AFM101 Chapter Notes - Chapter 9: Cash Flow, The Purchase Price, Title Insurance

62 views5 pages

viridianleopard866

6 Dec 2016

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM101

Professor

Thomas Manning

For unlimited access to Textbook Notes, a Class+ subscription is required.

qq919649100 and 40177 others unlocked

AFM101 Full Course Notes

Verified Note

30 documents

Document Summary

Chapter 9: reporting and interpreting property, plant, and equipment; natural. Long-lived (or long-term or capital) assets: tangible or intangible resources owned by a business and used in its operations to produce benefits over several years. Capitalized interest: represents interest on borrowed funds directly attributable to construction until the asset is ready for its intended use. Basket purchase: an acquisition of two or more assets in a single transaction for a single lump sum. Ordinary repairs and maintenance: expenditures for normal operating upkeep of long-lived assets. Revenue expenditures: maintain the productive capacity of the asset during the current accounting period only and are recorded as expenses. Extraordinary repairs: infrequent expenditures that increase the asset"s economic usefulness in the future. Betterments: costs incurred to enhance the productive or service potential of a long-lived asset. Capital expenditures: increase the productive life, operating efficiency, or capacity of the asset and are recorded as increases in asset accounts, not as expenses.

Related Questions

Can someone please provide the solutions. No explanation needed,just the answers so I can double check my work.

2. Firms with tangiblelong-term assets and less predictable cash flows, such as automanufacturers and steel companies, whose sales vary with changes ineconomic conditions, tend to use

a.	a more nearly equal mix of long-term debt and shareholdersâequity financing.
b.	a greater amount of long-term debt [80%] than shareholdersâequity financing [20%].
c.	a smaller amount of long-term debt [20%] than shareholdersâequity financing [80%].
d.	a greater amount of long-term debt [80%] than assets [20%].
e.	a greater amount of shareholdersâ equity [80%] than assets[20%].

3. During Year 3,Carrington Company made the following expenditures relating toplant machinery and equipment:

Â·	Continuing, frequent, and low cost repairs	$46,000
Â·	Special long-term protection devices were attached to tenmachines	11,000
Â·	A broken gear on a machine was replaced	5,000

How much should be charged to repairs and maintenance in Year3?

a.	$46,000
b.	$51,000
c.	$57,000
d.	$41,000
e.	none of the above

4. Which of the followingis/are not capitalized as an intangible asset?

a.	costs of an internally developed patent
b.	legal costs to defend a patent successfully
c.	goodwill acquired when a company purchases another company
d.	costs to purchase a patent
e.	none of the above

5. Repairs and maintenancedo not include

a.	the costs of restoring an asset's service potential afterbreakdowns.
b.	expenditures that increase the asset's life.
c.	routine costs such as for cleaning and adjusting.
d.	major tune-ups including labor and parts.
e.	All of the above are not considered to be repairs ormaintenance.

12. Sigma Company suffers a loss to itsbuilding in a fire and spends $100,000 on repairs and improvements.It judges that $80,000 of the expenditure replaces long-livedassets lost in the fire, and $20,000 represents improvements to thebuilding. Which of the following is the single journal entry thatSigma Company will make?

a.	Building . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 100,000 Cash . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . .. 100,000
b.	Loss from Fire . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 100,000 Cash . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . .. 100,000
c.	Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 100,000 Building . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . .. 20,000 Loss from Fire . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . .. 80,000
d.	Building . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 20,000 Loss from Fire . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 80,000 Cash . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . .. 100,000
e.	Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 100,000 Loss from Fire . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . .. 100,000

16. Firms treat expenditures as assetswhen they:

a.	have acquired rights to the future use of a resource as a resultof a past transaction or event.
b.	can reliably measure the cost of the expected benefits at thetime of initial recognition.
c.	can exercise the entityâs right to, or control of, thebenefit.
d.	can obtain the future service potential and control othersâaccess to it.
e.	all of the above

Clarion Realty

Clarion Realty has decided to construct its own office building.The construction will be partially financed through a constructionloan and any remainder will be financed from internally generatedfunds. The internal accountants have collected the followinginformation concerning the construction.

	Average Balance	Construction	Other
Year	Construction Account	Debt @ 6%	Debt @ 10%
1	$2,000,000	$1,000,000	$500,000
2	$4,000,000	$1,000,000	$250,000
3	$3,000,000	$800,000	$200,000

22. The amount, if any, of capitalizedinterest cost for Year 1 is

a.	$0
b.	$50,000
c.	$60,000
d.	$110,000
e.	$170,000

23. The amount, if any, of capitalizedinterest cost for Year 2 is

a.	$0
b.	$50,000
c.	$60,000
d.	$180,000
e.	$230,000

33. When a firm constructs its ownbuildings or equipment:

a.	it recognizes the labor, material, and overhead costs incurredas an asset.
b.	U.S. GAAP and IFRS require firms to include, or capitalize,interest costs during construction in the cost of aself-constructed asset.
c.	it recognizes the labor, material, and overhead costs incurredas a period expense.
d.	U.S. GAAP and IFRS require firms to expense interest costsincurred during construction of a self-constructed asset.
e.	both choices a and b are correct.

AFM101 Chapter Notes - Chapter 9: Cash Flow, The Purchase Price, Title Insurance

AFM101 Full Course Notes

Document Summary

Get access

Related Documents

AFM101 Chapter Notes - Chapter 9: European Cooperation In Science And Technology

AFM101 Chapter Notes - Chapter 9: Capital Cost Allowance, Historical Cost, Web Development

AFM101 Chapter Notes - Chapter 9: Intangible Asset, Book Value, Web Development

Related Questions