Kieso Chapter 10 - Acquisition And Disposition Of Property

Front 1

Which one of the following is not a characteristic of property, plant, and equipment?
A. They are acquired for use in operations.
B. They are long-term in nature and are always subject to depreciation.
C. They possess physical substance.
D. All of the options are characteristics

Back 1

B. They are long-term in nature and are always subject to depreciation

Front 2

Land costs include all of the following except

Back 2

All of the options are land costs

Front 3

The cost of buildings should include all of the following except:
A. building permits.
B. excavation costs.
C. overhead costs incurred during construction.
D. costs of removing an old building on the new building site

Back 3

costs of removing an old building on the new building sitev

Front 4

Overhead costs related to self-constructed assets are accounted for by:
A. allocating overhead on the basis of lost production.
B. assigning a portion of all overhead to the asset.
C. assigning no fixed overhead to the asset.
D. assigning a pro rata portion of fixed overhead to the asset

Back 4

assigning a pro rata portion of fixed overhead to the asset

Front 5

The approach for interest costs incurred during construction recommended under GAAP is to:
A. capitalize no interest charges during construction.
B. charge construction with all costs of funds employed, whether identifiable or not.
C. capitalize only the actual costs incurred during construction.
D. capitalize a pro rata portion of all costs of funds employed.

Back 5

C. capitalize only the actual costs incurred during construction

Front 6

The interest capitalization period begins when:
A. activities to get the asset ready for its intended use are in progress.
B. expenditures for the asset have been made.
C. interest cost is being incurred.
D. All of the options are necessary.

Back 6

All of the options are necessary

Front 7

The interest rate(s) used in computing avoidable interest is the:
A. rate incurred on specific borrowings.
B. weighted average rate incurred on all other outstanding debt.
C. lower of the rate incurred on specific borrowings or the weighted average rate.
D. rate incurred on specific borrowings for the weighted-average expenditures equal to the specific borrowings and the weighted average rate of other borrowings for the excess expenditures.

Back 7

rate incurred on specific borrowings for the weighted-average expenditures equal to the specific borrowings and the weighted average rate of other borrowings for the excess expenditures

Front 8

Plant assets purchased in exchange for a zero-interest-bearing note should be accounted for at the:
A. face value of the note.
B. fair value of the asset received.
C. book value of the asset received.
D. present value of the note

Back 8

present value of the note.

Front 9

Assets acquired in a lump sum purchase should be recorded at their:
A. appraised value.
B. relative book value.
C. relative fair market values.
D. fair market value

Back 9

C. relative fair market values

Front 10

Gains on exchanges of nonmonetary assets are:
A. never recognized.
B. recognized only on exchanges that have commercial substance.
C. recognized only on exchanges that lack commercial substance.
D. recognized partially on exchanges that lack commercial substance when cash is received.
v

Back 10

recognized partially on exchanges that lack commercial substance when cash is received.

Front 11

A nonmonetary asset acquired in an exchange that has commercial substance is usually recorded at the:
A. book value of the asset given up.
B. book value of the asset received.
C. fair value of the asset given up, unless fair value of the asset received is more clearly evident.
D. fair value of the asset received

Back 11

fair value of the asset given up, unless fair value of the asset received is more clearly evident.v

Front 12

In an exchange that lacks commercial substance in which a gain exists and cash is received, the asset received is recorded at the:
A. book value of the asset given up less cash received.
B. fair value of the asset given up less cash received.
C. book value of the asset given up less the deferred portion of the gain.
D. fair value of the asset received less the deferred portion of the gain

Back 12

fair value of the asset received less the deferred portion of the gain

Front 13

The gain recognized in an exchange that lacks commercial substance and in which cash is received is computed by multiplying the total gain by the formula of:
A. cash paid divided by the total of cash paid plus fair value of the asset received.
B. cash paid divided by the total of cash paid plus fair value of the asset given up.
C. cash received divided by the total of cash received plus fair value of the asset received.
D. cash received divided by the total of cash received plus fair value of the asset given up.

