TRUE-FALSEConceptual

1.Assets classified as Property, Plant, and Equipment can be either acquired for use in operations,
or acquired for resale.
False
2.Variable overhead costs incurred to self-construct an asset should be included in the cost of the
asset. True
3.If a nonmonetary exchange lacks commercial substance, and cash is received, a partial gain or
loss is recognized. False
4.Depreciation is based on the decline in the fair market value of the asset. False
5.An impairment loss is the amount by which the carrying amount of the asset exceeds the sum
of the expected future net cash flows from the use of that asset. False
6.Depreciation is based on the decline in the fair market value of the asset. False
7.The major objection to the straight-line method is that it assumes the assets economic
usefulness and repair expense are the same each year.
True
8. Intangible assets derive their value from the right (claim) to receive cash in the future. False
9.If a new patent is acquired through modification of an existing patent, the remaining book
value of the original patent may be amortized over the life of the new patent. True
10.If the fair value of an unlimited life intangible other than goodwill is less than its book value,
an impairment loss must be recognized. True
11.A zero-interest-bearing note payable that is issued at a discount will not result in any interest
expense being recognized. false
12.The fair value of an asset retirement obligation is recorded as both an increase to the related
asset and a liability. true
13.Companies usually make bond interest payments semiannually, although the interest rate is
generally expressed as an annual rate. true
14.The times interest earned ratio is computed by dividing income before interest expense by
interest expense. false