INTERMEDIATE ACCOUNTING II D104; PREASSESSMENT
1 UNITS 2-3 EXAM QUESTIONS COMPLETED WITH
QUALITY SOLUTIONS || DINSTINCTION GUARANTEED
When can interest costs for an asset be capitalized? - Correct Answer When assets are being prepared
for its intended use
Which method should be used to handle indirect costs of self-constructed assets? - Correct Answer
Assigning a pro rata portion of all overhead to the asset
A company purchases land for development into a subdivision. The land has a factory building on it that
will need to be demolished.
Where should the interest costs be allocated? - Correct Answer Cost of the land
In which situation can capitalization of interest be included in the cost of land? - Correct Answer When
purchasing land with the intension of developing it for lots sales
Which item is an asset's involuntary conversion? - Correct Answer Condemnation of property
Which description accurately characterizes intangible assets? - Correct Answer They lack physical
substance.
Company X replaced its packaging machine with a more efficient one. The old packaging machine was
sold for $5,000. The following information was available on the date of the replacement:
Purchase price of new packaging machine: $145,000Carrying amount of old packaging machine:
$15,000Fair value of old packaging machine: $4,000Installation cost of new packaging machine: $25,000
Which amount should Company X capitalize as the cost of the new packaging machine? - Correct Answer
$170,000
$145,000 + $25,000
1 UNITS 2-3 EXAM QUESTIONS COMPLETED WITH
QUALITY SOLUTIONS || DINSTINCTION GUARANTEED
When can interest costs for an asset be capitalized? - Correct Answer When assets are being prepared
for its intended use
Which method should be used to handle indirect costs of self-constructed assets? - Correct Answer
Assigning a pro rata portion of all overhead to the asset
A company purchases land for development into a subdivision. The land has a factory building on it that
will need to be demolished.
Where should the interest costs be allocated? - Correct Answer Cost of the land
In which situation can capitalization of interest be included in the cost of land? - Correct Answer When
purchasing land with the intension of developing it for lots sales
Which item is an asset's involuntary conversion? - Correct Answer Condemnation of property
Which description accurately characterizes intangible assets? - Correct Answer They lack physical
substance.
Company X replaced its packaging machine with a more efficient one. The old packaging machine was
sold for $5,000. The following information was available on the date of the replacement:
Purchase price of new packaging machine: $145,000Carrying amount of old packaging machine:
$15,000Fair value of old packaging machine: $4,000Installation cost of new packaging machine: $25,000
Which amount should Company X capitalize as the cost of the new packaging machine? - Correct Answer
$170,000
$145,000 + $25,000
