ACC 300 Chapter 10 Flashcards Preview

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Flashcards in ACC 300 Chapter 10 Deck (33)
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1
Q

Step one of capitalization of interest

A

Determine which assests qualify for cap of interest

2
Q

Step 2 on capitalization of interest

A

Determine the cap period

3
Q

Step 3 of capitalization of interest

A

Identify the expenditures made during the cap period

4
Q

Step 4 of capitalization of interest

A

Compute weighted average accumulated expenditures

5
Q

Step 5 for capitalization of interest

A

Compute aviodable interest

6
Q

Step 6 in capitalization of interest

A

Compute the actual interest cost inccurred

7
Q

Step 7 of capitalization of interest

A

Determine the interest cost to be capitalized

8
Q

Qualifying assets

A

Require a period of time to get ready for their intended use

9
Q

Determine the cap period

A

Begins when expenditures for the assest have been made, necessary activities to get the asset ready for its intended use are in progress, interest cost of some kind is being incurred

10
Q

Weighted average accumulated expenditures

A

Expenditures times the fraction of the period the expenditures occured

11
Q

Compute avoidable interest

A

Identify the specific debt(construction loan) and all general debt then compute avoidable interst

12
Q

Avoidable interest

A

(Specific debt interest rate x weighted average accumulated expenditures) + (general debt intetest rate x weighted average acc expenditures)

13
Q

Determind the interest cost to be capitalized

A

Cap interst is limited to the lesser of avoidable or actual interest

14
Q

Special assessments

A

Relatively permanent improvements such as pavements and drainage systems. Included in land

15
Q

Land improvements

A

Improvements with limited life. Recorded separately and depreciated over their estimated lives

16
Q

Cost of building

A

Expenditures related directly to acquisition or construction are capitalized as part of building.

17
Q

Cost of equipment

A

Expenditures incurred in acquiring the equpimentnand preparing it for use.

18
Q

Self constructed assets

A

Assign a portion of all overhead cost or assign no fixed overhead costs

19
Q

Special issues related to interest cap

A

Interest cost incurred in purchase of land to be used for a building site are part of the buildings cost not the land, interest cost incurred on land being developed for lot sales are part of land, interest rev earned on funds borrowed to finance construction of addsts is not netted

20
Q

Cash discount

A

Assume taken. Any discount not taken should be an expense

21
Q

Deferred payment contracts

A

Accounted for at the present value of the consideration exchanged at the date transaction

22
Q

Lump sum purchases

A

Cost allocated on the basis of relative fair valie of the assets required

23
Q

Exchanges of nonmonentary assets

A

Does it have commerical substance. Compute book value of old, compute gain or loss, determine gain or loss recognized, prepare journal entry

24
Q

Disposition

A

Giving away. Effects contribution expense and gain or loss recorded

25
Q

Ordinary repairs

A

Should be expensed

26
Q

Major repairs

A

Should be treated as an addition improvement or replacement

27
Q

Commercial substance and loss realized

A

Recongize the entire loss. Recorded at fair value of new asset

28
Q

Lacks commercial substance and loss realized

A

Record entire loss and record at fair value of new asset

29
Q

Commercial substance and gain realized

A

Recognize the entire gain and record at fair value of new asset

30
Q

Lacks commercial substance and gain and no cash exhanged or cash paid

A

Recognize no gain and record fair value of new asset minus gain deferred

31
Q

Lacks commercial substance and gain and cash is recieve

A

Recognize portion of gain and record at fair value of new asset minus gain deferred

32
Q

25% rule

A

Cash recieved/(cash recieved + fair value of recieved asset)

33
Q

Portion of gain recorded when boot is recieved

A

Realized gain x (cash recieved/(cash recieved+fv of recieved asset))