2. The overhaul resulted in a significant increase in production.
Neither the attachment nor the overhaul increased the estimated useful
life of the press. What amount of the above costs should be
capitalized?
3. The following two inventory items were purchased as a group in a
liquidation sale for $1,000.
4. The firm purchasing the inventory records item A at what amount?
5. Which of the following statements are correct when a company
applying the lower of cost or market method reports its inventory at
replacement cost?
6. Immediately after a note payable was signed, its present value was
$30,000. This note and $20,000 cash were used to acquire a used
plant asset at the beginning of the current year. The interest rate
implied in the note is 6%. Total interest payments due on the note
over its term amount to $4,000. The term exceeds one year. No
payments on the note are due during the current year. What amount of
interest expense is recognized for the first year (current year) on this
note, and what amount is capitalized to the plant asset account?
7. Cole Co. began constructing a building for its own use in January
2004. During 2004, Cole incurred interest of $50,000 on specific
construction debt and $20,000 on other borrowings. Interest computed
on the weighted-average amount of accumulated expenditures for the
building during 2004 was $40,000. What amount of interest cost
should Cole capitalize?
8. Many years after constructing a plant asset, management spent a
significant sum on the asset. Which of the following types of
expenditures should be capitalized in this instance:
9. Which of the following is a not requirement for an asset to be
categorized as a plant asset.