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HSU ACCT302 Final Exam Questions & Answers 2024/2025
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HSU ACCT302 Final Exam Questions & Answers 2024/2025 Property, Plant, and Equipment - ANSWERSassets with relatively long useful lives that are currently used in operating the business •used in operations •long term in nature and usually depreciate •possess physical substance How a...

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  • November 18, 2024
  • 27
  • 2024/2025
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HSU ACCT302 Final Exam Questions &
Answers 2024/2025

Property, Plant, and Equipment - ANSWERSassets with relatively long useful lives that are currently used
in operating the business

•used in operations

•long term in nature and usually depreciate

•possess physical substance



How are fixed assets recorded? - ANSWERSHistorial cost



Main reason to record assets at historical cost - ANSWERS•historical cost is reliable

• Company should not anticipate gains and losses but should recognize gains and losses only when Asset
is sold



Historical Cost Principle - ANSWERSAn accounting principle that states that companies should record
assets at their cost.



Historical cost = fair market value at ____ - ANSWERSTime of purchase



Cost of land - ANSWERSincludes all expenditures to acquire land and ready it for use



Cost of building - ANSWERSInclude all expenditures related directly to acquisition or construction. Costs
included

• Materials, labor, and overhead costs incurred during construction

•professional fees and building permits



Cost of Equipment - ANSWERSInclude all expenditures incurred in acquiring the equipment and
preparing it for use

,What cost approach is used for self constructed assets? - ANSWERSFull cost approach: means both fixed
overhead and variable overhead are allocated to the project



For self constructed assets can the cost ever exceed what you could've paid elsewhere for the asset? -
ANSWERSNo



2 types of financing - ANSWERSdebt and equity



GAAP requires capitalizing ____ interest - ANSWERSActual



Capitalization considers three items - ANSWERS1. Qualifying assets

2. Capitalization period

3. Amount to capitalize



Qualifying Assets for Interest Capitalization - ANSWERSassets must require a period of time to get them
ready for their intended use



two types of qualifying assets for interest capitalization. - ANSWERS1.) assets under construction for a
company's own use

2.) assets intended for sale or lease that are constructed or produced as DISCRETE projects



Capitalization period begins when - ANSWERS1. Expenditures for the asset have been made

2. Activities for readying the asset are in progress

3. Interest costs are being incurred



Capitalization periods ends when - ANSWERSThe asset is substantially complete and ready for use



If a company operates on a no debt base, can there be interests capitalization? - ANSWERSNo

, Capitalize the lesser of ... - ANSWERSActual and avoidable interest



Avoidable interest - ANSWERSthe amount of interest cost during the period that a company could
theoretically avoid if it had not made expenditures for the asset



3 forms of business organization - ANSWERS1. Sole Proprietorship

2. Partnership

3. Corporation



Special characteristics of the corporate form - ANSWERS1. Influence of state corporate law

2. Use of capital stock or share system

3. Development of a variety of ownership interests



articles of incorporation (corporate charter) - ANSWERSa written legal document that defines ownership
and operating procedures and conditions for the business



State corporate law - ANSWERSCorporation must submit articles of incorporation to the state in which
incorporation is desired

• advantage to incorporate in a state whose laws favor the corporate form of business organization

• accounting for stockholders equity follows the provisions of each state business incorporation act



In the absence of restrictive provisions, each share carries the following rights: - ANSWERS1) To share
proportionately in profits and losses.

2) To share proportionately in management (the right to vote for directors).

3) To share proportionately in corporate assets upon liquidation.

4) To share proportionately in any new issues of stock of the same class--called the preemptive right.



preemptive right - ANSWERSStockholders' right to maintain their proportionate interest in a corporation
with any additional shares issued.

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