Int. Accounting I, Chapter 10-11

The rate of return on total assets is computed by dividing

net income by average total assets

Falcon Company purchased a depreciable asset for $175,000. The estimated salvage value is $14,000 and the estimated useful life is 10 years. The straight-line method will be used for depreciation. What is the depreciation base of this asset?

$161,000

Henry Company purchased a depreciable asset for $360,000. The estimated salvage value is $33,000 and the estimated useful life is 10 years. The straight-line method will be used for depreciation. What is the depreciation base of this asset?

$327,000

Interest cost incurred in purchasing an asset that is ready for its intended use should

(none of these answers are correct)

Which of the following disclosures is not required in the financial statements regarding depreciation?

Details demonstrating how depreciation was calculated

Of the following costs related to the development of natural resources, which one is not a part of depletion cost?

Tangible equipment costs associated with machinery used to extract the natural resource

Which of the following statements is true regarding capitalization of interest?

The amount of interest cost capitalized during the period should not exceed the actual interest cost incurred

A company should immediately recognize

any loss when it ignorantly pays too much for an asset originally

The asset turnover is computed by dividing

net sales by average total sales

When a company purchases land as a site for a plant, interest costs capitalized during the period of construction are part of the

cost of the plant

Ringler Corporation exchanges one plant asset for a similar plant asset and gives cash in the exchange. The exchange is not expected to cause a material change in the future cash flows for either entity. If a gain on the disposal of the old asset is indicated, the gain will

effectively reduce the amount to be recorded as the cost of the new asset

When a plant asset is acquired by issuance of common stock, the cost of the plant asset is properly measured by the

market price of the stock

Accounting recognition should be given to some or all of the gain realized on a nonmonetary exchange of plant assets except when the exchange has

no commercial substance and additional cash is received

When funds are borrowed to pay for construction of assets that qualify for capitalization of interest, the excess funds not needed to pay for construction may be temporarily invested in interest-bearing securities. Interest earned on these temporary investments should be

recognized as revenue of the period.

A general description of the depreciation methods applicable to major classes of depreciable assets

should be included in corporate financial statements or notes thereto.

The period of time during which interest must be capitalized ends when

the asset is substantially complete and ready for its intended use

The book value of a plant asset is

the asset's acquisition cost less the total related depreciation recorded to date.

The cost of a nonmonetary asset acquired in exchange for another nonmonetary asset when the exchange has commercial substance is usually recorded at

the fair value of the asset given up, and a gain or loss is recognized

Plant assets purchased on long-term credit contracts should be accounted for at

the present value of the future payments