Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 10, Problem 10.7Q
When an asset is acquired and a note payable is assumed, explain how acquisition cost of the asset is determined when the interest rate for the note is less than the current market rate for similar notes.
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When an asset is acquired and a note payable is assumed, explain how acquisition cost of the asset is determined when the interest rate for the note is less than the current market rate for similar notes.
Assuming interest costs related to an asset qualify for interest capitalization, which of the following best describes the determination of how much interest should be capitalized?
The amount capitalized should be the average between the actual and avoidable interest amounts.
The amount capitalized should be the higher of the actual or avoidable interest amounts.
The amount capitalized should always be the actual interest amount.
The amount capitalized should be the lower of the actual or avoidable interest amounts.
The amount capitalized should always be the avoidable interest amount.
For assets acquired on credit or by installment, the cost or fair value is equal to: A. cash purchase priceB. invoice priceC. installment priceD. list price
Chapter 10 Solutions
Intermediate Accounting
Ch. 10 - Prob. 10.1QCh. 10 - Prob. 10.2QCh. 10 - Prob. 10.3QCh. 10 - Prob. 10.4QCh. 10 - Prob. 10.5QCh. 10 - Prob. 10.6QCh. 10 - When an asset is acquired and a note payable is...Ch. 10 - Explain how assets acquired in exchange for equity...Ch. 10 - Prob. 10.9QCh. 10 - What account is credited when a company receives...
Ch. 10 - Prob. 10.11QCh. 10 - Identify the two exceptions to valuing property,...Ch. 10 - In what situations is interest capitalized?Ch. 10 - Define average accumulated expenditures and...Ch. 10 - Explain the difference between the specific...Ch. 10 - Prob. 10.16QCh. 10 - Prob. 10.17QCh. 10 - Explain the accounting treatment of costs incurred...Ch. 10 - Explain the difference in the accounting treatment...Ch. 10 - Prob. 10.20QCh. 10 - Prob. 10.21QCh. 10 - Prob. 10.22QCh. 10 - Prob. 10.23QCh. 10 - Acquisition cost; machine LO101 Beavert on Lumber...Ch. 10 - Prob. 10.2BECh. 10 - Prob. 10.3BECh. 10 - Cost of a natural resource; asset retirement...Ch. 10 - Asset retirement obligation LO101 Refer to the...Ch. 10 - Prob. 10.6BECh. 10 - Acquisition cost; noninterest-bearing note LO103...Ch. 10 - Prob. 10.8BECh. 10 - Fixed-asset turnover ratio LO105 Huebert...Ch. 10 - Fixed-asset turnover ratio; solve for unknown ...Ch. 10 - Prob. 10.11BECh. 10 - Nonmonetary exchange LO106 Refer to the situation...Ch. 10 - Nonmonetary exchange LO106 Refer to the situation...Ch. 10 - Prob. 10.14BECh. 10 - Prob. 10.15BECh. 10 - Research and development LO108 Maxtor Technology...Ch. 10 - Prob. 10.17BECh. 10 - Research and development; various types LO108...Ch. 10 - Prob. 10.19BECh. 10 - Acquisition costs; land and building LO101 On...Ch. 10 - Acquisition cost; equipment LO101 Oaktree Company...Ch. 10 - Prob. 10.3ECh. 10 - Cost of a natural resource; asset retirement...Ch. 10 - Intangibles LO101 In 2018, Bratten Fitness...Ch. 10 - Goodwill LO101 On March 31, 2018, Wolfson...Ch. 10 - Prob. 10.7ECh. 10 - Prob. 10.8ECh. 10 - Prob. 10.9ECh. 10 - Acquisition costs; noninterest-bearing note ...Ch. 10 - Prob. 10.11ECh. 10 - Prob. 10.12ECh. 10 - Prob. 10.13ECh. 10 - Prob. 10.14ECh. 10 - Nonmonetary exchange LO106 [This is a variation...Ch. 10 - Prob. 10.16ECh. 10 - Nonmonetary exchange LO106 [This is a variation...Ch. 10 - Prob. 10.18ECh. 10 - Prob. 10.19ECh. 10 - Prob. 10.20ECh. 10 - FASB codification research LO101, LO106, LO107,...Ch. 10 - Prob. 10.22ECh. 10 - Interest capitalization LO107 On January 1, 2018,...Ch. 10 - Interest capitalization LO107 On January 1, 2018,...Ch. 10 - Interest capitalization; multiple periods LO107...Ch. 10 - Research and development LO108 In 2018, Space...Ch. 10 - Prob. 10.27ECh. 10 - IFRS; research and development LO108, LO109...Ch. 10 - IFRS; research and development LO109 IFRS NXS...Ch. 10 - Prob. 10.30ECh. 10 - Software development costs LO108 Early in 2018,...Ch. 10 - Prob. 10.32ECh. 10 - Intangibles; start-up costs LO101, LO108 