Question Details

The cost of a nonmonetary asset acquired 



1.	Which of the following is not a condition that must be satisfied before interest capitalization can begin on a qualifying asset?
a.	Interest cost is being incurred.
b.	Expenditures for the assets have been made.
c.	The interest rate is equal to or greater than the company's cost of capital.
d.	Activities that are necessary to get the asset ready for its intended use are in progress.

	2.	Which of the following is the recommended approach to handling interest incurred in financing the construction of property, plant and equipment?
a.	Capitalize only the actual interest costs incurred during construction.
b.	Charge construction with all costs of funds employed, whether identifiable or not.
c.	Capitalize no interest during construction.
d.	Capitalize interest costs equal to the prime interest rate times the estimated cost of the asset being constructed.

	3.	Which of the following nonmonetary exchange transactions represents a culmination of the earning process?
a.	Exchange of assets with no difference in future cash flows.
b.	Exchange of products by companies in the same line of business with no difference in future cash flows.
c.	Exchange of assets with a difference in future cash flows.
d.	Exchange of an equivalent interest in similar productive assets that causes the companies involved to remain in essentially the same economic position.

4.	When boot is involved in an exchange having commercial substance.
a.	gains or losses are recognized in their entirely.
b.	a gain or loss is computed by comparing the fair value of the asset received with the fair value of the asset given up.
c.	only gains should be recognized.
d.	only losses should be recognized.

	5.	The cost of a nonmonetary asset acquired in exchange for another nonmonetary asset and the exchange has commercial substance is usually recorded at
a.	the fair value of the asset given up, and a gain or loss is recognized.
b.	the fair value of the asset given up, and a gain but not a loss may be recognized.
c.	the fair value of the asset received if it is equally reliable as the fair value of the asset given up.
d.	either the fair value of the asset given up or the asset received, whichever one results in the largest gain (smallest loss) to the company.





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