FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following statements regarding the fixed asset turnover ratio is incorrect?

A) The numerator is net operating income.
B) The denominator is average net fixed assets.
C) The ratio is used to assess a company's effectiveness in generating sales from its fixed assets.
D) The ratio increases when a company sells a factory building for a gain.

E) All of the above
F) B) and C)

Correct Answer

verified

Show Answer

Question 42

True/False

Review LaterAdd Note

Review Later

An expenditure is capitalized when it is reported as an expense on the income statement.

A) True
B) False

Correct Answer

verified

Show Answer

Question 43

Multiple Choice

Review LaterAdd Note

Which of the following statements is correct?

In accounting for depreciation, acquisition cost and useful life usually are known quantities, whereas residual value is an estimate because it relates to an amount in the future.

When determining cash flow from operating activities using the indirect method, depreciation and amortization expense are deducted from net income.

On January 1, 2014, equipment was purchased for $80,000; the equipment's estimated residual value is $15,000, and its estimated useful life is 10 years. For 2014, the depreciation expense under the double-declining balance method is $13,000.

Tangible long-lived productive assets differ from intangible long-lived productive assets in that tangible assets have physical substance whereas intangible assets have no physical substance.

Williams Company purchased a machine costing $25,000 and is depreciating it over a 10-year estimated useful life with a residual value of $3,000. At the beginning of the eighth year, a major overhaul on it was completed at a cost of $8,000, and the total estimated useful life was changed to 12 years with the residual value unchanged. How much is the year 8 depreciation expense assuming use of the straight-line depreciation method?

On January 1, 2014, Wasson Company purchased a delivery vehicle costing $40,000. The vehicle has an estimated 6-year life and a $4,000 residual value. Wasson estimates that the vehicle will be driven 100,000 miles. What is the vehicle's book value as of December 31, 2015 assuming Wasson uses the units-of-production depreciation method and the vehicle was driven 10,000 miles during 2014 and 18,000 miles during 2015?

Which of the following describes the effect of recording depreciation expense at year-end?

On March 1, Wright Company purchased new equipment for $50,000 by paying cash. Other costs associated with the equipment were: transportation costs, $1,000; sales tax paid $4,000; and installation cost, $2,500. At what amount will the equipment be recorded on a balance sheet?

The units-of-production method of depreciation allocates an asset's cost over its useful life based on the current period's production relative to its total estimated production.

Landmark Restaurants reported net income of $45.9 million during Year 6. Landmark reported depreciation and amortization of plant and equipment of $48.8 million and cash paid for additions to property, plant and equipment of $162.9 million during Year 6. Required: Explain where each of these items would be reported and their impact on cash flows on the statement of cash flows.

The land cost initially reported on the balance sheet may include legal fees and title insurance.

Use of the double-declining-balance method of depreciation results in higher depreciation expense during the first year of an asset's life relative to use of the straight-line depreciation method.

Which of the following accounts would not be considered an intangible asset?

Covey Company purchased a machine on January 1, 2014, by paying cash of $250,000. The machine has an estimated useful life of five years, is expected to produce 500,000 units, and has an estimated residual value of $25,000. Required: A. Calculate depreciation expense to the nearest whole dollar for each year of the machine's useful life under 1. Straight-line depreciation method. 2. Double declining-balance method. B. What is the book value of the machine after three years using the double declining-balance method? C. What is the book value of the machinery after three years using the straight-line method? D. If the machine was used to produce and sell 120,000 units in 2014, what would be the depreciation expense using the units-of-production method?

Use of the double-declining-balance method of depreciation results in increasing amounts of depreciation expense over an asset's life.

During 2014, the Bowtie Company reported net income of $1,872 million, depreciation expense of $1,412 million and $978 million paid for purchases of property, plant and equipment. What would be the effect on cash flows from operating activities during 2014?

Which of the following includes only intangible assets?