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Concept explainers
1.
Provide explanation regarding the expenditures that a company capitalizes if acquires equipment for cash.
2.a
Explain the manner in which the company ascertains the cost of the equipment purchased by exchanging bonds having an established market price.
2.b
Provide explanation regarding the expenditures that a company capitalizes if bonds do not have an established market price
2.c
Provide explanation regarding the expenditures that a company capitalizes if common stock does not have established market price.
2.d
Provide explanation regarding the expenditures that a company capitalizes if similar equipment has determinable market value.
3.
Provide explanation for the factors that is used by company to ascertain whether it capitalizes expenditures relating to property, plant and equipment.
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Chapter 10 Solutions
Intermediate Accounting: Reporting And Analysis
- Fair value as a method of asset measurement is defined as: Multiple Choice O O the cost of an asset adjusted for the depreciation or amortization accumulated over its lifetime. price that would be received to sell assets in an orderly transaction between market participants on a given date. the net amount of cash into which an asset could be converted in the ordinary course of business. the value of what is given in exchange for the asset at its initial acquisition.arrow_forwardWhen nonmonetary assets are exchanged, a company records the cost of the nonmonetary asset acquired at: a.The fair value of the nonmonetary asset surrendered minus cash paid. b.The book value of the asset received minus cash paid. c.The fair value of the nonmonetary asset surrendered plus cash paid. d.The fair value of the nonmonetary asset surrendered plus cash received.arrow_forwardS1: In an acquisition where the acquirer pays cash for the acquiree assets, the book value of the acquiree is to be used for valuation. S2: In acquisition of assets for assets, the ownership structure of the acquiree does notchange Both statements are Only S2 is Only S1 is Both statements are 2. If the value implied by the purchase price of an acquired company exceeds the fair values of identifiable net assets, the excess should be Allocatedgoodwill Allocated to reduce long-livedassets Allocated to reduce any previously recorded goodwill and classify any remainder as an ordinary Allocated to reduce current and long-livedassetsarrow_forward
- Interest costs related to which of the following types of assets qualify for interest capitalization? An asset a company manufactures and sells on a routine basis. An asset ready for its intended use at the time of purchase. An asset a company constructs as a discrete project for sale or lease, or an asset a company constructs for its own All of the abovearrow_forwardQ7 How are transaction costs associated with the acquisition of financial assets recognized in the financial statements of the acquiring entity? Select one: a. They are always capitalized to increase the value of the financial asset. b. The treatment depends on the classification of the financial asset at acquisition date. c. They are only capitalized if the amortized cost model is used. d. They are always charged in the profit or loss account in the year in which the transaction was made.arrow_forwardIn an accretion/dilution analysis of an acquisition, if the purchase price exceeds the book value of the target’s assets, discuss the key components of the balance sheet that will be adjusted on the pro forma financials.arrow_forward
- In an accretion/dilution analysis of an acquisition, if the purchase price exceeds the book value of the target’s assets, discuss the key components of the balance sheet that will be adjusted on the pro forma financial statements.arrow_forwardWhich of the following would most likely appear under the heading of "Other Long-Term Assets" in the balance sheet? Multiple Choice Goodwill from the acquisition of another company Equipment used in primary operations Significant investment in equity securities of another company Long-term operating leases used in primary operations Iarrow_forwardStatement 1: If the financial asset is measured at fair value through profit or loss, transaction costs directly attributable to the acquisition are expensed immediately when incurred. Statement 2: Trading bond investments are reported at fair value. A. Only statement 1 is true B. Only statement 2 is true C. Both statements are true D. Both statements are falsearrow_forward
- Topic: Investmentarrow_forwardFor an investment to be classified as a current asset,a. the investment must be easily convertible to cash.b. the investor must intend to convert the investment to cash within one year or currentoperating cycle, whichever is longer, or use it to pay a current liability.c. both a and b must be met for the investment to be classified as a current asset.d. neither a nor b are relevant to the classification of an investment as a current asset.arrow_forwardWhich of the following statements are correct? I. IAS 16 Property, plant and equipment requires entities to disclose the purchase date of each asset II. The carrying amount of a non-current asset is the cost or valuation of that asset less accumulated depreciation III. IAS 16 Property, plant and equipment permits entities to make a transfer from the revaluation surplus to retained earnings for excess depreciation on revalue assets IV. Once decided, the useful life of a non-current asset should not be changedarrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
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