Question 1

Net income on a cash basis is arrived at by adding depreciation and amortization back to accrual net income.

Accepted Answer

Depreciation and amortization are non-cash expenses that are deducted from accrual net income. Adding them back gives a more accurate picture of the cash flow generated by the business.

Question 2

Asset turnover is calculated as Net income divided by Average Total Assets.

Accepted Answer

Asset turnover is calculated as Total Sales divided by Average Total Assets. Net income is not used in the calculation.

Question 3

Please complete the following sentences:
a.Accumulated amortization is used with ______________________________________.
b.Accumulated depreciation is used with ______________________________________.

Accepted Answer

The answer of Please complete the following sentences:
a.Accumulated amortization is...

Question 4

A revenue expenditure is deducted from the cost of the asset.

Accepted Answer

Revenue expenditure is not deducted from the cost of the asset. It is recorded as an expense in the income statement for the period in which it is incurred.

Question 5

Please answer the following questions regarding depreciation:
_________________________ is the GAAP depreciation method used most frequently?

Accepted Answer

The answer of Please answer the following questions regarding depreciation:
_________________________...

Question 6

Interest included as part of the acquisition cost of the asset is referred to as___________ of interest.

Accepted Answer

The answer of Interest included as part of the acquisition...

Question 7

All intangible assets should be amortized.

Accepted Answer

Not all intangible assets should be amortized. Some intangible assets, such as goodwill or trademarks with indefinite useful lives, are subject to impairment testing rather than amortization.

Question 8

When a real estate company sells equipment for a gain,the Gain on Sale of Asset is treated as revenue.

Accepted Answer

The gain on the sale of an asset is considered a non-operating income and is recorded separately from revenue, which is generated from the company's primary business activities.

Question 9

Flexibility in valuation of property,plant,and equipment under IFRS may cause problems with comparability of one company with another.

Accepted Answer

Under IFRS, companies have flexibility in choosing the valuation method for property, plant, and equipment which may result in varying values for the same asset between companies. This can cause problems with comparability of financial statements between companies.

Question 10

International accounting standards require companies to revalue their property,plant,and equipment to reflect fair market values.

Accepted Answer

International accounting standards do not require companies to revalue their property, plant, and equipment to reflect fair market values. However, companies may choose to do so for various reasons such as better decision making, more accurate financial reporting, or compliance with local regulations.

Question 11

Because plant and equipment are reported as long-term assets on the balance sheet,they have no impact on net income for the period until they are sold.

Accepted Answer

Plant and equipment impact net income through depreciation expense, which is recognized each period over the asset's useful life, reducing net income even before the asset is sold.

Question 12

Land is not a depreciable asset,but the amount allocated to the building is subject to ______________.

Accepted Answer

The answer of Land is not a depreciable asset,but the...

Question 13

The Loss on Sale of Asset indicates the amount by which the asset's sales price is less than its book value.

Accepted Answer

This statement is true, as Loss on Sale of Asset is calculated as the difference between the book value of the asset and the sales price received. If the sales price is less than the book value, a loss is incurred.

Question 14

Acquisition cost is also referred to as: ________________.

Accepted Answer

The answer of Acquisition cost is also referred to as:...

Question 15

In general,FASB standards concerning property,plant,and equipment are similar to the international accounting standards,with two important differences.

Accepted Answer

The FASB standards concerning property, plant, and equipment are largely converged with the international accounting standards, but there are still some differences between the two sets of standards. Two important differences are that under FASB standards, entities are allowed to use either cost model or revaluation model to measure property, plant, and equipment, while under international accounting standards, the revaluation model is the only allowed method. Additionally, FASB has specific guidance for impairment testing of long-lived assets, while international accounting standards have more general guidance.

Question 16

The FASB standards do not have a specific rule that requires residual value and asset life to be reviewed annually for property,plant,and equipment.

Accepted Answer

The FASB standards do not require annual review of residual value and asset life for property, plant, and equipment. However, companies need to assess the impairment of the assets whenever there is any indication of impairment.

Question 17

The three reasons why a company might choose an accelerated depreciation method are __________________________________________________,__________________________________________________,and __________________________________________________.

Accepted Answer

The answer of The three reasons why a company might...

Question 18

Plant assets,current assets,property,plant and equipment,and fixed assets are all tangible assets.

