ACG FINAL

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When equipment is sold for cash in an amount that is less than its book value, the company debits the following

Accumulated Depreciation, (ii) Cash, and (iii) Loss on Disposal of Plant Assets

Which of the following best describes depreciation?

It is a cost allocation method.

Which one of the following costs will not be included in the cost of equipment?

Maintenance costs

Which of the following statements is false?

Research and development costs are not expensed when they result to a successful patent.

Which of the following statements is true?

The amortization period of a patent is the lesser of its useful life or 20 years, whichever is shorter.

Which ratio is computed by dividing net income by net sales?

The profit margin ratio

Which of the following two ratios multiplied together yields the return on assets ratio?

The profit margin ratio and the asset turnover ratio

Which statement is true about additions to plant assets?

They are capitalized.

Corporations have several officers who manage the corporation. One such officer is the chief executive officer. The chief executive officer

has overall responsibility for managing the business.

The calculation of depreciation using the declining-balance method

ignores salvage value in determining the amount to which a constant rate is applied.

When there is a change in a depreciable asset's useful life or salvage value

only that asset's current and future years' depreciation will be affected.

When a plant asset is retired, the difference between the plant asset's cost and the accumulated depreciation of the same plant asset is

recognized on the income statement as a loss on disposal of plant asset

All of the following statements are true regarding the declining-balance method of depreciation except

the declining-balance method produces lower depreciation expense in the early years as opposed to the later years.


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