Ch.10 Quiz

Instructions
Please read the questions carefully.

This assessment is worth 100 points.

  1. Operational assets is a term used to describe assets created by the normal operation of the business, including inventories and receivables.    (2 points)

      
      

  2. Property, plant, and equipment may be shown net on the balance sheet.    (2 points)

      
      

  3. Sales tax paid on equipment used in the business is capitalized and depreciated.    (2 points)

      
      

  4. Demolition costs to remove an old building from land purchased as a site for a new building are considered part of the cost of the new building.    (2 points)

      
      

  5. The initial cost of an operational asset includes all the identifiable expenditures necessary to bring the asset to its desired condition and location for use.    (2 points)

      
      

  6. Organization costs include operating expenses incurred in the development stage of a business before revenues are generated.    (2 points)

      
      

  7. Costs incurred after discovery of a natural resource but before production begins are reported as expenses of the period in which the expenditures are made.    (2 points)

      
      

  8. Intangible assets are not always shown in the balance sheet as a separate reporting category.    (2 points)

      
      

  9. For accounting purposes, intangible assets include patents, franchises, goodwill, and accounts receivable.    (2 points)

      
      

  10. The fair market value of the asset given in a noncash acquisition determines the value of the consideration received.    (2 points)

      
      

  11. In a deferred payment agreement, the value of the asset acquired is based on either its fair market value, or the present value of the debt instrument, depending on which amount is more readily determinable.    (2 points)

      
      

  12. The FASB requires that revenue is recognized when assets, such as land, are donated to a firm.    (2 points)

      
      

  13. Accounting for assets acquired in an exchange depends on the similarity or dissimilarity of the assets involved.    (2 points)

      
      

  14. In exchanges of similar assets, with no cash received, GAAP require recognition of all losses and deferral of all gains.    (2 points)

      
      

  15. The fixed asset turnover ratio is determined by dividing net income by average fixed assets.    (2 points)

      
      

  16. Interest paid to finance the acquisition of fixed assets is always capitalized.    (2 points)

      
      

  17. The period for capitalization of interest for a self-constructed asset ends when the asset is placed in service.    (2 points)

      
      

  18. The FASB's required accounting treatment for research and development costs typically understates both net income and assets.    (2 points)

      
      

  19. Microsoft capitalizes all software development costs incurred after technological feasibility but before the initial sale of the product.    (2 points)

      
      

  20. The successful efforts and full-cost methods in oil and gas accounting serve as a reminder that financial reporting standard setting is unaffected by politics.    (2 points)

      
      

  21. Operational assets are:   (2 points)

    a.  
    b.  
    c.  
    d.  

  22. The acquisition costs of tangible operational assets do not include:   (2 points)

    a.  
    b.  
    c.  
    d.  

  23. Goodwill is:   (2 points)

    a.  
    b.  
    c.  
    d.  

  24. Assets acquired in a lump-sum purchase are valued based on:   (2 points)

    a.  
    b.  
    c.  
    d.  

  25. Assets acquired under deferred payment contracts are:   (2 points)

    a.  
    b.  
    c.  
    d.  

  26. Assets acquired by the issuance of equity securities are valued based on:   (2 points)

    a.  
    b.  
    c.  
    d.  

  27. The basic principle used to value the asset acquired in a nonmonetary exchange is to value it at:   (2 points)

    a.  
    b.  
    c.  
    d.  

  28. In nonmonetary exchanges the asset received is valued based on the fair value of the asset given up except:   (2 points)

    a.  
    b.  
    c.  
    d.  

  29. Interest is not capitalized for:   (2 points)

    a.  
    b.  
    c.  
    d.  

  30. The exclusive right to benefit from a creative work, such as a film, is a:   (2 points)

    a.  
    b.  
    c.  
    d.  

  31. The exclusive right to display a symbol of product identification is a:   (2 points)

    a.  
    b.  
    c.  
    d.  

  32. The capitalized cost of equipment excludes:   (2 points)

    a.  
    b.  
    c.  
    d.  

  33. Decisions involving the acquisition of operational assets are referred to as:   (2 points)

    a.  
    b.  
    c.  
    d.  

  34. Donated assets are recorded at:   (2 points)

    a.  
    b.  
    c.  
    d.  

  35. The critical difference between similar and dissimilar exchanges relates to the:   (2 points)

    a.  
    b.  
    c.  
    d.  

  36. In an exchange of similar equipment, a gain cannot be recognized unless:   (2 points)

    a.  
    b.  
    c.  
    d.  

  37. The fixed-asset turnover ratio provides:   (2 points)

    a.  
    b.  
    c.  
    d.  

  38. The cost of self-constructed fixed assets should:   (2 points)

    a.  
    b.  
    c.  
    d.  

  39. Software development costs are capitalized if they are incurred:   (2 points)

    a.  
    b.  
    c.  
    d.  

  40. Grab Manufacturing Co. purchased a ten-ton draw press at a cost of $180,000 with terms of 5/15 n/45. Payment was made within the discount period. Shipping costs were $4,600, which included $200 for insurance in transit. Installation costs totaled $12,000, which included $4,000 for taking out a section of a wall and rebuilding it because the press was too large for the doorway. The capitalized cost of the ten-ton draw press is:   (2 points)

    a.  
    b.  
    c.  
    d.  

  41. Rison Labs purchased a high speed industrial centrifuge at a cost of $310,000. Shipping costs totaled $15,000. Foundation work to house the centrifuge cost $8,000. An additional water line had to be run to the equipment at a cost of $3,000. Labor and testing costs totaled $6,000. Materials used up in testing cost $3,000. The capitalized cost is:   (2 points)

    a.  
    b.  
    c.  
    d.  

  42. Which of the following choices would be correct for Delta in case B?   (2 points)

    a.  
    b.  
    c.  
    d.  

  43. Which of the following choices would be correct for Ecton in case B?   (2 points)

    a.  
    b.  
    c.  
    d.  

  44. Which of the following choices would be correct for Foxboro in case B?   (2 points)

    a.  
    b.  
    c.  
    d.  

  45. Interest capitalized for 2000 was:   (2 points)

    a.  
    b.  
    c.  
    d.  

  46. Average accumulated expenditures for 2001 by the end of the construction period was:   (2 points)

    a.  
    b.  
    c.  
    d.  

  47. Interest capitalized for 2001 was:   (2 points)

    a.  
    b.  
    c.  
    d.  

  48. Storit's capitalized interest in 2000 was:   (2 points)

    a.  
    b.  
    c.  
    d.  

  49. What was the final cost of Storit's warehouse?    (2 points)

    a.  
    b.  
    c.  
    d.  

  50. In the current year Tool Corp. purchased Patent X for $42,000 and Patent Y for $38,000. Additional acquisition costs for X and Y were $7,000 and $5,000, respectively. Tool also paid litigation costs for patent infringement on X and Y of $40,000 and $30,000, respectively. The X litigation was unsuccessful. The Y litigation was successful. What amount should Tool capitalize for patents?    (2 points)

    a.  
    b.  
    c.  
    d.  



Portions copyright ©2005 The McGraw-Hill Companies.
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.