Accepted Answer

Plant assets, property, plant and equipment, and fixed assets are indeed tangible assets, but current assets include both tangible and intangible items (like cash, accounts receivable, and inventory).

Question 19

Research and development costs should be presented as intangible assets.

Accepted Answer

Research and development costs are typically expensed as incurred, according to most accounting standards, including IFRS and US GAAP, rather than capitalized as intangible assets.

Question 20

If a company chooses to treat small plant asset expenditures as expenses,GAAP are being violated.

Accepted Answer

Companies are allowed to expense small plant asset expenditures under GAAP, known as the de minimis safe harbor election. However, the threshold for what constitutes a "small expenditure" may vary depending on company policy and industry standards.

Quiz 8: Operating Assets: Property, plant, and Equipment, and Intangibles

Net income on a cash basis is arrived at by adding depreciation and amortization back to accrual net income.

Asset turnover is calculated as Net income divided by Average Total Assets.

Please complete the following sentences: a.Accumulated amortization is used with . b.Accumulated depreciation is used with .

A revenue expenditure is deducted from the cost of the asset.

Please answer the following questions regarding depreciation: _________________________ is the GAAP depreciation method used most frequently?

Interest included as part of the acquisition cost of the asset is referred to as___________ of interest.

All intangible assets should be amortized.

When a real estate company sells equipment for a gain,the Gain on Sale of Asset is treated as revenue.

Flexibility in valuation of property,plant,and equipment under IFRS may cause problems with comparability of one company with another.

International accounting standards require companies to revalue their property,plant,and equipment to reflect fair market values.

Because plant and equipment are reported as long-term assets on the balance sheet,they have no impact on net income for the period until they are sold.

Land is not a depreciable asset,but the amount allocated to the building is subject to ______________.

The Loss on Sale of Asset indicates the amount by which the asset's sales price is less than its book value.

Acquisition cost is also referred to as: ________________.

In general,FASB standards concerning property,plant,and equipment are similar to the international accounting standards,with two important differences.

The FASB standards do not have a specific rule that requires residual value and asset life to be reviewed annually for property,plant,and equipment.

The three reasons why a company might choose an accelerated depreciation method are ,,and __.

Plant assets,current assets,property,plant and equipment,and fixed assets are all tangible assets.

Research and development costs should be presented as intangible assets.

If a company chooses to treat small plant asset expenditures as expenses,GAAP are being violated.

Quiz 8: Operating Assets: Property, plant, and Equipment, and Intangibles

Net income on a cash basis is arrived at by adding depreciation and amortization back to accrual net income.

Asset turnover is calculated as Net income divided by Average Total Assets.

Please complete the following sentences: a.Accumulated amortization is used with ______________________________________. b.Accumulated depreciation is used with ______________________________________.

A revenue expenditure is deducted from the cost of the asset.

Please answer the following questions regarding depreciation: _________________________ is the GAAP depreciation method used most frequently?

Interest included as part of the acquisition cost of the asset is referred to as___________ of interest.

All intangible assets should be amortized.

When a real estate company sells equipment for a gain,the Gain on Sale of Asset is treated as revenue.

Flexibility in valuation of property,plant,and equipment under IFRS may cause problems with comparability of one company with another.

International accounting standards require companies to revalue their property,plant,and equipment to reflect fair market values.

Because plant and equipment are reported as long-term assets on the balance sheet,they have no impact on net income for the period until they are sold.

Land is not a depreciable asset,but the amount allocated to the building is subject to ______________.

The Loss on Sale of Asset indicates the amount by which the asset's sales price is less than its book value.

Acquisition cost is also referred to as: ________________.

In general,FASB standards concerning property,plant,and equipment are similar to the international accounting standards,with two important differences.

The FASB standards do not have a specific rule that requires residual value and asset life to be reviewed annually for property,plant,and equipment.

The three reasons why a company might choose an accelerated depreciation method are __________________________________________________,__________________________________________________,and __________________________________________________.

Plant assets,current assets,property,plant and equipment,and fixed assets are all tangible assets.

Research and development costs should be presented as intangible assets.

If a company chooses to treat small plant asset expenditures as expenses,GAAP are being violated.

Please complete the following sentences: a.Accumulated amortization is used with . b.Accumulated depreciation is used with .

The three reasons why a company might choose an accelerated depreciation method are ,,and __.