Questions 7,8,9,10,11,12 7. When may a company include interest costs as part of the cost of the asset?A. When they buy a piece of equipment and finance its acquisition by a bank loan.B. When they must borrow money to finance the manufacture of their inventory items.C. When they are self-constructing a piece of equipment they will use to manufacture their products, but only during theperiod of construction.D. Interest is never allowed to be capitalized.8.Johnson Company acquires land and building for $4,000,000 including all fees related to acquisition. The land is appraisedat $2,700,000 and the building at $2,100,000. The building is then renovated at a cost of $750,000. What amount iscapitalized to the building account?A. $2,078,125B. $2,500,000C. $2,375,000D. $4,000,0009. Newson's Courier Service recently purchased a new delivery van for $29,000. The van is estimated to have a useful lifeof 8 years or 250,000 kilometres. The van will have a residual value of $1,000. The company uses the units-of-production method of depreciation. Assuming the van travelled 36,000 kms. during the first year, what is thedepreciation expense for the van in year 1?A. $3,625B. $3,500C. $4,032D. $4,17610. A company decided to use the units-of-production method to calculate depreciation on a car to be driven by the salesmanager. The amount of annual depreciation will vary with which of the following?A. Age of the car.B. Balance in accumulated depreciation.C. Number of kilometres the car is driven.D. Amount of maintenance expense incurred on the car.11. Angstrom Corporation purchased a truck at a cost of $60,000. It has an estimated useful life of five years andestimated residual value of $5,000. At the beginning of year three, Angstrom's managers concluded that the total usefullife would be four years, rather than five. There was no change in the estimated residual value. What is the amount ofdepreciation that Angstrom should record for year 3 under the straight-line method?A. $8,250B. $11,000C. $15,500D. $16,500Calculation: ($60,000 - {[($60,000 - $5,000) ÷ 5] x 2} - $5,000) ÷2= $16,50012. How is the matching principle related to the recording of depreciation on tangible operational assets?A. The matching principle requires a company to use the same depreciation.B. Once a particular depreciation method is adopted for a particular asset, the owner must continue to use the samemethod.

Lets understand the basics. As per IAS 23 "Borrowing costs", borrowing cost incurred to acquisition,…

7. When may a company include interest costs as part of the cost of the asset? A. When they buy a piece of equipment and finance its acquisition by a bank loan. B. When they must borrow money to finance the manufacture of their inventory items. C. When they are self-constructing a piece of equipment they will use to manufacture their products, but only during the period of construction. D. Interest is never allowed to be capitalized.

7. When may a company include interest costs as part of the cost of the asset? A. When they buy a piece of equipment and finance its acquisition by a bank loan. B. When they must borrow money to finance the manufacture of their inventory items. C. When they are self-constructing a piece of equipment they will use to manufacture their products, but only during the period of construction. D. Interest is never allowed to be capitalized.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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