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Reporting and Analyzing Long Lived Assets
Reporting and Analyzing Long Lived Assets MCQs
?
A company is building a new plant that will take three years to construct. Interest capitalized during the construction as part of the cost of the bui...
is
is not
?
When can interest be included in the acquisition cost of a plant asset?
during the construction period of a self-constructed asset
if the asset acquisition is financed by a long-term note payable
if it is a part of a lump-sum purchase
if the asset is purchased on credit
?
What is depreciable cost?
the cost of an asset less accumulated depreciation
the book value of an asset less its salvage value
the book value of an asset
the cost of an asset less its salvage value
?
_________ are the costs incurred to increase the operating efficiency or useful life of a plant asset.
Capital expenditures
Ordinary repairs
Expense expenditures
Revenue expenditures
?
If a plant asset is retired before it is fully depreciated and no salvage value is received, a _____ on disposal occurs.
gain
loss
?
Where are natural resources generally shown on the balance sheet?
under owner's equity
under investments
under intangibles
under property, plant, and equipment
?
The cost of intangible assets with _____ should not be amortized.
limited life
indefinite lives
?
Companies usually show intangible assets separately under "Intangible assets."
True
False
?
Which of the following should be disclosed in the balance sheet or the notes to the financial statements?
All of the choices are correct
balances of the major classes of assets
amount of depreciation and amortization expense for the period
depreciation and amortization methods used
?
A patent that has a legal life of 20 years and a useful life of less than 20 years should
be amortized over its useful life.
be amortized over 20 years regardless of its useful life.
be expensed in the year of acquisition.
not be amortized.
?
Companies can amortize a patent for a period that cannot exceed
20 years.
40 years.
50 years.
10 years.
?
To find the asset turnover ratio, divide
net income by ending total assets.
net income by average total assets.
net sales by average total assets.
net sales by ending total assets.
?
To find the book value of a plant asset, you find the difference between the
cost of the asset and the accumulated depreciation to date.
replacement cost of the asset and its historical cost.
cost of the asset and the amount of depreciation expense for the year.
proceeds received from the sale of the asset and its original cost.
?
If the estimate of the useful life of equipment changes, then this change requires
that the amount of periodic depreciation be changed in the current year and in future years.
a retroactive change in the amount of periodic depreciation recognized in previous years.
that no change be made in the periodic depreciation so that depreciation amounts are comparable over the life of the asset.
that income for the current year be increased.
?
In selecting a depreciation method, a company should choose the method that
is easiest to apply.
has been used most often in the past by the company.
best measures the plan asset's market value over its useful life.
best measures the plant asset’s contribution to revenue over its useful life.
?
When estimating the useful life of an asset, accountants consider all of the following EXCEPT
the cost to replace the asset at the end of its useful life.
expected repairs and maintenance.
obsolescence factors.
the intended use of the asset.
?
A change in the estimate of the useful life of equipment requires
no change in the periodic depreciation.
an increase in annual income.
a retroactive change to the amount of periodic depreciation applied to all previous years.
the amount of periodic depreciation be changed in the current year and in future years.
?
A plant asset may be removed from the books even though it is not fully depreciated.
True
False
?
Which of the following applies a constant percentage to depreciable cost in calculating depreciation?
sum-of-year's-digits depreciation method
straight-line depreciation method
units-of-activity depreciation method
declining-balance depreciation method
?
An overall measure of profitability is the
net sales ratio.
return on assets ratio.
average total assets.
gross profit ratio.
?
Which term refers to a permanent decline in the market value of an asset?
capital expenditure
managed earning
impairment
plant asset disposal
?
Intangible assets should be reported
in the subsidiary plant ledger.
under the heading Property, Plant and Equipment.
as a separate classification on the balance sheet.
as current assets on the balance sheet.
?
Which of the following is used to determine the gain or loss on disposal of a plant asset?
the book value of the asset and the proceeds received from its sale
the original cost of the asset and the proceeds received from its sale
the book value of the asset and the asset's original cost
the replacement cost of the asset and the asset's original cost
?
If an intangible asset has a limited life, its cost must be amortized over a period of
20 years
its useful life
10 years
5 years
?
The difference between the cost of the asset and the accumulated depreciation to date is the
market value.
book value.
estimated value.
current value.
?
The depreciation and amortization methods should be described in
the capital expense report.
the capital account sheet.
the SEC filings.
the notes to the financial statements.
?
The asset turnover ratio is calculated by
dividing net income by net sales.
dividing net sales by average total assets.
multiplying net income by average total assets.
subtracting average total assets from net income.
?
Capital expenditures add to the utility of plant assets for ______ accounting period.
more than one
only one
?
To record depreciation, taxpayers must use on their tax returns either the straight-line method or the
double-declining-balance method.
units-of-activity method.
accelerated-balance method.
Modified Accelerated Cost Recovery System (MACRS).
?
Which of the following statements is true?
When land is acquired, expenditures for improvements made within one year can be charged to the land account.
When land is acquired, expenditures for paving, fencing, and lighting a new company parking lot should be charged to the plant asset account.
Land improvements such as paving, fencing, and lighting a new company parking lot should be charged to the land improvement account.
Land improvements are not considered a subdivision of plant assets.
?
________ is the difference between the cost of the plant asset and the accumulated depreciation to date.
Book value
Depreciated value
Estimated value
Fair market value
?
Intangible assets with indefinite lives are not amortized.
True
False
?
If the estimate of the useful life of equipment changes then
the amount of periodic depreciation must be changed in the current year and in future years.
the annual depreciation is prorated.
current annual income begins to fall behind previous expectations.
a retroactive change in the amount of periodic depreciation is applied to all previous years leading up to the present.
?
Capital expenditures are expenditures that increase the company's investment in
plant assets.
stocks.
purchased goods.
bonds.
?
When the book value of a plant asset exceeds the cash received from sale proceeds the result is
an amortization on disposal of the asset.
a depreciation on disposal of the asset.
a loss on disposal of the asset.
a gain on disposal of the asset.
?
Which of the following is computed and represented at cost less accumulated depreciation in the balance sheet?
trademarks
intangible assets
goodwill
plant assets
