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Accounting 3332 > Final - intermediate ACCT 3331 > Flashcards

Final - intermediate ACCT 3331 Flashcards

1
Q

T/F

plant assets, operating assets, and fixed assets are commonly used terms for PP&E.

A

True

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2
Q

T/F

PP&E are nondurable in nature.

A

False

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3
Q

Capitalizing means recognizing as an _____ on the _____.

A

Asset; B/S

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4
Q

Expensing means recognizing as an _____ on the _____.

A

expense; I/S

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5
Q

PP&E should be captialized at _____?

A

Historical cost

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6
Q

Costs that are capitalized for land are:

A

purchase price
closing costs, (title, attorney’s fees, recording fees)
cost of grading, filling, draining, and clearing
assumption of any liens, mortgages, encumbrances on property
additioanl land imporvements with an indefinte life

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7
Q

land improvements are depreciated as long as they have a/an _____ life.

A

definite life

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8
Q

Examples of land improvements:

A

Private driveways
walks
fences
parking lots

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9
Q

land acquired and held for speculation is classified as a/an

A

investment

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10
Q

land held by real estate concern for resale should be classified as

A

inventory

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11
Q

costs that are capitalized for buidling are:

A

materials, labor, and overhead costs incurred during construction
professional fees and building permits

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12
Q

Costs that are capitalized for Equipment are:

A 
purchase price
freight and handling charges
insurance on the equipment while in transit
cost of special foundations
assembling and installation
cost on conducting trial runs
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13
Q

Where is it shown on a B/S?

a lien that was attached to the land when purchased

A

land

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14
Q

Where is it shown on a B/S?

landscaping cost

A

land

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15
Q

Where is it shown on a B/S?

attorney’s fees and recording fees related to purchasing land

A

land

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16
Q

Where is it shown on a B/S?

variable overhead related to construction of machinery

A

equipment

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17
Q

Where is it shown on a B/S?

a parking lot servicing employees in the building

A

land improvements

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18
Q

Where is it shown on a B/S?

cost of temporary building for workers during construction of a building

A

building

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19
Q

Where is it shown on a B/S?

interest expense on bonds payable incurred during construction of a building

A

building

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20
Q

Where is it shown on a B/S?

the cost of demolishing an old building that was on the land when purchased

A

land

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21
Q

T/F

capitalize all cost directly associated with the construction of the asset, which include only material and overhead

A

False because labor is included

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22
Q

insterest that could have been avoided if the asset were not constructed and the money used to retire debt

A

avoidable interest

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23
Q

3 items to consider in capitalization of interest cost

A

qualifying assets
capitalization perid
amount to capitalize

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24
Q

steps in capitalizing process

A

compute actual interest expense
compute avoidable interest
capitalize the smaller of acutual or avoidable interest

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25
Q

comapnies should recored PP&E…

A

at the fair value of what they give up or

at the fair value of the asset received

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26
Q

assets, purchased though long term credit, are recored at the present value of the consideration exchange

A

deffered payment contracts

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27
Q

allocate the total cost among the various assets on the basis of their fair market values

A

lump sum purchases

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28
Q

the market value of the stock issued is a fair indication of the cost of the property acquired

A

issuance of stock

29
Q

companies should recognize immediately any gains or losses on the exchange when the transaction has

A

commercial substance

30
Q

when does an exchange have commercial substance?

A

if the expected futrue cash flows change as a result of the exchange

31
Q

typically has commerical substance because the assets have different uses and therefore different cash flows

A

dissimilar assets

ex. machinery exchange for land

32
Q

typically has no commerical substance

A

similar assets unless they are significantly different

33
Q

Capitalize or Expense?

