Answered: ABC Company purchases a truck by paying…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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1. ABC Company purchases a truck by paying $5000 cash and surrendering a piece of equipment with a book value of $12,000 and a fair value of $15,000. What is the cost of the truck acquired in this trade?

A. $15,000

B. $20,000

C. $17,000

D. $10,000

2. Routine repair and maintenance costs should be

A. capitalized and depreciated over the expected useful life.

B. added to the cost of the asset but not depreciated.

C. expensed in the period incurred.

D. expensed in the next fiscal year.

3. As long as three conditions are present, interest is capitalized for the period. Which one of the following is not one of these three conditions?

A. Expenditures for the asset have begun.

B. Activities that are necessary to get the asset ready for its intended use are in progress.

C. The asset is operational.

D. Interest cost is being incurred.

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