Intermediate Accounting Exam 3 Questions And Answers

Inventory is valued at - ANS lower of cost and net realizable value Under the conventional retail method, the denominator in the cost-to-retail percentage includes - ANS net markups, but not net markdowns Under the retail inventory method - ANS A company measures inventory on its balance sheet by converting retail prices to cost The conventional retail inventory method is based on - ANS Average, lower of cost and net realizable value An exclusive 20-year right to manufacture a product or use a process is a - ANS patent The exclusive right to display a symbol of product identification is a - ANS trademark Donated assets are recorded at - ANS fair value The fixed-asset turnover ratio provides - ANS the amount of sales generated per dollar of fixed assets Interest is eligible to be capitalized as part of an asset's cost, rather than being expensed immediately when - ANS -The interest is incurred during the construction period of the asset. -The asset is a discrete construction project for sale or lease. -The asset is self-constructed, rather than acquired Software development costs are capitalized if they are incurred - ANS after technological feasibility has been established but prior to the product availability date Journal Entry: Kerry Inc, Exchanged land and cash of $7700 for equipment. The land had a book value of $52000 and a fair value of $56,700. Prepare the journal entry to record the exchange. Assume the exchange has commercial substance. - ANS D. Equipment 64400 C. Gain 4700 C. Cash 7700 C. Land 52000 Cheney Company sold a 20-ton mechanical draw press for $55600. The old draw press cost $69400 and had a book value of $51000. Prepare the journal entry to record the disposition. - ANS D. Cash 55600 D. Acc. Dep. 18400 C. Equipment 69400 C. Gain on disposal of equipment 4600 The factors that need to be determined to compute depreciation are an asset's - ANS Cost, residual value, and service life Short Corporation acquired Hathaway Inc. for $52,000,000. The fair value of all Hathaway's identifiable tangible and intangible assets was $48,000,000. Short will amortize any goodwill over the maximum number of years allowed. What is the annual amortization of goodwill for this acquisition? - ANS $0 -Goodwill is not amortized Accounting for a change in the estimated service life of equipment - ANS Is handled prospectively An asset should be written down if there has been an impairment of value that is - ANS Significant Recognition of impairment for property, plant, and equipment is required if book value exceeds - ANS Undiscounted expected cash flows The amount of impairment loss is the excess of book value over - ANS fair value Which of the following types of subsequent expenditures normally is capitalized - ANS -Additions -Improvements -Rearrangements