Exchange Differences Recognised as Borrowing Costs and Included in the Cost

question 33

Multiple Choice

Exchange differences recognised as borrowing costs and included in the cost of an asset,are not recognised:

• A) until the asset is ready for its intended use or sale, provided the capitalisation of costs does not mean that the cost of the asset exceeds recoverable amount.
• B) until such time as they are deemed to be income and expenses by a resolution of the board of management.
• C) until such time as income is derived, at which time they are passed directly to profit or loss.
• D) until after the asset is ready for its intended use or sale, provided the capitalisation of costs does not mean that the cost of the asset exceeds recoverable amount.

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Definitions:

Bad Debts Expense

An expense recognized when it is judged that some accounts receivable cannot be collected, reflecting the cost of credit sales that will not turn into cash.

Allowance for Doubtful Accounts

A reserve account used to estimate the amount of receivables that may not be collectible.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of the business, whichever is longer.

Allowance for Doubtful Accounts

A contra-asset account that represents the amount of accounts receivable a company does not expect to collect.