17. Capital expenditures are not immediately expensed because these items:A)do not extend the life of an asset.B)return an asset to its prior condition.C)increase the asset's capacity.D)do all of the above.19. Which of the following should be included in the cost of equipment?A) Freight costs to deliver the equipmentB)Installation costs for the equipmentC)Testing costs to get the equipment ready for useD)All of the above

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Which of the following statements is TRUE regarding capitalization of interest? O Interest cost capitalized in connection with the purchase of land to be used as a building site should be debited to the land account and not the building account. The amount of interest cost capitalized during the period should not exceed the actual interest costs incurred. When excess borrowed funds not immediately needed for construction are temporarily invested, any interest carned should be offset against interest cost incurred when determining the amount of interest cost to be capitalized. The minimum amount of interest to be capitalized is determined by multiplying a weighted average interest rate by the amount of average accumulated expenditures on qualifying assets during the period.
When accounting for self-constructed PPE and computing the amount of interest cost to be capitalized, the concept of "avoidable interest" refers to а. that portion of average accumulated expenditures on which no interest cost was incurred O b. that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made O c. the total interest cost actually incurred d. a cost of capital charge for equity
Which of the following subsequent expenditures would not be capitalized? O Ordinary repairs and maintenance. Successful legal defense of intangible assets. O Additions. O Improvements.
The key difference between amortization and depreciation is that amortization charges off the cost of an intangible asset, while depreciation does so for a tangible asset. True False
Assets intended to be held and used for productive purposes may suffer from impairment in each of the following circumstances except O A change in the way the assets are used or physical change in the assets. O Asset costs incurred exceed the original amounts planned. Discounted expected future cash flows and interest charges are less than the carrying amount of the assets. O A significant adverse change in legal factors that might affect the assets' fair value.
Fixed assets have their expenses spread out over time with depreciation. Why aren't they fully expensed at the time they are purchased?
Insurance value differs from market value in that? a) the value is only attributed to the replacement value of the structure b) includes the land and structure values c) fair market value is not insurable d) it includes only the land value
Why certain long-lived assets are depreciated (amortized)?
When an expenditure is made and it is treated as an expense but should have been capitalized, the resulting impact in the year of the expenditure would be: A. Assets would be overstated, net income would be understated. B. Both the assets and net income would not be affected. C. Assets would be understated, net income would be understated. D. Assets would be understated, net income would be overstated.
Which of the following is not a capital expenditure decision Select one: a. Improvement in fixed asset b. Purchase of goodwill c. None of the options d. Replacement in fixed asset e. R&D Expenditure
Which of the following statements is FALSE? Some intangible assets are not required to be amortized. Research and development expenditures are expensed as incurred because of the uncertainty regarding their future cash flows. Amortization expense is generally recorded with a credit to the Accumulated Amortization account. Internally generated goodwill is not capitalized in the accounts.
1) All interest paid on a construction loan should be capitalized as part of the cost of the constructed asset. A) True B) False

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17. Capital expenditures are not immediately expensed because these items: A)do not extend the life of an asset. B)return an asset to its prior condition. C)increase the asset's capacity. D) do all of the above.