1 if a corporation purchases a lot and building and

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Reference no: EM13355679

1. If a corporation purchases a lot and building and subsequently tears down the building and uses the property as a parking lot, the proper accounting treatment of the cost of the building would depend on
A.The significance of the cost allocated to the building in relation to the combined cost of the lot and building.
B.The length of time for which the building was held prior to its demolition.
C.The contemplated future use of the parking lot.
D.The intention of management for the property when the building was acquired.

2. Rice Co. exchanged merchandise that cost $24,000 and normally sold for $36,000 for a new delivery truck with a list price of $40,000. The delivery truck should be recorded on Rice's books at
A.$24,000.
B.$30,000.
C.$36,000.
D.$40,000.

3.Assets that qualify for interest cost capitalization include
A.Assets under construction for a company's own use.
B.Assets that is 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.

4.When computing the amount of interest cost to be capitalized, the concept of "avoidable interest" refers to
A.The total interest cost actually incurred.
B.A cost of capital charge for stockholders' equity.
C.That portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made.
D.That portion of average accumulated expenditures on which no interest cost was incurred.

5. 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 fully depreciated.
D.The activities that are necessary to get the asset ready for its intended use have begun.

6. When a closely held corporation issues preferred stock for land, the land should be recorded at the
A.Total par value of the stock issued.
B.Total book value of the stock issued.
C.Total liquidating value of the stock issued.
D.Fair market value of the land.

7. Accounting recognition should be given to some or all of the gain realized on a nonmonetary exchange of plant assets except where the assets exchanged are
A.Similar and additional cash is paid.
B.Similar and additional cash is received.
C.Dissimilar and additional cash is paid.
D.Dissimilar and additional cash is received.

8.Depreciation accounting
A.Provides funds.
B.Funds replacements.
C.Retains funds.
D.All of these.

9.Economic factors that shorten the service life of an asset include
A.Obsolescence.
B.Supersession.
C.Inadequacy.
D.All of these.

Reference no: EM13355679

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