or quality of the asset's productivity is increased, capitalize cost of improvement/replacement to asset account.

 
Describe the accounting treatment for the following expenditure:
 
Rearrangement and reinstallation if carrying value is known.
Account for cost of rearrangement/reinstallation as a replacement.
 
 
 
Ch 10
Describe the accounting treatment for the following expenditure:
 
Rearrangement and reinstallation if carrying value is unknown.
If original installation cost is unknown and rearrangement/reinstallation cost is material in amount and benefits future periods, capitalize as an asset.
 
If it is NOT material in amount or future benefit is questionable, expense the cost when incurred.
 
 
Ch 10
Describe the accounting treatment for the following expenditure:
 
Ordinary Repairs.
Expense cost of repairs when incurred.
 
 
 
 
Ch 10
Describe the accounting treatment for the following expenditure:
 
Major Repairs.
As appropriate, treat as an addition, improvement or replacement.
 
 
 
 
Ch 10
True or False: If the future net cash flow is less than the carrying amount, an impariment has occured?
True.
This is known as the recoverability test.
 
 
 
Ch 10
What test is used to determine if an impairment has occured?
The recoverability test.
 
 
 
 
Ch 10
How do you calculate the carrying amount?
a) asset cost - accumulated depreciation.b) interest of all notes x period of note.c) asset cost + accumulated depreciation.d) book value - future cash flows
a) Asset Cost - Accumulated Depreciation = Carrying Value
 
 
Ch 10
If the fair value of a piece of equipment is increased after an impairment loss had previously occured, can you restore the loss?
No.  Restoration of any impairment loss is not permitted.
 
 
 
 
 
Ch 10
How do you calculate the depreciable base?
Cost - Salvage Value = Depreciable Base
 
 
 
 
Ch 11
True or False:  When you use the double declining method it's okay to use the depreciable base?
False.  You do not use the depreciable base when using the double declining method.  You use the historical cost.
 
 
 
Ch 11
Does the GAAP principle of lower of cost or market apply for PP&E?
No.
 
 
 
 
Ch 10
When the carrying value of an asset is not recoverable a company records a write-off.  What is another term for this "write-off"?
An impairment.
 
 
 
Ch 11
How do you calculate a loss on impairment?
a) fair value x carrying amount.
b) carrying amount - fair value.
c) WAAE - carrying amount x fair value.
d) WAAE x carrying amount.
b) Carrying amount - Fair value(aka market value) = Loss on Impairment
 
 
Ch 11
Which method below is the GAAP approved method for capitalzing interest during construction?
 
a) capitalize actual costs incurred during construction.
b) capitalize no interest during construction.
c) capitalize all costs of funds.
a) capitalize actual costs incurred during construction.
 
 
 
 
Ch 10
During construction what kind of costs are capitalized?
 
 
 
 
 
*hint- think managerial accounting.
Materials, Labor, Overhead,
Professional fees and building permits.
 
 
 
 
Ch 10
 
What does the following stand for:
 
WAAE
Weighted-Average Accumulated Expenditures.
 
 
 
 
Ch 10
Which calculation method is described?
A company weights the construction expenditures by the amount of time (fraction of a year or accounting period) that it can incur interest cost on the expenditure.
a) Avoidable interest.
b) Actual interst.
c) WAA
c) The weighted-average accumulated expenditure
aka - WAAE
 
 
 
 
Ch10
Which calculation method is described?
WAAE  x  Construction Note Interest Rate.
The avoidable interest calculation.
 
 
 
 
Ch 10
Which calculation method is described?
The total sum of each note on the books multiplied by its applicable interest rate.
 
Ex:
Construction Note   $75,000 x .15 = 11,250
5-year Note           $55,000 x .10 =   5,500
        
The actual interst cost calculation.
 
 
 
 
Ch 10
What is the term for the value earned from a bond valued at $100,000, earning 10% for 3 months.
 
Ex.
$100,000 x 10% x (3/12) = $2,500.
Interest revenue.
 
 
 
 
Ch 10
True or False: The capitalized interest is the same as the actual interest?
False: The capitalized interest is the same as the avoidable interest.
 
