ACC 302 Exam 1 Questions and Correct
Answers
Which of the following assets do not qualify for capitalization of interest costs incurred
during construction of the assets?
a. Assets under construction for an enterprise's own use.
b. Assets intended for sale or lease that are produced as discrete projects.
c. Assets financed through the issuance of long-term debt.
d. Assets not currently undergoing the activities necessary to prepare them for their
intended use.
Assets not currently undergoing the activities necessary to prepare them for their intended
use.
Interest cost incurred in purchasing an asset that is ready for its intended use should
a. be written off over the remaining term of the debt.
b. be accumulated in a separate deferred charge account and written off equally over a
40-year period.
c. not be written off until the related asset is fully depreciated or disposed of.
d. none of these.
none of these
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.
Capitalize only the actual interest costs incurred during construction
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. effectively increase the amount to be recorded as the cost of the new asset.
d. be credited directly to the owner's capital account.
effectively reduce the amount to be recorded as the cost of the new asset.
Accounting recognition should be given to some or all of the gain realized on a
nonmonetary exchange of plant assets except when the exchange has
a. no commercial substance and additional cash is paid.
b. no commercial substance and additional cash is received.
c. commercial substance and additional cash is paid.
d. commercial substance and additional cash is received.
no commercial substance and additional cash is paid.
A plant site donated by a township to a manufacturer that plans to open a new factory
should be recorded on the manufacturer's books at
A. the nominal cost of taking title to it.
B. its market value.
Answers
Which of the following assets do not qualify for capitalization of interest costs incurred
during construction of the assets?
a. Assets under construction for an enterprise's own use.
b. Assets intended for sale or lease that are produced as discrete projects.
c. Assets financed through the issuance of long-term debt.
d. Assets not currently undergoing the activities necessary to prepare them for their
intended use.
Assets not currently undergoing the activities necessary to prepare them for their intended
use.
Interest cost incurred in purchasing an asset that is ready for its intended use should
a. be written off over the remaining term of the debt.
b. be accumulated in a separate deferred charge account and written off equally over a
40-year period.
c. not be written off until the related asset is fully depreciated or disposed of.
d. none of these.
none of these
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.
Capitalize only the actual interest costs incurred during construction
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. effectively increase the amount to be recorded as the cost of the new asset.
d. be credited directly to the owner's capital account.
effectively reduce the amount to be recorded as the cost of the new asset.
Accounting recognition should be given to some or all of the gain realized on a
nonmonetary exchange of plant assets except when the exchange has
a. no commercial substance and additional cash is paid.
b. no commercial substance and additional cash is received.
c. commercial substance and additional cash is paid.
d. commercial substance and additional cash is received.
no commercial substance and additional cash is paid.
A plant site donated by a township to a manufacturer that plans to open a new factory
should be recorded on the manufacturer's books at
A. the nominal cost of taking title to it.
B. its market value.
