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Intermediate Accounting II D104; Pre-
Assessment 1 Units 2-3
1.
When can interest costs for an asset be capitalized?: When assets are being
prepared for
its intended use
2. Which method should be used to handle indirect costs of self-
constructed
assets?:
Assigning a pro rata portion of all overhead to the asset
3. A company purchases land for development into a subdivision. The
land has
a factory building on it that will need to be demolished.
Where should the interest costs be allocated?: Cost of the land
4. In which situation can capitalization of interest be included in
the cost of
land?:
When purchasing land with the intension of developing it for lots sales
5.
Which
item
is
an
asset's
involuntary
conversion?:
Condemnation of
property
6. Which description accurately characterizes intangible assets?:
They
lack physical
substance.
7.
Company X replaced its packaging machine with a more
efficient one. The old packaging machine was sold for $5,000. The
following information was available on the date of the
replacement:
Purchase price of new packaging machine: $145,000Carrying amount
of old packaging machine: $15,000Fair value of old packaging
