Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

Explain how to calculate total asset turnover.Describe what it reveals about a company's financial condition,whether a higher or lower ratio is desirable,and how it is best applied for comparative purposes.

Accepted Answer

Total asset turnover is calculated by dividing net sales by average total assets.The result is interpreted as the amount of net sales generated by each dollar of assets.Thus,the ratio reflects a company's ability to efficiently use its assets to generate sales.A high number is desirable; however,it must be interpreted in comparison with prior years as well as with competitors and industry standards.

Question 3

The specific meaning of goodwill in accounting is:

Accepted Answer

A) The amount by which a company's value exceeds the value of its individual assets and liabilities. 
B) Long term assets held as investment. 
C) The support of the board of directors for the operating decisions of management. 
D) The cost of developing,maintaining,or enhancing the value of a trademark. 
E) Rights granted an entity to deliver a product or service under specified conditions. 
A) The amount by which a company's value exceeds the value of its individual assets and liabilities. 
B) Long term assets held as investment. 
C) The support of the board of directors for the operating decisions of management. 
D) The cost of developing,maintaining,or enhancing the value of a trademark. 
E) Rights granted an entity to deliver a product or service under specified conditions. A

Question 4

The cost of an intangible asset is systematically allocated to depreciation expense over its estimated useful life.

Accepted Answer

A) True 
 B)False

Question 5

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

A) True 
 B)False

Question 6

Which of the following is an example of an extraordinary repair?

Accepted Answer

A) New tires for a truck. 
B) Replacement of all florescent light tubes in an office. 
C) Carpet cleaning and repair. 
D) Replacing the roof on a manufacturing warehouse. 
E) Routine machine maintenance. 
A) New tires for a truck. 
B) Replacement of all florescent light tubes in an office. 
C) Carpet cleaning and repair. 
D) Replacing the roof on a manufacturing warehouse. 
E) Routine machine maintenance.

Question 7

To capitalize an expenditure is to:

Accepted Answer

A) Debit an expense account. 
B) Credit an expense account. 
C) Credit the owner's capital account. 
D) Credit an asset account. 
E) Debit an asset account. 
A) Debit an expense account. 
B) Credit an expense account. 
C) Credit the owner's capital account. 
D) Credit an asset account. 
E) Debit an asset account.

Question 8

A machine originally had an estimated useful life of 6 years,but after 4 complete years,it was decided that the original estimate of useful life should have been 10 years.At that point the remaining cost to be depreciated should be allocated over the remaining:

Accepted Answer

A) 2 years. 
B) 4 years. 
C) 6 years. 
D) 16 years. 
E) 10 years. 
A) 2 years. 
B) 4 years. 
C) 6 years. 
D) 16 years. 
E) 10 years.

Question 9

A company purchased equipment valued at $66,000.It traded in old equipment for a $9,000 trade-in allowance and the company paid $57,000 cash with the trade-in.The old equipment cost $44,000 and had accumulated depreciation of $36,000.This transaction has commercial substance.What is the recorded value of the new equipment?

Accepted Answer

A) $8,000. 
B) $9,000. 
C) $57,000. 
D) $65,000. 
E) $66,000. 
A) $8,000. 
B) $9,000. 
C) $57,000. 
D) $65,000. 
E) $66,000.

Question 10

A company purchased land on which to construct a new building for a cost of $350,000.Additional costs incurred were:
Real estate broker's commissions………………………….$24,500
Legal fees incurred in purchase of the real estate………… 1,500
Landscaping………………………………………………..8,000
Cost to remove old house located on land…………… 3,000
Proceeds from selling materials salvaged from old house 1,000
What total dollar amount should be charged to Land and what amount should be charged to Building or other accounts?

Accepted Answer

All costs except landscaping,w

Question 11

Total asset turnover is used to evaluate:

Accepted Answer

A) The efficient use of assets to generate sales. 
B) The necessity for asset replacement. 
C) The number of times operating assets were sold during the year. 
D) The cash flows used to acquire assets. 
E) The relation between asset cost and book value. 
A) The efficient use of assets to generate sales. 
B) The necessity for asset replacement. 
C) The number of times operating assets were sold during the year. 
D) The cash flows used to acquire assets. 
E) The relation between asset cost and book value.

