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ACC 572 ACC572 ACC/572 Week 5 Mid Term 85% Correct

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ACC 572 Week 5 Mid Term 85% Correct Which of the following statements is true regarding capitalization of interest? Assets that qualify for interest cost capitalization include When computing the amount of interest cost to be capitalized, the concept of “avoidable interest” refers to Huffman Corporation constructed a building at a cost of $20,000,000. Average accumulated expenditures were $8,000,000, actual interest was $1,200,000, and avoidable interest was $600,000. If the salvage value is $1,600,000, and the useful life is 40 years, depreciation expense for the first full year using the straight-line method is When funds are borrowed to pay for construction of assets that qualify for capitalization of interest, the excess funds not needed to pay for construction may be temporarily invested in interest-bearing securities. Interest earned on these temporary investments should be When an asset acquired through government grants is recorded using the capital approach, Which of the following is required by IFRS? Lee Company received an HK$1,800,000 subsidy from the government to purchase manufacturing equipment on January, 2, 2011. The equipment has a cost of HK$3,000,000, a useful life a six years, and no salvage value. Lee depreciates the equipment on a straight-line basis. If Lee chooses to account for the grant as an adjustment to the asset, the amount of depreciation expense recorded in 2011 will be: Lee Company received an HK$1,800,000 subsidy from the government to purchase manufacturing equipment on January, 2, 2011. The equipment has a cost of HK$3,000,000, a useful life a six years, and no salvage value. Lee depreciates the equipment on a straight-line basis. If Lee chooses to account for the grant as an adjustment to the asset, the book value of the asset on the 2012 statement of financial position will be: Lee Company received an HK$1,800,000 subsidy from the government to purchase manufacturing equipment on January, 2, 2011. The equipment has a cost of HK$3,000,000, a useful life a six years, and no salvage value. Lee depreciates the equipment on a straight-line basis. If Lee chooses to account for the grant as deferred revenue, the grant revenue recognized will be: Tender Foot Inc. is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that they may lose the case. The attorneys estimated that there is a 40% chance of losing. If this is the case, their attorney estimated that the amount of any payment would be $500,000. What is the required journal entry as a result of this litigation? Which of the following are not factors that are considered when evaluating whether or not to record a liability for pending litigation? Winter Co. is being sued for illness caused to local residents as a result of negligence on the company’s part in permitting the local residents to be exposed to highly toxic chemicals from its plant. Winter’s lawyer states that it is probable that Winter will lose the suit and be found liable for a judgment costing Winter anywhere from $1,200,000 to $6,000,000. However, the lawyer states that the most probable cost is $3,600,000. As a result of the above facts, Winter should accrue Examples of contingent assets include all of the following except: Which of these statements regarding the IFRS and U.S. GAAP is correct? The objective of financial reporting in the International Accounting Standards Board’s (IASB’s) Conceptual Framework Under current IFRS, inflation is ignored in accounting due to the A soundly developed conceptual framework enables the International Accounting Standards Board (IASB) to I. Issue more useful and consistent pronouncements over time. II. More quickly solve new and emerging practical problems by referencing basic theory. The second level of the International Accounting Standards Board’s (IASB’s) Conceptual Framework Expe

ACC 572 ACC572 ACC/572 Week 5 Mid Term 85% Correct

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