J0. 1,.A betterment g records is an example of a revenue expenditure 31. T, F. R
ID: 2589655 • Letter: J
Question
J0. 1,.A betterment g records is an example of a revenue expenditure 31. T, F. Recording an extr 32. T, F. When as asset is sold f aordinary repair leaves the carrying value of the asset unchanged. or less than its carrying value, one of the debits is to Loss on Sale of Machinery and one of the credits is to Accumulated Depreciation Machinery 33. T, F. Capital Expenditure is another term for expense. 34. T, F. In determining the number of important than the period legally covered by these assets. years to amortize copyrights and patents, useful life is more 35. T, 36. T, F. G oodwill should only be recorded only when an entire company has been purchased F. Research and development costs should be capitalized when they can be associated with a specific new product. 37. T, F. The full costing method capitalizes the cost of both successful efforts and dry wells in oil and gas industry. 38. T, F. A long-term asset's carrying value should be reduced when its value has be impaired. 39. T. F. If the defense of an intangible asset in the court of law is successful, the cost of the defense should be capitalized. 40. T, F. If there is a change in the life or residual value of an operational asset, the change should be reflected in the financial statements for the current period and future periods by recalculating periodic depreciation, depletion, or amortization. 41. T, F. A change in accounting principle by a company must be justified by recalculating the effects 42. T, F. A change in accounting estimate like a change in depreciation rate is not usually justifiable 43. A material error in accounting for operational assets that is discovered in a year subsequent to on income statement, retained earnings and earnings per share. by management but the effects of such changes must be disclosed. the error should be corrected by: a. Previous financial statements that were affected must be corrected b. Retained earnings must be corrected as prior year adjustment c. Earnings Per share of subsequent periods must be corrected d. Statement of Changes in Owners' equity must be corrected e. All of the above 44. When a company undertakes to invest in property, plant and equipment, it is actually taking a financial risk for which it must earn a reasonable rate of return. The rate of return it should accept must not be below: a. A bank borrowing rate; b. Government risk-free rate of return c. Average rate on its operational assets d. Industry's rate of return None of the above.Explanation / Answer
30. False – A betterment is not a revenue expenditure but a capital expenditure which extends the useful life of an asset or improves the quality or quantity of output of the asset.
31. False – An extraordinary repair is different from normal routine repairs. An extraordinary repair increases the useful life of the asset and is thus capitalized thereby increasing the carrying value of the asset.
32. False – When an asset is sold for less than its carrying value, both the Loss on Sale of Machiney, and the Accumulated Depreciation Machinery accounts are debited.
33. False – Capital expenditure is not another term for expense but means the cost is capitalized and expensed out over the useful life of the asset.
34. True – In amortizing copyrights and patents, the number of years of useful life is considered if it is shorter than the period legally covered by these assets.
35. True – Goodwill is recorded only when an entire business is purchased.
36. False – Research and development costs are expensed as and when incurred.
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