 
 
 
Ch 10
Prepare the jounal entry for the following:
 
Bobs Market purchase a truck from Ricart and pays with 5,000 shares of common stock (par value $10) that have a fair market value of $12 per share.
Truck (5,000 x $12)                   60,000
     Common Stock (5,000 x $10)          50,000
     Paid in Capital in Excess of Par       10,000
 
 
 
 
Ch 10
Which value is used in recording an exchange of nonmenetary assets?
The fair value of what they give up or the fair value of the asset received, which ever is more clearly evident.
 
 
 
 
Ch 10
True or False:  an exchange has "commerical substance" if the future cash flows change as a result of the transaction?
True.
A company should recognize immediately any gains or losses on the exchange when the transaction has "commercial substance".
 
 
 
 
Ch 10
How does a company recognize a portion of a gain when they receive cash (boot) in an exchange that lacks commerical substance?
Which formula?
{Cash Received (Boot) ÷ Cash Received (Boot) + Fair Value of other assets Received} x Total Gain.
 
 
Ch 10
Queenan Corporation traded in used machinery with a book value of $60,000 (cost $110,000 less accumulated depreciation $50,000) and a fair value of $100,000. It receives in exchange a machine with a fair value of $90,000 plus cash of $10,000.
 
Calcula
Fair value of old machine exchanged    $100,000
Book value of old machine exchanged  $  60,000
Total Gain                                        $  40,000
 
Recognized Gain 
{10,000 ÷ (10,000 + 90,000)} x 40,000 = 4,000
 
 
Ch 10
Prepare the jounal entry for the following:
 
Queenan Corporation traded in used machinery with a book value of $60,000 (cost $110,000 less accumulated depreciation $50,000) and a fair value of $100,000. It receives in exchange a machine with a fair va
Cash                                            10,000
Machine (Fair value - deferred gain)  54,000
Accumlated Depreciation-Machine     50,000
     Machine                                       110,000
     Gain on disposal of machine              4,000
 
 
Ch 10
Know the following.
 
What is the term for:
The process of allocating the cost of natural resources.
Depletion.
 
 
 
 
Ch 11
What is the term for:
The expiration of intangible assets, such as patents or copyrights.
Amortization.
 
 
 
 
Ch 11
Which one of the following is not a characteristic of property, plant, and equipment?
A) They are acquired for use in operations.
B) They are long-term in nature and are always subject to depreciation.
C) They possess physical substance.
D) All of
B) They are long-term in nature and are always subject to depreciation.
 
 


Ch 10
Land costs include all of the following except:
A) closing costs such as attorney's fees.
B) assumption of any liens and mortgages.
C) special assessments for street lights.
D) All of the options are land costs.
D.  All of the options are land costs.
 Land costs include closing costs, assumption of any liens and mortgages, and special assessments.
 
