Question 1

Land is not subject to depreciation because it has an unlimited life.This means that items which increase the usefulness of the land such as parking lots are not depreciated.

Accepted Answer

While it's true that land itself is not depreciated because it has an unlimited life, improvements made to the land, such as parking lots, are subject to depreciation. These improvements have a finite useful life and lose value over time.

Question 2

Extraordinary repairs are expenditures extending the asset's useful life beyond its original estimate,and are capital expenditures because they benefit future periods.

Accepted Answer

Extraordinary repairs are considered capital expenditures because they increase the useful life of the asset and provide future benefits.

Question 3

Revenue expenditures are additional costs of plant assets that materially increase the assets' life or productive capabilities.

Accepted Answer

Revenue expenditures are costs that are necessary for the day-to-day operations of a business, such as repairs and maintenance. They do not materially increase the life or productive capabilities of plant assets. Capital expenditures, on the other hand, are costs that are incurred to acquire or improve plant assets and can materially increase their life or productive capabilities.

Question 4

The first step in accounting for an asset disposal is to calculate the gain or loss on disposal.

Accepted Answer

The answer of The first step in accounting for an...

Question 5

Cowers reported net sales of $2,463 million and average total assets of $1,546 million.Its total asset turnover equals 1.59.

Accepted Answer

Total Asset Turnover = Net Sales/Average Total Assets
Total Asset Turnover = $2,463/$1,546 = 1.59

Question 6

Ordinary repairs are expenditures that keep assets in normal,good operating condition.

Accepted Answer

Ordinary repairs are defined as expenditures that are necessary to maintain assets in normal, good operating condition. They are routine and recurring in nature and help to extend the useful life of an asset.

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 is applied by (1) computing the asset's straight-line depreciation rate, (2) doubling it, (3) multiplying the resulting percentage by the asset's book value at the beginning of the period to arrive at the depreciation expense for the period, and (4) subtracting that depreciation expense from the asset's book value at the beginning of the period to get the book value at the end of the period. The salvage value is not subtracted from the cost until the end of the asset's useful life when calculating the gain or loss on disposal.

Question 8

Capital intensive companies have a relatively large amount invested in assets to generate a given level of sales.

Accepted Answer

Capital intensive companies require significant investments in machinery, equipment, and other fixed assets to operate effectively, which typically requires a large initial capital outlay.

Question 9

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

Accepted Answer

If a machine is damaged during unpacking, the repairs needed to fix it will be added to the cost of the machine.

Question 10

Abers reported average total assets of $10,965 million and net sales of $11,430 million.Its total asset turnover equals .96.

Accepted Answer

Total Asset Turnover = Net Sales/Average Total Assets
Total Asset Turnover = $11,430/$10,965 = 1.04

Question 11

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 calculates depreciation based on how much the asset is used and is therefore a variable expense each period.

Question 12

When a company constructs a building,the cost of the building includes materials and labor,design fees,building permits,and insurance during construction.

Accepted Answer

The cost of the building includes materials and labor, design fees, building permits, and insurance during construction.

Question 13

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 14

A company purchased a plant asset for $45,000.The asset has an estimated salvage value of $6,000,and an estimated useful life of 10 years.The annual depreciation expense using the straight-line method is $3,900 per year.

Accepted Answer

Depreciation Expense = (Cost - Salvage Value)/Estimated Useful Life
Depreciation Expense = ($45,000 - $6,000)/10; Depreciation Expense = $3,900

Question 15

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

Accepted Answer

A lump-sum purchase typically refers to the purchase of an entire property, which includes the land, building, and any related improvements, all in one transaction.

Question 16

Betterments are a type of capital expenditure.

Accepted Answer

Betterments are capital expenditures that improve the quality or usefulness of an asset, and are intended to increase the asset's remaining useful life, productivity or efficiency.

Question 17

Capital expenditures are also called balance sheet expenditures.

Accepted Answer

The answer of Capital expenditures are also called balance sheet...

Question 18

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

Accepted Answer

An accelerated depreciation method, such as the double-declining balance method, results in larger depreciation expenses in the early years of an asset's life and smaller depreciation expenses in the later years.

Question 19

Total asset cost plus depreciation expense equals book value.

Accepted Answer

The answer of Total asset cost plus depreciation expense equals...

Question 20

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 is the definition of cost according to accounting principles.

Quiz 10: Plant Assets, natural Resources, and Intangibles