Accounting Chapter 7

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Equipment was purchased for $50,000. The equipment is expected to be used 15,000 hours over its useful life and then have a residual value of $10,000. In the first two years of operation, the equipment was used 2,700 hours and 3,300 hours, respectively. What is the equipment's accumulated depreciation at the end of the second year using the activity-based method?

$16,000

Bryer Co. purchases all of the assets and liabilities of Stellar Co. for $1,500,000. The fair value of Stellar's assets is $2,000,000, and its liabilities have a fair value of $1,200,000. The book value of Stellar's assets and liabilities are not known. For what amount would Bryer record goodwill associated with the purchase?

$700,000

Equipment originally costing $95,000 has accumulated depreciation of $30,000. If the equipment is sold for $55,000, the company should record

A loss of $10,000.

The book value of an asset is equal to the what?

Asset's cost less accumulated depreciation

We normally record a long-term asset at the ____?

Cost of the asset plus all costs necessary to get the asset ready for use.

Which of the following will mazimize net income by minimizing depreciation expense in the first year of the asset's life?

Long service life, high residual value, and straight-line depreciation.

Which of the following expenditures should be recorded as an espense?

Repairs and maintenance that maintain current benefits.

The company's profitability on each dollar invested in assets is represented by which of the following ratios:

Return on assets.

Research and development costs ______

Should be expensed

The balance in the Accumulated Depreciation account represents what?

The amount charged to depreciation expense since the acquisition of the plant asset

Which of the following statements is true regarding the amortization of intangible assets?

The expected residual value of most intangible assets is zero.

Sandwich Express incurred the following costs related to its purchase of a bread machine. Cost of the equipment$20,000 Sales tax (8%) 1,600 Shipping 2,200 Installation 1,400 Total costs $25,200 At what amount should Sandwich Express record the bread machine?

$25,200

Equipment was purchased for $50,000. At that time, the equipment was expected to be used eight years and have a residual value of $10,000. The company uses straight-line depreciation. At the beginning of the third year, the company changed its estimated useful life to a total of six years (four years remaining) and the residual value to $8,000. What is depreciation expense in the third year?

$8,000

A company has a profit margin of 10% and reports net sales of $4,000,000 and average total assets of $5,000,000. Calculate the company's returon on assets.

8%


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