 
Ch 10
The cost of buildings should include all of the following except: A. building permits. B. excavation costs. C. overhead costs incurred during construction. D. costs of removing an old building on the new building site.
D. costs of removing an old building on the new building site.The cost of removing an old building is a cost of getting the land ready and relates to the land instead of the new building.Ch 10
Overhead costs related to self-constructed assets are accounted for by: A. allocating overhead on the basis of lost production. B. assigning a portion of all overhead to the asset. C. assigning no fixed overhead to the asset. D. assigning a pro rat
D. assigning a pro rata portion of fixed overhead to the asset.A pro rata portion of fixed overhead should be assigned to the self-constructed asset because a better matching of costs and revenues results. Ch 10
The approach for interest costs incurred during construction recommended under GAAP is to: A. capitalize no interest charges during construction. B. charge construction with all costs of funds employed, whether identifiable or not. C. capitalize only
C. capitalize only the actual costs incurred during construction. Capitalizing actual interest costs is the approach recommended under GAAP. Ch 10
The interest capitalization period begins when: A. activities to get the asset ready for its intended use are in progress. B. expenditures for the asset have been made. C. interest cost is being incurred. D. All of the options are necessary.
D. All of the options are necessary. The capitalization period begins when all three options are present. Ch 10
The interest rate(s) used in computing avoidable interest is the:
A. rate incurred on specific borrowings.
B. weighted average rate incurred on all other outstanding debt.
C. lower of the rate incurred on specific borrowings or the weighted average rat
D. rate incurred on specific borrowings for the weighted-average expenditures equal to the specific borrowings and the weighted average rate of other borrowings for the excess expenditures. The interest rates used in computing avoidable interest are the specific interest rate and the weighted average rate. Ch 10
Plant assets purchased in exchange for a zero-interest-bearing note should be accounted for at the: A. face value of the note. B. fair value of the asset received. C. book value of the asset received. D. present value of the note.
D. present value of the note. Plant assets purchased in exchange for a zero-interest-bearing note are recorded at the present value of the note. Ch 10
Assets acquired in a lump sum purchase should be recorded at their: A. appraised value. B. relative book value. C. relative fair market values. D. fair market value.
C. relative fair market values. Assets acquired in a lump sum purchase are recorded on the basis of their relative fair market values. Ch 10
Gains on exchanges of nonmonetary assets are: A. never recognized. B. recognized only on exchanges that have commercial substance. C. recognized only on exchanges that lack commercial substance. D. recognized partially on exchanges that lack commer
D. recognized partially on exchanges that lack commercial substance when cash is received. Gains are partially recognized on exchanges that lack commercial substance when cash is received. Ch 10
A nonmonetary asset acquired in an exchange that has commercial substance is usually recorded at the:
A. book value of the asset given up.
B. book value of the asset received.
C. fair value of the asset given up, unless fair value of the asset received
C. fair value of the asset given up, unless fair value of the asset received is more clearly evident. 
 
 
Ch 10
A nonmonetary asset acquired in an exchange that has commercial substance is usually recorded at the:
A. book value of the asset given up.
B. book value of the asset received.
C. fair value of the asset given up, unless fair value of the asset received
C. fair value of the asset given up, unless fair value of the asset received is more clearly evident. 
 
Ch 10
In an exchange that lacks commercial substance in which a gain exists and cash is received, the asset received is recorded at the: A. book value of the asset given up less cash received. B. fair value of the asset given up less cash received. C. book
D. fair value of the asset received less the deferred portion of the gain. When cash is received in an exchange that lacks commercial substance and a gain exists, the asset received is recorded at the fair value of the asset received less the deferred portion of the gain. Ch 10
The gain recognized in an exchange that lacks commercial substance and in which cash is received is computed by multiplying the total gain by the formula of: A. cash paid divided by the total of cash paid plus fair value of the asset received. B. cash
C. cash received divided by the total of cash received plus fair value of the asset received.The gain recognized in an exchange is computed by multiplying the total gain by the cash received divided by the total of cash received plus the fair value of the asset received. Ch 10
Expenditures that extend the useful life of a plant asset without improving its quantity or quality are accounted for: A. as additions. B. as improvements. C. by debiting the asset account. D. by debiting Accumulated Depreciation.
D. by debiting Accumulated Depreciation. Expenditures that extend the useful life of a plant asset are accounted for by debiting Accumulated Depreciation.Ch 10
When plant assets are sold: A. only losses are recorded. B. only gains are recorded. C. a loss is recorded when the selling price is less than the asset's cost. D. a gain is recorded when the selling price is greater than the asset's book value.
D. a gain is recorded when the selling price is greater than the asset's book value. When plant assets are sold for an amount greater than their book value, a gain is recorded. Ch 10
All of the following are true regarding the revaluation model allowed under iGAAP except: A. after initial recognition, the revalued amount is fair value less subsequent depreciation and impairment losses. B. when an asset is revalued, any increase in
B. when an asset is revalued, any increase in carrying amount is reported as miscellaneous revenue. Revalued assets cannot be written up above original cost.Ch 10
/ 58
Term:
Definition:
Definition:

Leave a Comment ({[ getComments().length ]})

Comments ({[ getComments().length ]})

{[comment.username]}

{[ comment.comment ]}

View All {[ getComments().length ]} Comments
Ask a homework question - tutors are online