Property, plant, and equipment and intangible assets are long-term, revenue producing assets. T/F
TRUE
Sales tax paid on equipment acquired for use in the business is not capitalized. T/F
FALSE
Demolition costs to remove an old building from land purchased as a site for a new building are considered part of the cost of the new building. T/F
FALSE
The initial cost of property, plant, and equipment includes all the identifiable expenditures necessary to bring the asset to its desired condition and location for use. T/F
TRUE
A distinguishing characteristic of intangible assets is the degree of uncertainty about when or if they will provide future benefits. T/F
TRUE
Costs incurred after discovery of a natural resource but before production begins are reported as expenses of the period in which the expenditures are made. T/F
FALSE
The relative fair values are used to determine the valuation of individual assets acquired in a lump-sum purchase. T/F
TRUE
The fair value of the asset, debt or equity securities given in a noncash acquisition should determine the value of the consideration received. T/F
TRUE
Under current GAAP, fair value is used to measure the components of all nonmonetary exchanges. T/F
FALSE
The capitalization period for a self-constructed asset ends either when the asset is substantially complete and ready for use or when interest costs no longer are being incurred. T/F
TRUE
The FASB's required accounting treatment for research and development costs often understates both net income and assets. T/F
TRUE
According to International Financial Reporting Standards, all research and development expenditures are expensed in the period incurred. T/F
FALSE
A company that prepares its financial statements according to International Financial Reporting Standards must calculate amortization of capitalized software development costs in the same way as under U.S. GAAP. T/F
FALSE
The successful efforts method of accounting for oil and gas exploration costs allows costs incurred in searching for oil and gas within a large geographical area to be capitalized. T/F
FALSE
The three factors in cost allocation of a depreciable asset are service life, allocation base, and allocation method. T/F
TRUE
The physical life of a depreciable asset sets the lower limit of its service life. T/F
FALSE
Any method of depreciation should be both systematic and rational. T/F
TRUE
Total depreciation is the same over the life of an asset regardless of the method of depreciation used. T/F
TRUE
Advocates of accelerated depreciation methods argue that their use tends to level out the total cost of ownership of an asset over its benefit period if one considers both depreciation and repair and maintenance costs. T/F
TRUE
Activity-based methods of depreciation are appropriate for assets whose service life is a function of use rather than time. T/F
TRUE
Once selected for existing assets, a company must consistently use the same method of depreciation for all subsequent fixed asset acquisitions. T/F
FALSE
One of the advantages of group and composite methods is that gains and losses on the disposal of individual assets need not be computed. T/F
TRUE
Statutory depletion is the maximum amount of depletion that may be reported in financial statements prepared according to GAAP. T/F
FALSE
A change in the estimated recoverable units used to compute depletion requires retroactive adjustments to the financial statements. T/F
FALSE
Changes in the estimates involved in depreciation, depletion, and amortization require retroactive restatement of financial statements. T/F
FALSE
Property, plant, and equipment and finite-life intangible assets must be tested for impairment at least once a year. T/F
FALSE
Both U.S. GAAP and International Financial Reporting Standards require goodwill to be tested for impairment at least annually. T/F
TRUE
According to International Financial Reporting Standards, property, plant, and equipment must be valued at cost less accumulated depreciation. T/F
FALSE
Component depreciation, required under International Financial Reporting Standards, is allowed but rarely used by U.S. companies. T/F
TRUE
Biological assets are valued at fair value less estimated costs to sell under International Financial Reporting Standards. T/F
TRUE
According to International Financial Reporting Standards, an impairment loss for property, plant, and equipment is required only when an asset's book value exceeds the undiscounted sum of the asset's estimated future cash flows. T/F
FALSE
According to International Financial Reporting Standards, the impairment loss for an indefinite-life intangible asset other than goodwill is the difference between book value and the recoverable amount. T/F
TRUE
According to International Financial Reporting Standards, the costs to successfully defend an intangible right normally are capitalized and amortized. T/F
FALSE
MACRS (Modified accelerated cost recovery system) depreciation is equivalent to sum-of-the-years' digits depreciation. T/F
FALSE
By the replacement depreciation method, depreciation is recorded when assets are replaced. T/F
TRUE
