FAR 3 Module 4 Flashcards
What costs should be included or excluded when determining the amount to report for land on the balance sheet?
what does capitalize interest cost mean?
How would we find the what was capitalized for the current year?
Capitalizing interest costs: Adding interest on a construction loan to the asset’s cost, rather than expensing it, and depreciating it over time.
What should be done with the proceeds from the sale of a building on land purchased for construction?
Which of the following would be charged to the land and why?
I. Title and recording fees: These are directly related to acquiring the land and should be capitalized.
II. Clearing of trees and grading: These are costs incurred to prepare the land for construction, so they should also be capitalized as part of the land cost.
IV. Building Cost
V. Construction cost
How should leasehold improvement costs be treated for a leased property?
Capitalized and amortized over the lesser of the useful life of the improvements or the remaining lease term.
What would the company value the acquisition of the land at?
Should costs for building modifications and production line rearrangement be capitalized if they do not increase asset value or extend its useful life?
Building modification costs
Production line Rearrangement costs
Building modification costs: YES
Production line Rearrangement costs: YES
When does depreciation expense begin for a capital asset?
The date the equipment was installed and placed in service
When should a buyer record a liability for goods shipped FOB Destination?
When BUYER receives the goods
Which of the following costs should be capitalized?
What is AIR?
Addition - increases the quantity of fixed assets
Improvement - improve the quality of fixed assets
Replacement - subs of new, similar asset for an old one
What costs should be assigned to
Land
Buildings
Equipment
How should plant assets purchased under a deferred payment contract be valued?
How should a building refurbished with higher quality materials after suffering uninsured fire damage be accounted for?
Component method:
If the carrying value of the damaged, uninsured portion is known, a loss must be recognized for that amount.
How would you calculate the capitalized interest on the construction?
What is capitalized interest based on?
How would you find the interest to be capitalized for the following?
Capitalized interest is based on the average expenditures during the construction period, reflecting the actual funds used rather than the total borrowed amount.
How would you calculate the interest capitalized for the following?
How would you calculate the capitalized interest for the following?
Since The interest to capitalize < Actual Interest,
The amount of Capitalized interest would be: $17,000.
How would you calculate the interest to be capitalized for the following?
“After remodeling was completed, the facility was ready for use on March 1.”
How would you calculate the weighted average to be used in the following?
