FAR 9.17.2016

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  1. Do you Capitalize or Expense?

    Freight charges paid for goods held for resale?
    Capitalize - Freight charges are directly connected with bringing the goods tot he place of business of the buyer.
  2. Do you Capitalize or Expense?

    In-Transit insurance on goods held for resale purchased FOB shipping point.
    Capitalize - Insurance charges are directly connected with bringing the goods to the place of business of the buyer.
  3. Do you Capitalize or Expense?

    Interest on note payable for goods held for resale.
    Expense - Only interest costs related to continued assets constructed for internal use or assets produced as discrete products for sale or lease should be capitalized.  The informational benefit of capitalization does not justify the cost of the accounting for the interest as a product cost.
  4. Do you Capitalize or Expense?

    Installation of equipment.
    Capitalize - Direct cost of bringing the equipment to the buyer.
  5. Do you Capitalize or Expense?

    Testing of newly purchased equipment.
    Capitalize - Direct cost of converting the equipment to a usable condition.
  6. Do you Capitalize or Expense?

    Cost of current year service contract on equipment.
    Expense - Does not relate to bringing the equipment to the buyer or putting it into a usable condition.
  7. What are the 3 conditions that must be met to capitalize interest?
    • 1. Expenditures for the asset have been made
    • 2. Activities intended to get asset ready are in progress.
    • 3. Interest cost is being incurred
  8. when does a transaction have commercial substance?
    A transaction has commercial substance if the configuration of cash flows are significantly different as a result of the exchange.
  9. Cash flows from tax effects are --------considered in determining if the transaction has commercial substance.
    Cash flows from tax effects are not considered in determining if the transaction has commercial substance.
  10. Cash flows from tax effects are not considered in determining if the transaction has ------------------------------.
    Cash flows from tax effects are not considered in determining if the transaction has commercial substance.

Card Set Information

Author:
Joens1313
ID:
323282
Filename:
FAR 9.17.2016
Updated:
2016-09-17 18:16:39
Tags:
FAR
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Description:
FAR 9.17.2016
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