Chapter 8, Problem 2QE

Which of the following statements is (are) correct?a. Accumulated depreciation represents a cash fund beingaccumulated for the replacement of plant assets.b. The cost of a machine includes the cost of repairingdamage to the machine during the installation process.c. A company may use different depreciation methods inits financial statements and its income tax return.d. The use of an accelerated depreciation method causesan asset to wear out more quickly than does use of thestraight-line method.

Identify the following costs that could be capitalized on the firm’s balance sheet (included in property, plant, and equipment). New windshield wiper blades on the company’s truck New sidewalks in front of the firm’s factory Freight expenses for new equipment installed in the factory Installation costs for the new equipment Realtor’s fees associated with land purchase Minor engine repair on the truck Engine replacement on the truck Razing or demolishing a building on newly acquired land Design costs for a new building Value-added tax Construction expenses associated with building a garage Costs required to bring the equipment to its intended location Administration and other general overhead costs Idle capacity Wasted materials, labour and other resources

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

Which of the following costs incurred internally to create an intangible asset is generallyexpensed? a. Research and development costs.b. Filing costs.c. Legal costs.d. All of the above.

When a company purchases land with a building on it and immediately tears down thebuilding so that the land can be used for the construction of a plant, the costs incurredto tear down the building should be:a. expensed as incurredb. added to the cost of the plantc. added to the cost of the landd. amortized over the estimated time period between the tearing down of thebuilding and the completion of the plan

asap What is the criterion a company uses to decide whether to include an expenditure in the cost of property, plant,and equipment rather than expensing it? Give an example of the types of expenditures that are included in the cost of property, plant and equipment as a result of the application of this criterion

Which of the following research and development costs should always be capitalized? a. costs of intangibles purchased from othersb. costs of materials, equipment, and intangibles with alternative future uses purchased fromothersc. costs of equipment with an expected life greater than three yearsd. costs of contract services purchased from others

Indicate whether each of the following statements is true or false. When land with an old building is purchased as a future building site, the cost of removing the old building is part of the cost of the new building.  Answer   Special assessments for local improvements such as streetlights and sewers should be accounted for as land improvements.  Answer   Avoidable interest is the amount of interest cost that a company could theoretically avoid if it had not made expenditures for the asset.