Back 13

cash received divided by the total of cash received plus fair value of the asset received

Front 14

Expenditures that extend the useful life of a plant asset without improving its quantity or quality are accounted for:
A. as additions.
B. as improvements.
C. by debiting the asset account.
D. by debiting Accumulated Depreciation

Back 14

by debiting Accumulated Depreciation

Front 15

When plant assets are sold:
A. only losses are recorded.
B. only gains are recorded.
C. a loss is recorded when the selling price is less than the asset's cost.
D. a gain is recorded when the selling price is greater than the asset's book value

Back 15

a gain is recorded when the selling price is greater than the asset's book valuev

Front 16

All of the following are true regarding the revaluation model allowed under iGAAP except:
A. after initial recognition, the revalued amount is fair value less subsequent depreciation and impairment losses.
B. when an asset is revalued, any increase in carrying amount is reported as miscellaneous revenue.
C. revaluations must be made regularly to ensure that the carrying value is not materially different from fair value.
D. once selected, the revaluation policy applies to an entire class of property, plant, and equipment.
v

Back 16

when an asset is revalued, any increase in carrying amount is reported as miscellaneous revenue

Front 17

The cost of driveways, walks, and parking lots are included in the cost of land.
A. True
B. False

Back 17

B. False

Front 18

Interest revenue earned on borrowed funds during the construction of an asset to be used by a firm can be used to reduce the cost of interest to be capitalized.
A. True
B. False

Back 18

False

Front 19

When nonmonetary assets are traded in an exchange that lacks commercial substance and no cash is received, any loss is recognized immediately.
A. True
B. False

Back 19

True

Front 20

The receipt of an asset from a contribution should be recorded as additional paid-in capital.
A. True
B. False

Back 20

B. False

Front 21

The cost of a replacement that extends the useful life of an asset should be debited to the asset account.
A. True
B. False

Back 21

False

Front 22

Land is only depreciated if it suffers a material decrease in value.
A. True
B. False

Back 22

A. True

Front 23

A portion of fixed overhead incurred during self-construction of an asset must be allocated to the construction process.
A. True
B. False
v

Back 23

B. False

Front 24

Avoidable interest is the amount of interest cost incurred during the construction period that a company could theoretically avoid if it had not made expenditures for the asset.
A. True
B. False

Back 24

A. True

Front 25

If an exchange has commercial substance losses should be recognized immediately and gains should be deferred.
A. True
B. False

Back 25

B. False

Front 26

Cash or other assets received in an exchange are referred to as “boot.”
A. True
B. False

Back 26

. False

Front 27

The only major characteristic of property, plant and equipment shown below is:
A. they are acquired for resale.
B. they are always subject to depreciation.
C. they are long-term in nature.
D. they lack physical substance

Back 27

they are long-term in nature

Front 28

The cost of equipment includes:
A. purchase price less any discounts.
B. freight charges.
C. cost of conducting trial runs.
D. All of the above

Back 28

All of the above

Front 29

Special assessments for local improvements, such as pavements, street lights, sewers, and drainage systems, are usually charged to what account?
A. Land.
B. Land Improvements.
C. Building Improvements.
D. Betterments.

Back 29

A. Land.

Front 30

The cost of property acquired by the issuance of securities is equal to:
A. the original cost of the securities.
B. the market value of the securities.
C. the par value of the securities.
D. the book value of the property acquired

Back 30

the market value of the securities.

Front 31

In an exchange of nonmonetary assets that lacks commercial substance in which a gain exists and no cash is paid or received, the asset received is recorded at:
A. book value of the asset received less the gain deferred.
B. fair value of the asset received up less the gain deferred.
C. book value of the asset given up plus the deferred gain.
D. fair value of the asset given up less the deferred gain

Back 31

fair value of the asset given up less the deferred gain

Front 32

When a company sells equipment for a price that is less than the asset's book value, which of the following is recorded?
A. Gain.
B. Loss.
C. Extraordinary gain.
D. Extraordinary loss.

Back 32

Loss.

Front 33

Which of the following is one of the conditions that must be present for the capitalization period of interest to begin?
A. Expenditures for the asset must be budgeted.
B. Activities that are necessary to get the asset ready for its intended use must be known.
C. Interest costs are being incurred.
D. The construction period must occur in the current accounting period.

Back 33

Interest costs are being incurred

Front 34

The cost of the various assets acquired for a single lump sum price is determined by using their relative:
A. fair market values.
B. historical costs.
C. book values.
D. net realizable values

Back 34

A. fair market values

Front 35

In an exchange of nonmonetary assets that has commercial substance, when no cash is involved, the new asset is valued at:
A. the fair value of the new asset plus the gain deferred.
B. the book value of the old asset.
C. the book value of the old asset plus the gain deferred.
D. the fair value of the new asset

Back 35

the fair value of the new asset.

Front 36

Property received through a contribution is to be recognized at its fair market value and offset with a credit entry to a:
A. Miscellaneous Gain account.
B. Paid-in Capital account.
C. Contribution Revenue account.
D. Additional Paid-in Capital account

Back 36

Contribution Revenue account.