Improvements

A

capitalize

34
Q

Capitalize or Expense?

repairs

A

expense

35
Q

Capitalize or Expense?

rearrangements

A

expense

36
Q

Capitalize or Expense?

additions

A

capitalize

37
Q

T/F

furture economic benefit includes increase in useful life, quantity of product produced, and quality of product produced

A

True

38
Q

depreciation must be taken up to the date of

A

sale

39
Q

future economic benefits would include increases in:

A

useful life
quantity of product
quality of product

40
Q

fixed assets (tangible)=

A

depreciation expense

41
Q

intangibles (patent, copywrites, trademark, goodwill) =

A

amortization expense

42
Q

natural resources (oil, mines) =

A

depletion expense

43
Q

what is not subject to depreciation?

A

land

44
Q

depreciable base =

A

historical cost - salvage value

45
Q

what are the 4 methods of depreciation?

A

activity (units of use or production)
straight line
sum of the years digits
declinging balance

46
Q

which 2 depreciation mehtods are considered accelerated methods

A

sum of the years digits

declining balance

47
Q

match higher depreciation expense with higher revenues in the early years of an asset’s useful life when the asset is more efficient

A

accelerated depreciation methods

48
Q

units of production (activity) =

A

(cost - residual value) / estimated units

dep. exp = dep. rate x units produced

49
Q

when the carrying amount of an asset is not recoverable, a company records a write off reffered to as an

A

impairment

50
Q

what are the events that lead to an impairment?

A

1: decrease in the FV of an asset
2: change in the manner in which an asset is used
3: adversed change in legal factors or in the business climate
4: accumulation of costs in excess of the amount originally expected to acquire or construct an asset
5: a projection or forecast that demonstrates continuing losses associated with an asset

51
Q

steps in measuring impairment

A

review events for possible impairment
recoverability test (BV - undiscounted FV C/F)
fair value test (BV - FV)

52
Q

What are the potential accounting manipulations?

A

capitalization of PP&E
depreciation of PP&E
impairment of PP&E

53
Q

T/F

interest cost in connection with the purchase of land should be capitalized to the land account

A

False

54
Q

T/F

Under US GAAP, all research and development costs are expensed as soon as they are incurred

A

False

55
Q

T/F

internally generated goodwill should not be capitalized in the accounts

A

True

56
Q

T/F

land is always classified as PP&E on a company’s balance sheet

A

False

57
Q

T/F
When a company exchanges nonmonetary assets and a loss results, the company recognizes the loss only if the exchange has commerical substance

A

False

58
Q

when computing the amount of interest cost to be capitalized, the concept of avoidable interest refers to

A

the portion of total interest cost which would have been incurred if expenditures for asset construction had not been made

59
Q

T/F
the three factors involved in the depreciation process are the depreciation base, the useful life, and the risk of obsolescence

A

False

60
Q

If a firm increases its estimate of salvage value for a machine (with other things unchanged), the annual depreciation will _____ under the straight line method

A

decrease

61
Q

when a firm records an impairment loss for a manchine, its net income _____, and its total assets _____.

A

decrease; decrease

62
Q

Seasons’ Fun Corp. spent $20000 to add a spa room in its hotel in downtown. the $20000 should be expensed or capitalized?

A

capitalized

63
Q

name some examples of intangle assets

A

patent (20 years)
trademark (10 years)
copywrite (70+ years
goodwill

64
Q

intangible assets can be either _____ or _____.

A

purchased; internally created

purchased are capitalized and internally created are not

65
Q

T/F

internally created intangible assets are generally recorded on the balance sheet

A

False

they are created

66
Q

T/F

Both limited life and indefinte life intangibles are amortized (typically using SL method)

A

False

only limited life

67
Q

T/F

goodwill can be externally acquired or internally generated

A

True

68
Q

Goodwill should not be amortized, but we do adjust the carrying value of goodwill when it is _____.

A

impaired

69
Q

what are the steps in the measurement of goodwill impairement

A
  1. compare FV of each reporting unit to BV of the reporting unit (BV>FV then impairment exits)
  2. Implied FV of goodwill (FV-FV of all net assets other than goodwill)

BV of goodwill - Implied FV of good will

Accounting 3332 (10 decks)

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