Which of the following types of interest cost incurred in connection with the purchase or manufacture of inventory should be capitalized as a product cost? A. Purchase discounts lost B. Interest incurred during the production of discrete projects such as ships or real estate projects C. Interest incurred on notes payable to vendors for routine purchases made on a repetitive basis D. All of these should be capitalized

Which of the following types of interest cost incurred in connection with the purchase or manufacture of inventory should be capitalized as a product cost? A. Purchase discounts lost B. Interest incurred during the production of discrete projects such as ships or real estate projects C. Interest incurred on notes payable to vendors for routine purchases made on a repetitive basis D. All of these should be capitalized

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 4MC: Which of the following statements about capitalizing costs is correct? A. Capitalizing costs refers...

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Which of the following statements about capitalizing costs is correct? A. Capitalizing costs refers to the process of converting assets to expenses. B. Only the purchase price of the asset is capitalized. C. Capitalizing a cost means to record it as an asset. D. Capitalizing costs results in an immediate decrease in net income.
The possible answers for option D are:Cost of Goods SoldDepreciation ExpenseEarned RevenueIncome Tax ExpenseInsurance ExpenseInterest ExpenseSupplies ExpenseWage Expense
Costs to be capitalized in the inventory account include which of the following? a. Cost of the inventory b. Transportation costs c. Taxes d. Installation e. All of the above
Choose only the letter of answer Which of the following would not be reported as inventory? * a. Machinery acquired by a manufacturing entity for use in the production process b. Land acquired for resale by a real estate firm c. Shares and bonds held for resale by a brokerage firm d. Partially completed goods held by a manufacturing entity In which of the following instances is a write-down of inventories to net realizable value may not be required? a. the inventories are damaged b. the inventories have become wholly or partially obsolete c. selling prices are rising because demand has increased d. the estimated costs to complete or costs to sell have increased
Which of the following accounts is an example of a contra-asset?A) Cost of Goods Sold B)Sales Discounts C) Purchases D) Deferred Revenue E) LIFO Reserve
According to GAAP, interest cost incurred to finance construction of an asset must be capitalized in which of the following situations? when an asset is ready for its intended use when the asset is inventory that is routinely manufactured in large quantities on a repetitive basis when an asset is being constructed for a firm's own use when an asset is used in other than the earning activities of the firm
The reason goodwill is sometimes referred to as a master valuation account is because a. it represents the purchase price of a business that is about to be sold.b. it is the difference between the fair market value of the net tangible and identifiableintangible assets as compared with the purchase price of the acquired business.c. the value of a business is computed without consideration of goodwill and thengoodwill is added to arrive at a master valuation.d. it is the only account in the financial statements that is based on value, all otheraccounts are recorded at an amount other than their value.
Which of the following statements about merchandisingactivities is true? (More than one answer may be correct.)a. As inventory is purchased, the Inventory Expenseaccount is debited and Cash (or Accounts Payable) iscredited.b. Inventory is recorded as an asset when it is firstpurchased. c. As inventory is sold, its cost is transferred from the bal-ance sheet to the income statement. d. As inventory is sold, its cost is transferred from theincome statement to the balance sheet.
. In addition to the purchase price, what additional expenditures does the companyinclude in the initial cost of merchandise?
Purchase commitmentsA. Are obligations of the company to acquire certain goods at a fixed price and fixed quantity sometime in the futureB. require disclosures when considered common and significantC. Giving rise to a purchase price falling below the agreed price is accounted for as debit to loss on purchase commitments and credited to an estimated liabilityD. All of the aboveE. None of the aboveOwnership of inventories is normally transferred to the buyerA. when legal title to inventories is transferredB. when the purchase price if fully paidC. upon shipment of the goodsD. upon filling up the sales orderWhen accounting for inventoriesA. the form of sales contract is more important than its substanceB. the agreement between seller and buyer shall be considered in determining the timing of transfer of ownership over the goodsC. sales contract is ignored since ownership over inventories are transferred only upon receipt of delivery by the buyerD. a journal entry is made only upon receipt…
When a company uses LIFO for external reporting purposes FIFO for internal reporting pusposes, an Allowance to Reduce Inventory to LIFO account is used. This account should be reported? A) on the income statement in the other Revenue and gains section. B) on the income statement in the cost of goods sold section. C) on the income statement in the other Expenses and losses section. D) on the balance sheet in the current asset section.
Which of the following statements is incorrect? Select one: a. By using the IFRS, goods shipped on consignment from a seller to another company should be included in the inventory of the seller. b. Many argue that LIFO provides a better matching of current costs against revenue from a financial reporting point of view. c. Both IFRS and GAAP account for inventory acquisitions at historical cost and value inventory at the lower-of-cost-or-net-realizable value subsequent to acquisition. d. Both inventory and net income are higher when companies use LIFO in a period of inflation.