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problem1: When a plant asset is acquired by issuance of common stock, the cost of the plant asset is properly measured by the;

[A] Book value of the stock

[B] Market value of the stock

[C] Par value of the stock

[D] Stated value of the stock

problem2: Cotton Hotel Corporation recently purchased Holiday Hotel and the land on which it is located with the plan to tear down the Holiday Hotel and build a new luxury hotel on the site. The cost of the Holiday Hotel should be

[A] Capitalized as part of the cost of the land

[B] Capitalized as part of the cost of the new hotel

[C] Depreciated over the period from acquisition to the date the hotel is scheduled to be tom down

[D] Written off as an extraordinary loss in the year the hotel is torn down

problem3: 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 contemplated future use of the parking lot.

[B] the intention of management for the property when the building was acquired.

[C] the significance of the cost allocated to the building in relation to the combined cost of the lot and building.

[D] the length of time for which the building was held prior to its demolition

problem4: Plant assets purchased on long-term credit contracts should be accounted for at

[A] The present value of the future payments

[B] The total value of the future payments

[C] The future amount of the future payments

[D] None of these

problem5: The period of time during which interest must be capitalized ends when

[A] The asset is abandoned, sold, or fully depreciated

[B] The activities that are necessary to get the asset ready for its intended use have begun

[C] The asset is substantially complete and ready for its intended use

[D] No further interest cost is being incurred

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  • Category:- Basic Finance
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