ACCT 306 Final Exam Questions and Answers Latest Update 2025-2026
Which of the following is not a major characteristic of a plant asset? - Answers acquired for resale
Which of these is not part of the historical cost of an asset? - Answers training costs
The cost of land purchased as a building site does not include - Answers costs of improvement with
limited lives
Fences and parking lots are reported on the balance sheet as - Answers land improvements
Which of the following costs are capitalized for self-constructed assets? - Answers materials, labor, and
overhead directly related to construction only
Which of the following would not be considered a remediation cost? - Answers permit costs to acquire
landfill site
Example of existing legal obligations that require recognition of an Asset Retirement Obligation (ARO)
include the following except: - Answers acquisition costs of an oil or gas property
When computing the amount of interest cost to be capitalized, the concept of "avoidable interest"
refers to - Answers that portion of total interest cost that would not have been incurred if expenditures
for the asset construction had not been made
The period of time during which interest must be capitalized ends when - Answers the asset is
substantially complete and ready for its intended use
When boot is involved in an exchange having commercial substance, - Answers gains or losses are
recognized in their entirety
Plant assets purchased on long-term credit contracts should be accounted for at - Answers the present
value of the future payments
When a plant asset is acquired by the issuance of common stock and the fair value of the plant asset is
not clearly determinable, the cost of the plant asset is properly measured by the - Answers market price
of the stock
In which of the following situations would a cost incurred after an asset's acquisition be capitalized? -
Answers The useful life of the asset is increased.
Termination of an asset's service due to theft or fire is referred to as - Answers involuntary conversion
Which of the following is true of depreciation accounting? - Answers It is not a matter of valuation, It is
part of matching revenues and expenses, and It is the process of cost allocation
Which of the following principles best describes the conceptual rationale for the methods of matching
depreciation expense with revenues? - Answers systematic and rational allocation
, Each of the following is a physical factor affecting depreciation except - Answers obsolescence
The term "depreciable base", or "depreciation base", as it is used in accounting, refers to - Answers the
total amount to be charged (debited) to expense over an asset's useful life
Economic factors that shorten the service life of an asset include - Answers obsolescence
The activity method of depreciation - Answers is a variable charge approach
For the composite method, the composite - Answers life is the total depreciable cost divided by the total
annual depreciation.
Depreciation is normally computed on the basis of the nearest - Answers full month and to the nearest
dollar
A change in estimate should - Answers be handled in current and future periods
The book value of a plant asset is - Answers the asset's acquisition cost less the total related
depreciation recorded to date.
Depletion expense - Answers is usually reported as cost of goods sold when the resource is sold.
Usually, companies compute depletion for accounting purposes using a - Answers the units-of-
production method
In accounting for oil and gas reserves, larger international companies tend to use - Answers the
successful-efforts concept
A general description of the depreciation methods applicable to major classes of depreciable assets -
Answers should be included in corporate financial statements or notes thereto
The asset turnover is computed by dividing - Answers net sales by average total assets.
The return on total assets is computed by dividing - Answers net income by average total assets.
The return on total assets measures - Answers efficiency, profitability, and liquidity
Asset turnover is a measure of - Answers how efficiently a company uses its assets to generate sales
Which of the following does not describe intangible assets? - Answers they are financial instruments
Which of the following characteristics do intangible assets possess? - Answers long-lived
Which characteristic is not possessed by limited-life intangible assets? - Answers physical existence
Which of the following costs incurred internally to create an intangible asset is generally expensed? -
Answers research and development costs
Which of the following is not a major characteristic of a plant asset? - Answers acquired for resale
Which of these is not part of the historical cost of an asset? - Answers training costs
The cost of land purchased as a building site does not include - Answers costs of improvement with
limited lives
Fences and parking lots are reported on the balance sheet as - Answers land improvements
Which of the following costs are capitalized for self-constructed assets? - Answers materials, labor, and
overhead directly related to construction only
Which of the following would not be considered a remediation cost? - Answers permit costs to acquire
landfill site
Example of existing legal obligations that require recognition of an Asset Retirement Obligation (ARO)
include the following except: - Answers acquisition costs of an oil or gas property
When computing the amount of interest cost to be capitalized, the concept of "avoidable interest"
refers to - Answers that portion of total interest cost that would not have been incurred if expenditures
for the asset construction had not been made
The period of time during which interest must be capitalized ends when - Answers the asset is
substantially complete and ready for its intended use
When boot is involved in an exchange having commercial substance, - Answers gains or losses are
recognized in their entirety
Plant assets purchased on long-term credit contracts should be accounted for at - Answers the present
value of the future payments
When a plant asset is acquired by the issuance of common stock and the fair value of the plant asset is
not clearly determinable, the cost of the plant asset is properly measured by the - Answers market price
of the stock
In which of the following situations would a cost incurred after an asset's acquisition be capitalized? -
Answers The useful life of the asset is increased.
Termination of an asset's service due to theft or fire is referred to as - Answers involuntary conversion
Which of the following is true of depreciation accounting? - Answers It is not a matter of valuation, It is
part of matching revenues and expenses, and It is the process of cost allocation
Which of the following principles best describes the conceptual rationale for the methods of matching
depreciation expense with revenues? - Answers systematic and rational allocation
, Each of the following is a physical factor affecting depreciation except - Answers obsolescence
The term "depreciable base", or "depreciation base", as it is used in accounting, refers to - Answers the
total amount to be charged (debited) to expense over an asset's useful life
Economic factors that shorten the service life of an asset include - Answers obsolescence
The activity method of depreciation - Answers is a variable charge approach
For the composite method, the composite - Answers life is the total depreciable cost divided by the total
annual depreciation.
Depreciation is normally computed on the basis of the nearest - Answers full month and to the nearest
dollar
A change in estimate should - Answers be handled in current and future periods
The book value of a plant asset is - Answers the asset's acquisition cost less the total related
depreciation recorded to date.
Depletion expense - Answers is usually reported as cost of goods sold when the resource is sold.
Usually, companies compute depletion for accounting purposes using a - Answers the units-of-
production method
In accounting for oil and gas reserves, larger international companies tend to use - Answers the
successful-efforts concept
A general description of the depreciation methods applicable to major classes of depreciable assets -
Answers should be included in corporate financial statements or notes thereto
The asset turnover is computed by dividing - Answers net sales by average total assets.
The return on total assets is computed by dividing - Answers net income by average total assets.
The return on total assets measures - Answers efficiency, profitability, and liquidity
Asset turnover is a measure of - Answers how efficiently a company uses its assets to generate sales
Which of the following does not describe intangible assets? - Answers they are financial instruments
Which of the following characteristics do intangible assets possess? - Answers long-lived
Which characteristic is not possessed by limited-life intangible assets? - Answers physical existence
Which of the following costs incurred internally to create an intangible asset is generally expensed? -
Answers research and development costs
