Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

ACCT 301 > Ch. 10 > Flashcards

Ch. 10 Flashcards

1
Q

Cash discounts for prompt payment, how should the discount be taken?

A

Company should consider the discount as a reduction in the purchase price of the asset

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

When no interest rate is stated or if the specified rate is unreasonable

A

Company imputes an appropriate interest rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

When imputing an interest rate, companies consider what factors?

A

Brows credit rating, the amount and maturity date of the note, and prevailing interest rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Cash exchange price of the asset acquired is used for

A

The basis for recording the asset and measuring the interest element

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

In lump sum purchases the total cost is allocated

A

Among the various assets on the basis of their relative fair values

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

No monetary assets

A

Is accounted on the basis of fair value of asset given up or the fair value of the asset received whichever is clearly more evident

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Companies should recognize what immediately?

A

Gains and losses on exchange

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Rationale for immediate recognition is that more transactions have

A

Commercial substance and gains and losses should be recognized

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

An exchange has commercial substance if

A

Future cash flows change as a result of that transaction

Two parties economic position change

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

For the exchange of similar assets can the economic position of company change,?

A

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

It is possible to exchange similar assets but not have a significant difference in cash flows. So if the company is in the same positions before the exag version the company recognizes?

A

Loss but generally defers a gain

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

If company receives no cash in exchange it defers

A

Gain

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

If company receives cash in such exchange it recognizes

A

Part of gain immediately

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

When the company exchanges non monetary assets and a loss results the companies recognize the loss immediately because

A

Companies should not value assets at more than their cash equivalent price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Should companies recognize a loss whether it has commercial substance or not?

A

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Cost of non monetary asset acquired in exchange for another non monetary asset at the fair value of he asset given up and immediately recognizes a gain

A

,

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

When should the fair value of the asset received be used?

A

Only when it is clearly more evident the fair value of asset given up

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Contribution is some type of asset such as cash securities land building BUT IT COULD ALSO BE

A

Forgiveness of debt

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Accounting for contributions should be recognized as

A

Contributions received as revenues in the period received

20
Q

Some companies promise to give pledge some type of asset in the future

If the promise is UNCONDITIONAL

A

UNCONDITIONAL : depends only on the passage of time or on de and by the recipient for performance, the company should report contribution expense and related payable immediately

CONDITIONAL : company recognizes the expense in the period benefited by the contribution generally when it transfers the asset

21
Q

Prudent cost

A

This concept states that if for some reason accompany ignorantly paid too much for an asset originally it is theoretically preferable to charge a loss immediately

22
Q

Costs incurred to achieve greater future benefits should be

A

Capitalized

23
Q

Whereas expenditures that simply maintain a given level of services should be

A

Expensed

24
Q

In Oder to capitalize cost , one of the three conditions must be present

A
  1. The useful life of asset must be increased
  2. Quantity of units produced from asset must be increased
  3. Quality of the units produced must be enhanced
25
Q

Four major expenditures

A

Additions - increase or extension of existing assets

Improvements and replacements - substitution of an improved asset for an existing one

Rearrangement and reinstallation - movements of assets from one location to another

Repairs- expenditures that maintain assets in condition for operation

26
Q

By definition companies do what to any addition to plant assets because a new asset is created

A

Capitalize

27
Q

The problem additions have is h

A

Accounting for any changes related to the existing structure as a result of the addition.

28
Q

Companies substitute one asset for another through

A

Improvements and replacements

29
Q

Improvement

A

Is the substitution of a better asset for the one currently used

30
Q

Replacement

A

Is the substitution of a similar asset

31
Q

If the expenditure increase the future service potential of the asset a company can capitalize it using three ways

A
  1. Substitution approach
  2. Capitalize the new cost
  3. Charge to accumulated depreciation
32
Q

Substitution approach is correct if what is available

A

Carrying amount of old asset

33
Q

Capitalize new cost

A

Capitalizes improvement and keeps the carrying amount of old asset on the books

34
Q

Charge to accumulated depreciation

A

If company does not improve quantity or quality of the asset itself but instead extends its useful life the company debits expenditure to accumulated depreciation

35
Q

Rearrangement and reinstallation costs

A

If material : capitalize new costs as an asset to be amortized over future periods expected to benefit

If immaterial: cannot be separated from other operating expenses or if their future benefit is questionable, company should immediately expense

36
Q

Ordinary repAIRS

A

Maintain assets in operating condition

37
Q

Ordinary repairs are charged to

A

Expense account in the period incurred on the basis that it is the primary period benefited

38
Q

If a major report occurs server all periods will benefit

A

True

39
Q

For repairs , a company should handle costs as an

A

Addition improvement or replacement

40
Q

Generally the book value of asset does not equal the disposed value of asset

A

True

Reasons: depreciation is an estimate of cost allocation and not a Process of valuation

41
Q

Gain or loss is a correction of

A

Net income

42
Q

Involuntary conversion

A

Such as fire flood theft or condemnation

43
Q

If company scraps or abandons an asset without

A

Any cash recovery it recognize a loss to the asset book. Value

44
Q

If scrap exists the gain or loss that occurs is between

A

Assets scrap value and its book value

45
Q

If an asset can still be used even though it is fully depreciated

A

It may be kept on the books at historical cost less depreciation

ACCT 301 (12 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions