Kieso ifrs test bank ch10 PDF

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CHAPTER 10ACQUISITION AND DISPOSITION OFPROPERTY, PLANT, AND EQUIPMENTTRUE-FALSE—ConceptualAnswer No. DescriptionF 1. Nature of property, plant, and equipment. T 2. Nature of property, plant, and equipment. F 3. Cost of removing old building. T 4. Insurance on equipment purchased. F 5. Accounting fo...

Description

CHAPTER 10 ACQUISITION AND DISPOSITION OF PROPERTY, PLANT, AND EQUIPMENT TRUE-FALSE—Conceptual Answer F T F T F T F F F T T T T F T F T F T F T T T T F

No.

Description

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25.

Nature of property, plant, and equipment. Nature of property, plant, and equipment. Cost of removing old building. Insurance on equipment purchased. Accounting for special assessments. Overhead costs in self-constructed assets. Overhead costs in self-constructed assets. Interest capitalization. Qualifying assets for interest capitalization. Avoidable interest. Interest capitalization on land purchase. Deferred-payment contracts. Accounting for non-monetary exchanges. Recognizing losses on non-monetary exchanges. Government grant. Government grant and asset’s cost. Government grant assets. Accounting for government grant. IFRS requirements for government grants. Recognizing gains on non-monetary exchanges. Deferred revenue on government grant. Recognizing government grant. Costs subsequent to acquisition. Definition of improvements. Involuntary conversion gains/losses.

No.

Description

26. 27. 28. 29. 30. 31. 32. 33. 34. S 35. 36. 37 . 38.

Definition of plant assets. Characteristics of plant assets. Characteristics of plant assets. Composition of land cost. Composition of land cost. Determination of land cost. Determine cost of land used as a parking lot. Determine cost of machinery. Classification of fences and parking lots. Accounting for overhead costs. Determine costs capitalized for self-constructed assets. Assets which qualify for interest capitalization. Assets which qualify for interest capitalization.

MULTIPLE CHOICE—Conceptual Answer d b d c c c d a b d d d a

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Test Bank for Intermediate Accounting: IFRS Edition

c

39.

Definition of "avoidable interest."

Answer

No.

Description

MULTIPLE CHOICE—Conceptual (cont.) a b b a d c a a d b b a d c c c a a b c d d a c c d a c d d c P S

40. 41. 42. 43. 44. S 45. S 46. 47. 48. 49. 50. 51. 52. 53. 54. S 55. S 56. S 57. P 58. 59. 60. 61. 62. 63. 64. 65. 66. P 67. S 68. 69. 70.

Period of time over which interest may be capitalized. Maximum amount of annual interest that may be capitalized. Interest capitalization—weighted-average factor. Classification of interest earned on securities purchased with borrowed funds. Write-off of capitalized interest costs. Conditions for interest capitalization. Capitalization of interest on constructed assets. Interest capitalization/interest revenue. Government grants-deferred revenue approach. Accounting for government grants. Classification of Deferred Grant Revenue. Government grants' effect on SFP. IFRS requirements for government grants. Government grant and asset cost. Government grants’ effect on expenses/income. Non-monetary exchanges and culmination of earning process. Recognizing gains/losses in exchange having commercial substance. Valuation of non-monetary asset. Gain recognition on plant asset exchange. Valuation of plant assets. Plant asset acquired by issuance of stock. Valuation of non-monetary exchanges. Gain recognition on a non-monetary exchange. Gain recognition on a non-monetary exchange. Capital expenditure. Identification of a capital expenditure. Identification of a capital expenditure. Accounting for revenue expenditures. Accounting for capital expenditures. Determine loss on sale of depreciable asset. Knowledge of involuntary conversions.

These questions also appear in the Problem-Solving Survival Guide. These questions also appear in the Study Guide.

MULTIPLE CHOICE—Computational Answer b d d c c b c b a d

No. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80.

Description Determine cost of land. Determine cost of building. Calculate cost of land and building. Calculate cost of equipment. Calculate cost of equipment. Determine cost of land. Determine cost of building. Determine cost of land improvements. Interest capitalization/depreciation expense. Overhead included in self-constructed asset.

Acquisition and Disposition of Property, Plant, and Equipment d

81.

Overhead included in self-constructed asset.

MULTIPLE CHOICE—Computational (cont.) Answer a b a b a c b a d a b c c b d b b d d a c c a b d a c d b d b a a d b b a a c b a c a d c c c b

No. 82. 83. 84. 85. 86 87. 88. 89. 90. 91. 92. 93. 94. 95. 96. 97. 98. 99. 100. 101. 102. 103. 104. 105. 106. 107. 108. 109. 110. 111. 112. 113. 114. 115. 116. 117. 118. 119. 120. 121. 122. 123. 124. 125. 126. 127. 128. 129.

Description Calculate interest to be capitalized. Calculate average accumulated expenditures. Calculate interest to be capitalized. Calculate average accumulated expenditures. Calculate average accumulated expenditures. Calculate amount of interest to be capitalized. Calculate weighted-average accumulated expenditures. Calculate weighted-average accumulated expenditures. Calculate weighted-average accumulated expenditures. Calculate actual interest cost incurred during year. Calculate amount of interest to be capitalized. Calculate amount of interest to be capitalized. Calculate weighted-average accumulated expenditures. Calculate interest to be capitalized. Calculate weighted-average accumulated expenditures. Calculate interest to be capitalized. Calculate weighted-average accumulated expenditures. Calculate weighted-average interest rate. Calculate amount of avoidable interest. Calculate amount of actual interest. Calculate amount of interest expense. Calculate interest to be capitalized. Calculate interest to be capitalized. Calculate interest to be capitalized. Calculate interest to be capitalized. Exchange with commercial substance. Exchange lacking commercial substance. Exchange lacking commercial substance. Calculate amount of grant revenue. Calculate depreciation expense/government grant. Calculate depreciation expense/government grant. Calculate book value of government grant asset. Calculate government grant effect on net income. Recording government grant. Calculate amount of grant revenue. Calculate Deferred Grant Revenue balance. Exchange of non-monetary assets. Exchange lacking commercial substance. Exchange lacking commercial substance. Valuation of a non-monetary exchange. Valuation of a non-monetary exchange. Calculate gain on exchange lacking commercial substance. Allocation of cost in a lump sum purchase. Allocation of cost in a lump sum purchase. Calculate cost of land acquired. Determine cost of purchased machine. Calculate cost of truck purchased. Calculate cost of machine purchased.

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Test Bank for Intermediate Accounting: IFRS Edition 130.

Allocation of cost of a lump sum purchase.

MULTIPLE CHOICE—Computational (cont.) Answer b d b b b d a d b a b b d b d c c b b

No. 131. 132. 133. 134. 135. 136. 137. 138. 139. 140. 141. 142. 143. 144. 145. 146. 147. 148. 149.

Description Calculate cost of equipment. Acquisition of equipment by exchange of stock held as an investment. Exchange lacking commercial substance. Exchange lacking commercial substance /gain. Exchange lacking commercial substance /gain. Valuation of a non-monetary exchange. Exchange lacking commercial substance/gain. Valuation of a non-monetary exchange. Gain recognition of a non-monetary exchange. Valuation of a non-monetary exchange. Valuation of a non-monetary exchange. Calculate gain on non-monetary exchange. Calculate loss on non-monetary exchange. Calculate gain on non-monetary exchange. Calculate loss on non-monetary exchange. Calculate cash received from sale of machinery. Calculate cash received from sale of machinery. Calculate loss on sale of machine. Calculate gain on sale of equipment.

MULTIPLE CHOICE—CPA Adapted Answer c b b a a d a

No. 150. 151. 152. 153. 154. 155. 156.

Description Determine cost of land. Classification of sale of building. Determine interest cost to be capitalized. Valuation of a non-monetary exchange. Exchange lacking commercial substance. Costs subsequent to acquisition. Valuation of replacement equipment.

EXERCISES Item E10-157 E10-158 E10-159 E10-160 E10-161 E10-162 E10-163 E10-164 E10-165

Description Plant asset accounting. Weighted-average accumulated expenditures. Capitalization of interest. Non-monetary exchange. Non-monetary exchange. Capitalizing vs. expensing. Non-monetary exchange. Government grants. Government grants.

Acquisition and Disposition of Property, Plant, and Equipment

PROBLEMS Item P10-166 P10-167 P10-168 P10-169 P10-170 P10-171 P10-172 P10-173 P10-174

Description Capitalizing acquisition costs. Capitalization of interest. Capitalization of interest. Asset acquisition Non-monetary exchange. Non-monetary exchange. Non-monetary exchange. Non-monetary exchange. Non-monetary exchange.

CHAPTER LEARNING OBJECTIVES 1.

Describe property, plant, and equipment.

2.

Identify the costs to include in the initial valuation of property, plant, and equipment.

3.

Describe the accounting problems associated with self-constructed assets.

4.

Describe the accounting problems associated with interest capitalization.

5.

Understand accounting issues related to acquiring and valuing plant assets.

6.

Describe the accounting treatment for costs subsequent to acquisition.

7.

Describe the accounting treatment for the disposal of property, plant, and equipment.

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Test Bank for Intermediate Accounting: IFRS Edition

SUMMARY OF LEARNING OBJECTIVES BY QUESTIONS Item

Type

Item

Type

Item

Type

Item

Type

Item

1.

TF

2.

TF

26.

3. 4. 5. 29.

TF TF TF MC

30. 31. 32. 33.

MC MC MC MC

34. 71. 72. 73.

Learning Objective 1 MC 27. MC 28. Learning Objective 2 MC 74. MC 78. MC 75. MC 79. MC 76. MC 150. MC 77. MC 151. Learning Objective 3 MC 158. E MC 159. E

6. 7.

TF TF

S

35. 36.

MC MC

80. 81.

8. 9. 10. 11. 37. 38. 39.

TF TF TF TF MC MC MC

40. 41. 42. 43. 44. S 45. S 46.

MC MC MC MC MC MC MC

47. 82. 83. 84. 85. 86. 87.

12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 48.

TF TF TF TF TF TF TF TF TF TF TF MC

49. 50. 51. 52. 53. 54. S 55. S 56. S 57. P 58. 59. 60.

MC MC MC MC MC MC MC MC MC MC MC MC

61. 62. 63. 107. 108. 109. 110. 111. 112. 113. 114. 115.

23. 24.

TF TF

64. 65.

MC MC

25. 69.

TF MC

70. 146.

MC MC

Note:

66. 67.

P

147. 148.

TF = True-False MC = Multiple Choice P = Problem E = Exercise

Learning Objective 4 MC 88. MC 95. MC 89. MC 96. MC 90. MC 97. MC 91. MC 98. MC 92. MC 99. MC 93. MC 100. MC 94. MC 101. Learning Objective 5 MC 116. MC 128. MC 117. MC 129. MC 118. MC 130. MC 119. MC 131. MC 120. MC 132. MC 121. MC 133. MC 122. MC 134. MC 123. MC 135. MC 124. MC 136. MC 125. MC 137. MC 126. MC 138. MC 127. MC 139. Learning Objective 6 S MC 68. MC 156. MC 155. MC 157. Learning Objective 7 MC 149. MC MC

Type

Item

Type

Item

Type

MC MC MC MC

157. 162. 166.

E E P

MC MC MC MC MC MC MC

102. 103. 104. 105. 106. 125. 152.

MC MC MC MC MC MC MC

157. 159. 162. 167. 168.

E E E P P

MC MC MC MC MC MC MC MC MC MC MC MC

140. 141. 142. 143. 144. 145. 153. 154. 157. 160. 161. 162.

MC MC MC MC MC MC MC MC E E E E

163. 164. 165. 169. 170. 171. 172. 173. 174.

E E E P P P P P P

MC E

162.

E

MC

Acquisition and Disposition of Property, Plant, and Equipment

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TRUE-FALSE—Conceptual 1. Assets classified as property, plant, and equipment can be either acquired for use in operations, or acquired for resale. 2. Assets classified as property, plant, and equipment must be both long-term in nature and possess physical substance. 3. 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. 4. Insurance on equipment purchased, while the equipment is in transit, is part of the cost of the equipment. 5. Special assessments for local improvements such as street lights and sewers should be accounted for as land improvements. 6. Variable overhead costs incurred to self-construct an asset should be included in the cost of the asset. 7. Companies should assign no portion of fixed overhead to self-constructed assets. 8. When capitalizing interest during construction of an asset, an imputed interest cost on stock financing must be included. 9. Assets under construction for a company’s own use do not qualify for interest cost capitalization. 10. Avoidable interest is the amount of interest cost that a company could theoretically avoid if it had not made expenditures for the asset. 11. When a company purchases land with the intention of developing it for a particular use, interest costs associated with those expenditures qualify for interest capitalization. 12. Assets purchased on long-term credit contracts should be recorded at the present value of the consideration exchanged. 13. Companies account for the exchange of non-monetary assets on the basis of the fair value of the asset given up or the fair value of the asset received. 14. When a company exchanges non-monetary assets and a loss results, the company recognizes the loss only if the exchange has commercial substance. 15. A government grant generally subsidizes a company by transferring resources to that company. 16. When a company acquires an asset through a government grant, the asset's cost is zero so the cost recorded is the direct cost, such as legal fees, incurred. 17. Assets acquired through government grants are generally recorded at fair value.

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Test Bank for Intermediate Accounting: IFRS Edition

18. When an asset acquired through a government grant is recorded on the books, equity will increase by the cost of the asset. 19. IFRS requires the income approach to account for assets received through government grants. 20. Under IFRS, all gains on non-monetary exchanges are recognized, regardless of whether the transaction has commercial substance or not. 21. The fair value of an asset acquired through a government grant can be recorded as deferred revenue and recognized as income over the life of the asset. 22. One way of recognizing a government grant is to deduct the grant from the carrying amount of the assets received from the grant. 23. Costs incurred subsequent to the acquisition of an asset are capitalized if it is probable that the company will obtain future economic benefits. 24. Improvements are often referred to as betterments and involve the substitution of a better asset for the one currently used. 25. Companies always treat gains or losses from an involuntary conversion as part of discontinued operations.

True False Answers—Conceptual Item 1. 2. 3. 4. 5.

Ans. F T F T F

Item 6. 7. 8. 9. 10.

Ans. T F F F T

Item 11. 12. 13. 14. 15.

Ans. T T T F T

Item 16. 17. 18. 19. 20.

Ans. F T F T F

Item 21. 22. 23. 24. 25.

Ans. T T T T F

Acquisition and Disposition of Property, Plant, and Equipment

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MULTIPLE CHOICE—Conceptual 26.

Plant assets may properly include a. deposits on machinery not yet received. b. idle equipment awaiting sale. c. land held for possible use as a future plant site. d. none of these.

27.

Which of the following is not a major characteristic of a plant asset? a. Possesses physical substance b. Acquired for resale c. Acquired for use d. Long-term in nature

28.

Which of these is not a major characteristic of a plant asset? a. Possesses physical substance b. Acquired for use in operations c. Long-term in nature d. All of these are major characteristics of a plant asset.

29.

Cotton Hotel Corporation recently purchased Emporia Hotel and the land on which it is located with the plan to tear down the Emporia Hotel and build a new luxury hotel on the site. The cost of the Emporia Hotel should be a. depreciated over the period from acquisition to the date the hotel is scheduled to be torn down. b. written off as loss in the year the hotel is torn down. c. capitalized as part of the cost of the land. d. capitalized as part of the cost of the new hotel.

30.

The cost of land does not include a. costs of grading, filling, draining, and clearing. b. costs of removing old buildings. c. costs of improvements with limited lives. d. special assessments.

31.

The cost of land typically includes the purchase price and all of the following costs except a. grading, filling, draining, and clearing costs. b. street lights, sewers, and drainage systems cost. c. private driveways and parking lots. d. assumption of any liens or mortgages on the property.

32.

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.

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Test Bank for Intermediate Accounting: IFRS Edition

33.

The debit for a sales tax properly levied and paid on the purchase of machinery preferably would be a charge to a. the machinery account. b. a separate deferred charge account. c. miscellaneous tax expense (which includes all taxes other than those on income). d. accumulated depreciation--machinery.

34.

Fences and parking lots are reported on the statement of financial position as a. current assets. b. land improvements. c. land. d. property and equipment.

35.

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.

36.

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

37.

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. As...