Chapter 9

which of the following should be included in the acquisition of a piece of equipment

transportation costs installation costs testing costs prior to placing the equipment into production

when the amount of use of a fixed asset varies from year to year, the method of determining depreciation expense that best matches allocation of cost with revenue is

units of production

a characteristic of a fixed asset is that it is

used in operations of a business

Darden Company has cash of $28,000, accounts receivable of $38,000, inventory of $20,000 and equipment of $58,000. Assuming current liabilities of $28,000, this company's working capital is:

$58,000. Explanation: Working capital = Current assets - Current liabilities. Working capital = ($28,000 + $38,000 + $20,000) - $28,000 = $58,000.

Milton Company has total current assets of $48,000, including inventory of $11,500, and current liabilities of $24,000. The company's current ratio is:

2.00. Explanation: Current ratio = Current assets / Current liabilities. Current ratio = $48,000 / $24,000 = 2.00.

The following balance sheet information is provided for Greene Company for Year 2: Assets: Cash = $7,800 Accounts receivable = $13,950 Inventory = $15,900 Prepaid expenses = $2,700 Plant and equipment, net of depreciation = $20,600 Land = $14,500 Total Assets = $75,450 Liabilities and Stockholders' Equity: Accounts payable = $3,450 Salaries payable = $7,130 Bonds payable (Due in ten years) = $17,500 Common stock, no par = $11,000 Retained earnings = $36,370 Total liabilities and stockholders' equity = $75,450 What is the company's quick (acid-test) ratio? (Round your answer to 2 decimal places.)

2.06. Explanation: Quick ratio = Quick assets / Current liabilities. Quick ratio = (Cash + Receivables + Current marketable securities) / Current liabilities. Quick ratio = ($7,800 + $13,950 + $0) / ($3,450 + $7,130) = $21,750 / $10,580 = 2.06.

expenditure that add to the utility of fixed assets for more than one accounting period are

capital expenditures

Accumulated Depreciation

contra asset account

Expenditures for research and development are generally recorded as

current operation expenses

expected useful life

estimated at the time that the asset is placed in service

process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called

depletion

a fixed asset's estimated value at the time it is to be retired from service is called

residual value

Regardless the depreciation method

the amount of total depreciation expense during the life of the asset will be the same

The following balance sheet information is provided for Apex Company for Year 2: Assets: Cash = $7,000 Accounts receivable = $13,150 Inventory = $15,500 Prepaid expenses = $2,300 Plant and equipment, net of depreciation = $20,200 Land = $14,100 Total Assets = $72,250 Liabilities and Stockholders' Equity: Accounts payable = $3,210 Salaries payable = $7,530 Bonds payable (Due in ten years) = $15,500 Common stock, no par = $13,000 Retained earnings = $33,010 Total liabilities and stockholders' equity = $72,250 What is the company's working capital?

$27,210. Explanation: Working capital = Current assets - Current liabilities. Working capital = ($7,000 + $13,150 + $15,500 + $2,300) - ($3,210 + $7,530) = $37,950 - $10,740 = $27,210.