Question 1

Companies that have a relatively large amount invested in assets to generate a given level of sales are considered capital-intensive.

Accepted Answer

This statement is true. Companies with a higher amount of assets invested in their operations are considered more capital-intensive, as they require more fixed assets and equipment to generate revenue compared to companies with fewer assets.

Question 2

An accelerated depreciation method yields larger depreciation expense in the early years of an asset's life and less depreciation expense in later years.

Accepted Answer

This is true because accelerated depreciation methods assume that assets are more productive and valuable in their early years, and therefore, assign more of the asset's cost to those early years through a higher depreciation expense. As the asset ages and becomes less productive, the depreciation expense decreases in later years.

Question 3

A company purchased a plant asset for $60,000.The asset has an estimated salvage value of $4,000,and an estimated useful life of 7 years.The annual depreciation expense using the straight-line method is $4,000 per year.

Accepted Answer

The annual depreciation expense using the straight-line method is calculated as (Cost - Salvage Value) / Useful Life. Therefore, ($60,000 - $4,000) / 7 = $8,000 per year.

Question 4

The straight-line depreciation method results in consistent depreciation expense.

Accepted Answer

The straight-line depreciation method results in consistent depreciation expense over the useful life of an asset. This is because the depreciation expense is calculated by dividing the cost of the asset by its useful life, resulting in an equal amount of expense each year.

Question 5

Total asset turnover is calculated by dividing average total assets by net sales.

Accepted Answer

Total asset turnover is calculated by dividing net sales by average total assets.

Question 6

The Modified Accelerated Cost Recovery System (MACRS)is part of the U.S.federal income tax laws and may be used for financial reporting.

Accepted Answer

MACRS is used for tax purposes to determine depreciation deductions for assets, but for financial reporting, companies typically use different depreciation methods that comply with accounting standards such as GAAP (Generally Accepted Accounting Principles).

Question 7

The double-declining balance method is applied by (1)computing the asset's straight-line depreciation rate,(2)doubling it,(3)subtracting salvage value from cost,and (4)multiplying the rate times the net value.

Accepted Answer

The double-declining balance method involves multiplying the straight-line depreciation rate by a factor of 2 and applying it to the net book value each year, not the cost of the asset. Salvage value is subtracted at the end of the asset's useful life.

Question 8

Total asset cost plus depreciation expense equals book value.

Accepted Answer

Book value is calculated by taking the total asset cost and subtracting the accumulated depreciation, not adding it.

Question 9

The cost of fees for insuring the title and any accrued property taxes are included in the cost of land.

Accepted Answer

The answer of The cost of fees for insuring the...

Question 10

An asset's cost includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.

Accepted Answer

This statement is correct according to accounting principles. The cost of an asset includes all expenses that are necessary to get the asset ready for its intended use, such as purchase price, installation fees, transportation costs, and any other costs associated with preparing the asset for use.

Question 11

Total asset turnover is calculated by dividing net sales by average total assets.

Accepted Answer

Total asset turnover is calculated by dividing net sales by average total assets. This ratio measures how efficiently a company is using its assets to generate sales.

Question 12

The units-of-production method of depreciation charges a varying amount of expense for each period of an asset's useful life depending on its usage.

Accepted Answer

The units-of-production method of depreciation considers the asset's usage to calculate the depreciation expense, so the amount charged each period can vary.

Question 13

The purchase of a property that included land,building,and related improvements is called a lump-sum or basket purchase.

Accepted Answer

A lump-sum or basket purchase refers to the purchase of all elements of a property in a single transaction, including the land, building, and related improvements, as opposed to separate transactions for each individual element.

Question 14

When a company constructs a building,the cost of the building includes materials and labor but not design fees,building permits,or insurance during construction.

Accepted Answer

The cost of a building includes materials, labor, design fees, building permits, and insurance during construction. These additional costs are often referred to as soft costs.

Question 15

If a machine is damaged during unpacking,the repairs are added to its cost.

Accepted Answer

The answer of If a machine is damaged during unpacking,the...

Question 16

Edmond reported average total assets of $9,965 million and net sales of $10,430 million.Its total asset turnover equals .96.

Accepted Answer

Total asset turnover is calculated as net sales divided by average total assets. In this case, it would be $10,430 million / $9,965 million = 1.05.

Question 17

Additions to land that increase the usefulness of the land such as parking lots,fences,and lighting are not depreciated.

Accepted Answer

Additions to land like parking lots, fences, and lighting are considered improvements and have a finite useful life, thus they are subject to depreciation, unlike the land itself which is not depreciated.

Question 18

Asset turnover is computed by dividing net sales by average total assets.

Accepted Answer

This statement is true. Asset turnover is calculated by dividing net sales by average total assets.

Question 19

Decision makers and other users of financial statements are especially interested in evaluating a company's ability to use its assets in generating sales.

Accepted Answer

Evaluating a company's ability to use its assets in generating sales is an important aspect of financial analysis for decision makers and other users of financial statements. This can help them assess the company's efficiency and profitability.

Question 20

Duncan reported net sales of $2,523 million and average total assets of $1,476 million.Its total asset turnover equals 1.71.

Accepted Answer

Total asset turnover is calculated by dividing net sales by average total assets. Therefore, total asset turnover for Duncan is 1.71 ($2,523 million / $1,476 million).

Quiz 8: Accounting for Long-Term Assets

Companies that have a relatively large amount invested in assets to generate a given level of sales are considered capital-intensive.

An accelerated depreciation method yields larger depreciation expense in the early years of an asset's life and less depreciation expense in later years.

A company purchased a plant asset for $60,000.The asset has an estimated salvage value of $4,000,and an estimated useful life of 7 years.The annual depreciation expense using the straight-line method is $4,000 per year.

The straight-line depreciation method results in consistent depreciation expense.

Total asset turnover is calculated by dividing average total assets by net sales.

The Modified Accelerated Cost Recovery System (MACRS)is part of the U.S.federal income tax laws and may be used for financial reporting.

The double-declining balance method is applied by (1)computing the asset's straight-line depreciation rate,(2)doubling it,(3)subtracting salvage value from cost,and (4)multiplying the rate times the net value.

Total asset cost plus depreciation expense equals book value.

The cost of fees for insuring the title and any accrued property taxes are included in the cost of land.

An asset's cost includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.

Total asset turnover is calculated by dividing net sales by average total assets.

The units-of-production method of depreciation charges a varying amount of expense for each period of an asset's useful life depending on its usage.

The purchase of a property that included land,building,and related improvements is called a lump-sum or basket purchase.

When a company constructs a building,the cost of the building includes materials and labor but not design fees,building permits,or insurance during construction.

If a machine is damaged during unpacking,the repairs are added to its cost.

Edmond reported average total assets of $9,965 million and net sales of $10,430 million.Its total asset turnover equals .96.

Additions to land that increase the usefulness of the land such as parking lots,fences,and lighting are not depreciated.

Asset turnover is computed by dividing net sales by average total assets.

Decision makers and other users of financial statements are especially interested in evaluating a company's ability to use its assets in generating sales.

Duncan reported net sales of $2,523 million and average total assets of $1,476 million.Its total asset turnover equals 1.71.