13. Fences and parking lots are reported on the balance sheet as a. current asse
ID: 2601616 • Letter: 1
Question
13. Fences and parking lots are reported on the balance sheet as
a. current assets.
b. land improvements.
c. land.
d. property and equipment.
14. Assets that qualify for interest cost capitalization include
a. assets under construction for a company's own use.
b. assets that are ready for their intended use in the earnings of the company.
c. assets that are not currently being used because of excess capacity.
d. All of these assets qualify for interest cost capitalization.
15. When computing the amount of interest cost to be capitalized, the concept of "avoidable interest" refers to
a. the total interest cost actually incurred.
b. a cost of capital charge for stockholders' equity.
c. that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made.
d. that portion of average accumulated expenditures on which no interest cost was incurred.
16. The period of time during which interest must be capitalized ends when
a. the asset is substantially complete and ready for its intended use.
b. no further interest cost is being incurred.
c. the asset is abandoned, sold, or fully depreciated.
d. the activities that are necessary to get the asset ready for its intended use have begun
Explanation / Answer
13.
Land improvements
(A land improvement is any type of changes to the land to make it more usable. Changes are improvements have a limited life and can be depreciated unlike land.)
14.
a. assets under construction for a company's own use
(Capitalized interest is the cost of the funds used to finance the construction of a long-term asset that an entity constructs for its own use.)
15.
c. that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made.
(Avoidable Interest is the amount of interest cost during the period that theoretically could be avoided.)
16.
a. the asset is substantially complete and ready for its intended use.
(When a company capitalizes interest expense, the amount of interest to capitalize is added to cost of asset.)
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