Final Flashcards
Yamaha Inc. hires a new chief financial officer and promises to pay him a lump-sum bonus four years after he joins the company. The new CFO insists that the company invest an amount of money at the beginning of each year in a 7% fixed rate investment fund to insure the bonus will be available. To determine the amount that must be invested each year, a computation must be made using the formula for:
Future value of an annuity due
The basic principle used to value an asset acquired in a nonmonetary exchange is to value it at:
Fair value of the asset(s) given up
Suppose a company spends $100,000 on research and development in 2023. As a result of the products developed, additional revenue is generated over the next five years totaling $600,000. When is the cost of the research and development in 2023 recognized as an expense?
Full amount in 2023
Accounting for a change in the estimated service life of equipment:
Is handled prospectively
The allocation base for an asset is:
Excess of its cost over residual value
When a company reports a gain on the sale of a depreciable asset, which of the following is always true?
The company sold the asset for more than its book value
The legal life of a patent is:
20 years
Losses on the cash sales of property, plant and equipment:
Are the excess of the book value over the cash proceeds
With an ordinary annuity, a payment is made or received on the date the agreement begins. T/F
F
Other things being equal, the present value of an annuity due will be less than the present value of an ordinary due. T/F
F
A deferred annuity is one in which interest charges are deferred for a stated time period. T/F
F
The initial valuation of a natural resource can include the expected cost of an asset retirement obligation to be settled at the end of the natural resource’s useful life to the company. T/F
T
The relative fair values of individual assets acquired in a lump-sum purchase are used to determine the valuation of each of those assets. T/F
T
The initial valuation of natural resources can include (a) acquisition costs, (b) exploration costs, (c) development costs, and (d) restoration costs. T/F
T
Expenditures made to maintain a given level of benefits provided by an asset typically are expensed as incurred. T/F
T
A change in the estimated recoverable units used to compute depletion requires retroactive adjustments to the financial statements. T/F
F
Property, plant, or equipment classified as held for sale is reported at whichever is lower, the asset’s book value or the asset’s fair value less cost to sell. T/F
T
A loss on the disposal of an asset indicates that management likely has not efficiently used the asset over its service life. T/F
F