Freitas...Ch. 10 - Prob. 10.34ECh. 10 - Prob. 10.1PCh. 10 - Prob. 10.2PCh. 10 - Prob. 10.3PCh. 10 - Prob. 10.4PCh. 10 - Acquisition costs; journal entries LO101, LO103,...Ch. 10 - Prob. 10.6PCh. 10 - Nonmonetary exchange LO106 On September 3, 2018,...Ch. 10 - Prob. 10.8PCh. 10 - Interest capitalization; specific interest method ...Ch. 10 - Prob. 10.10PCh. 10 - Research and development LO108 In 2018,...Ch. 10 - Prob. 10.12PCh. 10 - Judgment Case 101 Acquisition costs LO101, LO103,...Ch. 10 - Research Case 102 FASB codification; locate and...Ch. 10 - Judgment Case 103 Self-constructed assets LO107...Ch. 10 - Judgment Case 104 Interest capitalization LO107...Ch. 10 - Prob. 10.6BYPCh. 10 - Prob. 10.7BYPCh. 10 - Judgment Case 108 Research and development LO108...Ch. 10 - Prob. 10.9BYPCh. 10 - Prob. 10.11BYPCh. 10 - Ethics Case 1012 Research and development LO108...Ch. 10 - Prob. 10.13BYPCh. 10 - Prob. 10.14BYPCh. 10 - Prob. 10.15BYPCh. 10 - Prob. 10.16BYPCh. 10 - Continuing Cases Target Case LO101, LO105 Target...
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- Which of the following statements is true for historical cost valuations? (Select one or more) a. Present value of cash flows using historical interest rates is an item in which cash receipts or cash payments will occur over time, these future cash flows are then discounted at the interest rate in effect at the time of the initial transaction. Balance sheet examples include notes receivable and notes payable. b. Acquisition cost is the amount paid initially to acquire the asset, examples include prepayments, land, and intangibles with indefinite lives. c. Acquisition cost is the amount paid initially to acquire the asset, examples include amounts invested in research and development for intellectual property. d. Adjusted acquisition cost is the amount paid initially to acquire an asset less accumulated depreciation and amortization, examples include equipment and intangible assets with limited lives.arrow_forwardhow is the acquisition cost of an asset determined when the asset is acquired in exchange for securities?arrow_forwardDescribe the steps to record non monetary asset exchange.arrow_forward
- GAAP provides guidelines for the inclusion of interest in the initial cost of a self-constructed asset.Required:1. What assets qualify for interest capitalization? What assets do not qualify for interest capitalization?2. Over what period should interest be capitalized?3. Explain average accumulated expenditures.4. Explain the two methods that could be used to determine the appropriate interest rate(s) to be used in capitalizing interest.5. Describe the three steps used to determine the amount of interest capitalized during a reporting periodarrow_forwardThe capitalization rate used to determine the capitalizable borrowing cost should be disclosed. TRUE OR FALSEarrow_forwardThe time value concept/calculation used in amortizing a loan is ________.arrow_forward
- Fair value is used to value which of the following balance sheet accounts? a. Prepaid expenses; patents; property, plant, and equipment b. Capital lease obligations, bonds payable c. Receivables net of allowance for doubtful accounts d. Debtsecurities available for sale, trading securitiesarrow_forwardWhich of the following case would allow the capitalization of Interest Expense No Case allows this transaction Borrowing Cost Provided the interest is immaterial Only if Management Allowsarrow_forwardThe current asset financing policy that calls for matching the maturities of assets with the maturities of liabilities is known as the a. permanent current ratio approach b. temporary net working capital approach C. conservative approach d. self-liquidating approach e. aggressive approacharrow_forward
- what is the important difference in the acquisition and payment of long-lived assets compared to those of current assets? Briefly explain.arrow_forwardTypically, the estimated amount available for short-term payments in a statement of affairs (financial statement) a.Carrying amount b.Current fair value c.Zero d.Net realizable valuearrow_forwardExplain Loan Amortization Patterns?arrow_forward
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