Question 12

Natural resources are:

Accepted Answer

A) Assets that are physically consumed when used such as standing timber,mineral deposits,and oil and gas fields. 
B) Tangible assets used in the operations of the business. 
C) Current liabilities because they are depleted. 
D) Not subject to allocation to expense over their useful lives. 
E) Depleted using a straight-line method. 
A) Assets that are physically consumed when used such as standing timber,mineral deposits,and oil and gas fields. 
B) Tangible assets used in the operations of the business. 
C) Current liabilities because they are depleted. 
D) Not subject to allocation to expense over their useful lives. 
E) Depleted using a straight-line method.

Question 13

A ________ results from revising estimates of the useful life or salvage value of a plant asset.

Accepted Answer

change in

Question 14

Salvage value is:

Accepted Answer

A) Not a factor relevant to determining depletion. 
B) A factor relevant to amortizing an intangible asset with an indefinite life. 
C) An estimate of the asset's value at the end of its benefit period. 
D) A factor relevant to determining depreciation under MACRS. 
E) A factor relevant to determining an asset's useful life. 
A) Not a factor relevant to determining depletion. 
B) A factor relevant to amortizing an intangible asset with an indefinite life. 
C) An estimate of the asset's value at the end of its benefit period. 
D) A factor relevant to determining depreciation under MACRS. 
E) A factor relevant to determining an asset's useful life.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000.The machine is depreciated using the double-declining-balance method.
-The machine's useful life is estimated to be 5 years with a $4,000 salvage value.The machine's book value at the end of year 2 is:

Accepted Answer

A) $12,000. 
B) $7,200. 
C) $9,600. 
D) $8,640. 
E) $14,400. 
A) $12,000. 
B) $7,200. 
C) $9,600. 
D) $8,640. 
E) $14,400.

Question 17

A company purchased land with a building for a lump-sum cost of $2,570,000 ($500,000 paid in cash and the balance on a long-term note).It was estimated that the land and building had market values of $600,000 and $2,400,000,respectively.
Determine the cost to be apportioned to the land and to the building and prepare the journal entry to record the acquisition.

Accepted Answer

The answer of A company purchased land with a building...

Question 18

A leasehold refers to the rights the lessor grants to the lessee under the terms of the lease.

Accepted Answer

A) True 
 B)False

Question 19

A company had net sales of $1,540,500 in Year 1 and $1,495,000 in Year 2.Its average assets were $810,000 for Year 1 and $800,000 for Year 2.(1)Calculate the total asset turnover for each year.(2)Interpret and comment on the company's efficiency in the use of its assets.

Accepted Answer

Year 1: $1,540,500/$810,000 = 1.90
Year

Question 20

Martin Company purchases a machine at the beginning of the year at a cost of $60,000.The machine is depreciated using the double-declining-balance method.The machine's useful life is estimated to be 4 years with a $5,000 salvage value.
-The machine's book value at the end of year 3 is:

Accepted Answer

A) $30,000. 
B) $45,000. 
C) $52,500. 
D) $7,500. 
E) $6,875. 
A) $30,000. 
B) $45,000. 
C) $52,500. 
D) $7,500. 
E) $6,875.

Exam 8: Accounting for Long-Term Assets

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

Explain how to calculate total asset turnover.Describe what it reveals about a company's financial condition,whether a higher or lower ratio is desirable,and how it is best applied for comparative purposes.

The specific meaning of goodwill in accounting is:

The cost of an intangible asset is systematically allocated to depreciation expense over its estimated useful life.

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

Which of the following is an example of an extraordinary repair?

To capitalize an expenditure is to:

A machine originally had an estimated useful life of 6 years,but after 4 complete years,it was decided that the original estimate of useful life should have been 10 years.At that point the remaining cost to be depreciated should be allocated over the remaining:

Total asset turnover is used to evaluate:

Natural resources are:

A ________ results from revising estimates of the useful life or salvage value of a plant asset.

Salvage value is:

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

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000.The machine is depreciated using the double-declining-balance method. -The machine's useful life is estimated to be 5 years with a $4,000 salvage value.The machine's book value at the end of year 2 is:

A leasehold refers to the rights the lessor grants to the lessee under the terms of the lease.

A company had net sales of $1,540,500 in Year 1 and $1,495,000 in Year 2.Its average assets were $810,000 for Year 1 and $800,000 for Year 2.(1)Calculate the total asset turnover for each year.(2)Interpret and comment on the company's efficiency in the use of its assets.

Martin Company purchases a machine at the beginning of the year at a cost of $60,000.The machine is depreciated using the double-declining-balance method.The machine's useful life is estimated to be 4 years with a $5,000 salvage value. -The machine's book value at the end of year 3 is:

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Cash,fraud,and Internal Controls

Accounting for Receivables

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Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

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Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

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