Question

1)An expenditure to improve an asset can be added to the depreciable basis of that asset if the expenditure extends the life of the asset.

True

False

2)Identifiable intangible assets are intangible assets that can be separated from the company and sold, transferred, licensed, rented, or exchanged.

True

False

3)The net price method of recording sales and receivables generally requires less record keeping and is more cost effective

True

False

4)In order for a derivative to be considered a hedge, it must be mostly effective in offsetting a substantial amount of risk exposure associated with changes in fair values or cash flows of the hedged item.

True

False

5)Inventory costs include all costs directly or indirectly associated with bringing an item to its existing condition or location for sale.

True

False

6)When a company purchases investments with the intent to profit on short-term changes in price, the company should classify these investments as available-for-sale.

True

False

Answer 1

Ans 1

True

Reason- If life of asset is increased, then it is capitalized in value of asset

Ans 2 True

Reason- Identifiable intangible asset are intangible assets tat can be separated from the company and sold, transferred, licensed, rented or exchanged. Example-patents, trademarks and copyright

Ans 3 True

Reason:- Since sales discount is not considered in net accounting

Ans 4 True

Reason- Main aim of derivative as a hedge is to hedge either a fair value exposure or cash flow exposure to foreign exchange risk.

Ans 5 True

Reason- Direct and indirect cost wrt to inventory are part of inventory cost up to the point of sale.

Ans 6 False

Reason- When aim is to earn trading profit then it is categorised as Held for Trading

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