Quiz 8
PAMANTASAN NG LUNGSOD NG MAYNILA
FINANCIAL ACCOUNTING QUIZ 7
NAME: ____________________________
TRUE OR FALSE: 1. Assets under construction for a company’s own use do not qualify for interest cost capitalization. 2. Avoidable interest is the amount of interest cost that a company could theoretically avoid if it had not made expenditures for the asset. 3. When a company purchases land with the intention of developing it for a particular use, interest costs associated with those expenditures qualify for interest capitalization. 4. Assets purchased on long-term credit contracts should be recorded at the present value of the consideration exchanged. 5. Costs incurred subsequent to the acquisition of an asset are capitalized if they provide future benefits. 6. When an ordinary repair occurs, several periods will usually benefit. 7. If a company scraps an asset without any cash recovery, it recognizes a loss equal to the asset’s book value. 8. An impairment loss is the amount by which the carrying amount of the asset exceeds the sum of the expected future net cash flows from the use of that asset. 9. The first step in determining whether an impairment has occurred is to estimate the future net cash flows expected from the use of that asset and its eventual disposition. 10. Normally, companies compute depletion on a straight-line basis.
MULTIPLE CHOICE: 1. Assets that qualify for interest cost capitalization include
a. assets under construction for a company's own use.
b. assets that are ready for their intended use in the earnings of the company.
c. assets that are not currently being used because of excess capacity.
d. All of these assets qualify for interest cost capitalization. 2. The period of time during which interest must be capitalized ends when
a. the asset is substantially complete and ready for its intended use.
b. no further interest cost is being incurred.
c. the asset is abandoned, sold, or
FINANCIAL ACCOUNTING QUIZ 7
NAME: ____________________________
TRUE OR FALSE: 1. Assets under construction for a company’s own use do not qualify for interest cost capitalization. 2. Avoidable interest is the amount of interest cost that a company could theoretically avoid if it had not made expenditures for the asset. 3. When a company purchases land with the intention of developing it for a particular use, interest costs associated with those expenditures qualify for interest capitalization. 4. Assets purchased on long-term credit contracts should be recorded at the present value of the consideration exchanged. 5. Costs incurred subsequent to the acquisition of an asset are capitalized if they provide future benefits. 6. When an ordinary repair occurs, several periods will usually benefit. 7. If a company scraps an asset without any cash recovery, it recognizes a loss equal to the asset’s book value. 8. An impairment loss is the amount by which the carrying amount of the asset exceeds the sum of the expected future net cash flows from the use of that asset. 9. The first step in determining whether an impairment has occurred is to estimate the future net cash flows expected from the use of that asset and its eventual disposition. 10. Normally, companies compute depletion on a straight-line basis.
MULTIPLE CHOICE: 1. Assets that qualify for interest cost capitalization include
a. assets under construction for a company's own use.
b. assets that are ready for their intended use in the earnings of the company.
c. assets that are not currently being used because of excess capacity.
d. All of these assets qualify for interest cost capitalization. 2. The period of time during which interest must be capitalized ends when
a. the asset is substantially complete and ready for its intended use.
b. no further interest cost is being incurred.
c. the asset is abandoned, sold, or