ch 9 questions

When equipment is sold for cash in an amount that is greater than its book value, the company debits the following (i) Accumulated Depreciation and (ii) Cash (i) Accumulated Depreciation, (ii) Cash, and (iii) Gain on Disposal of Plant Assets (i) Cash and (ii) Gain on Disposal of Plant Assets (i) Accumulated Depreciation, (ii) Cash, and (iii) Loss on Disposal of Plant Assets (i) Cash

(i) Accumulated Depreciation and (ii) Cash

When equipment is sold for cash in an amount that is greater than its book value, the company debits the following (i) Cash and (ii) Gain on Disposal of Plant Assets (i) Accumulated Depreciation and (ii) Cash (i) Accumulated Depreciation, (ii) Cash, and (iii) Gain on Disposal of Plant Assets (i) Accumulated Depreciation, (ii) Cash, and (iii) Loss on Disposal of Plant Assets (i) Cash

(i) Accumulated Depreciation and (ii) Cash

Which one of the following will maximize a company's reported net income in the first year of owning an asset? A long estimated life, a low salvage value, and declining-balance depreciation A long estimated life, a high salvage value, and declining-balance depreciation A short estimated life, a high salvage value, and straight-line depreciation A long estimated life, a high salvage value, and straight-line depreciation A short estimated life, a low salvage value, and declining balance depreciation

A long estimated life, a high salvage value, and straight-line depreciation

Which one of the following will maximize depreciation expense in the first year of owning an asset? A short estimated life, a high salvage value, and straight-line depreciation A short estimated life, a low salvage value, and declining balance depreciation A long estimated life, a low salvage value, and declining-balance depreciation A long estimated life, a high salvage value, and straight-line depreciation A long estimated life, a high salvage value, and declining-balance depreciation

A short estimated life, a low salvage value, and declining balance depreciation

Which of the following measures provides an indication of how efficient a company is in employing its assets? Debt to total assets ratio Profit margin ratio Current ratio Inventory turnover ratio Asset turnover ratio

Asset turnover ratio

Harrington Corporation recently leased a number of trucks from Andre Corporation. In inspecting the books of Harrington Corporation, you notice that the trucks have been recorded as assets on Harrington's balance sheet. The balance sheet also shows a liability for the leases. Based on this information, what type of acquisition are the trucks for Harrington? Capital expenditure Capital lease Operating lease Purchase of trucks Net lease

Capital lease

Companies can either lease or purchase assets that they need to operate their business. For example, many companies lease vehicles instead of buying them. Which of the following is not an advantage of leasing using an operating lease relative to purchasing an asset? All of these are advantages of operating leases The lessee does not report the item as an asset on its balance sheet Sharing of tax advantages between the lessor and lessee Little or no down payment by the lessee Higher risk of obsolescence by the lessee

Higher risk of obsolescence by the lessee

Which of the following best describes depreciation? It is a cash accumulation approach. All of these It is an adjustment to market value. Correct Answer It is a cost allocation method. It is a valuation approach.

It is a cost allocation method.

Which of the following best describes depreciation? It is an adjustment to market value. All of these It is a valuation approach. It is a cost allocation method. It is a cash accumulation approach.

It is a cost allocation method.

Which of the following is not a depreciable asset? Equipment Trucks Buildings Land improvements Land

Land

Which one of the following costs will not be included in the cost of equipment? Assembly costs Delivery fees Sales taxes associated with buying the equipment Maintenance costs Installation costs

Maintenance costs

Which of the following gives the recipient the right to manufacture, sell, or otherwise control an invention for a period of 20 years? Trademark Goodwill Copyright Patent License

Patent

Which of the following statements is true? Goodwill is recorded when a business invests in itself by acquiring property, plant & equipment. If an intangible asset has an unspecified or indeterminate life, it should be amortized. The amortization period of a patent is the lesser of its useful life or 20 years, whichever is shorter. Trademarks are amortized over a period of 20 years. Research and development costs are usually added to the cost of an asset rather than expensed when incurred.

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

Which of the following statements is true? If an intangible asset has an unspecified or indeterminate life, it should be amortized. Trademarks are amortized over a period of 20 years. The amortization period of a patent is the lesser of its useful life or 20 years, whichever is shorter. Goodwill is recorded when a business invests in itself by acquiring property, plant & equipment. Research and development costs are usually added to the cost of an asset rather than expensed when incurred.

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

Which of the following is an intangible asset that is not amortized? All of these are amortized. Copyright Patent Trademark

Trademark

Which of the following two ratios multiplied together yields the return on assets ratio? The debt to total assets ratio and the asset turnover ratio The asset turnover ratio and the debt to assets ratio The current ratio and the debt to assets ratio The profit margin ratio and the asset turnover ratio The current ratio and the asset turnover ratio

The profit margin ratio and the asset turnover ratio

Which statement is true about additions to plant assets? Their cost is immediately expensed. They increase a Repair Expense account. They are revenue expenditures. They are capitalized. They increase the Purchases account.

They are capitalized.

The calculation of depreciation using the declining-balance method all of these. multiplies a declining percentage times a constant book value. results in an increasing depreciation expense each period. ignores salvage value in determining the amount to which a constant rate is applied. multiplies a constant percentage times the previous year's depreciation expense.

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 a footnote disclosure must explain why the change in estimate occurred. the company's previous depreciation expenses should be corrected. only that asset's current and future years' depreciation will be affected. only that asset's future years' depreciation will be affected. new plant assets should be acquired to replace the old.

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

All of the following statements are true regarding the declining-balance method of depreciation except the declining-balance method is compatible with the matching principle. the book value to which to which the depreciation rate is applied declines each year. the declining-balance method is appropriate when assets lose their usefulness rapidly. the declining-balance method produces lower depreciation expense in the early years as opposed to the later years. these are all true

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