Reference no: EM132960965

Problem 1: To be consistent with the historical cost principle, overhead costs incurred by an enterprise constructing its own building should be

a. allocated on the basis of lost production.

b. eliminated completely from the cost of the asset.

c. allocated on an opportunity cost basis.

d. allocated on a pro rata basis between the asset and normal operations.

Problem 2: Which of the following costs are capitalized for self-constructed assets?

a. Materials and labor only

b. Labor and overhead only

c. Materials and overhead only

d. Materials, labor, and overhead

Problem 3: Which of the following assets do not qualify for capitalization of interest costs incurred during construction of the assets?

a. Assets under construction for a company's own use.

b. Assets intended for sale or lease that are produced as discrete projects.

c. Assets financed through the issuance of long-term debt.

d. Assets not currently undergoing the activities necessary to prepare them for their intended use.