ACC 291 Chapter 9 – Flashcards

If a plant asset is retired before it is fully depreciated and no salvage value is received, a ______ on disposal occurs.

Where is the loss on disposal of a plant asset reported in the financial statements? A : as a direct decrease to the capital account on the balance sheet B : as a direct increase to the capital account on the balance sheet C : in the Other Expenses and Losses section of the income statement D : in the Other Revenues and Gains section of the income statement

To find the asset turnover ratio, divide A : net income by average total assets B : net income by ending total assets C : net sales by average total assets D : net sales by ending total assets

The cost of intangible assets with ___________ should not be amortized.

Companies can amortize a patent for a period that cannot exceed A : 20 years B : 50 years C : 10 years D : 40 years

A patent that has a legal life of 20 years and a useful life of less than 20 years should A : be amortized over its useful life B : be amortized over 20 years regardless of its useful life C : be expensed in the year of acquisition D : not be amortized

Companies usually show intangible assets separately under "Intangible assets." A : True B : False

Which of the following should be disclosed in the balance sheet or the notes to the financial statements? A : balances of the major classes of assets B : amount of depreciation and amortization expense for the period C : depreciation and amortization methods used D : all of the choices are correct

In selecting a depreciation method, a company should choose the method that A : best measures the plant asset's contribution to revenue over its useful life B : best measures the plant asset's market value over its useful life C : has been used most often in the past by the company D : is easiest to apply

Which of the following expenditures is intended to add to the utility of plant assets for more than one accounting period? A : current expenditures B : revenue expenditures C : committed expenditures D : capital expenditures

Capital expenditures are expenditures that increase the company's investment in A plant assets B purchased goods C bonds D stocks

A change in the estimated salvage value of a plant asset requires a restatement of both current and future years' depreciation. A True B False

Which ratio is calculated as net sales divided by average total assets? A average sales B beginning total assets C net income D asset turnover

An operating lease allows the lessee to account for the transaction as a rental. A True B False

All of the following are classified under property, plant and equipment except A land improvement, such as parking lots and fences B a truck held for resale by an automobile dealership C a building used as a factory D land used in ordinary business operations

If the invoice price is $30,000 and freight charges are $5,000, then the total cost of equipment is $35,000. A True B False

On December 1, 2013, Acme Company places a new asset into service. The cost of the asset is $50,000 with an estimated 5-year life and $10,000 salvage value at the end of its useful life. What is the depreciation expense for 2014 if Acme Company uses the straight-line method of depreciation? A $8,000 B $1,333 C $4,500 D $2,000

If the estimate of the useful life of equipment changes, the amount of periodic depreciation _________ be changed in the current year and in future years.

A plant asset is used in the operations of the business. A True B False

The change in a plant asset's market value ______________ be measured during ownership.

The cost of a long-term asset is expensed as the asset benefits the company. A : True B : False

Gains on disposal occur when proceeds from the ________ of a plant asset exceeds its book value. A sale B depreciation C exchange D amortization

Gains on disposal occur when the proceeds from the sale of a plant asset are greater than the A market value B current value C depreciated value D book value

________ to a plant asset that increase its operating efficiency, productive capacity, or expected useful life are generally debited to the asset affected. A Ordinary repairs B Indirect expenses C Regular maintenance D Additions and improvements

A depreciable cost is the cost of an asset A less its face value B less its book value C minus accumulated depreciation D less its salvage value

In determining the cost of land, companies do NOT include A costs associated with new building construction B cash purchase price of property C accrued property taxes and other liens on the land D attorney's fees and real estate brokers' commissions

Interest incurred_____________ construction can be included in the cost of constructing a building.

Which of the following should be depreciated over the useful life of land improvements? A land or the land improvements, whichever is longer B land improvements C buildings on the land D land

Salt's Imports accepted a credit card for a $400 purchase. The cost of the goods sold is $300. The credit card company charges a 3% fee. What is the impact of this purchase on net operating income? A $400 increase B $12 increase C $88 increase D $103 increase You selected B : $12 increase got it wrong the correct Answer is C : $88 increase Solution ($400 - $300) - ($400 x .03) = $88

Two advantages for the retailer of accepting a national credit card are that the issuer performs the credit investigation and that the issuer undertakes the collection process. A True B False

A captive finance company is prevented by law from lending money for the purpose of purchasing its owner company's goods. A True B False

How do retailers handle purchases made with Visa and MasterCard? A by charging the credit card companies a fee B by keeping careful records for the credit card companies C as cash sales D as sales on credit

Businesses pay factors to collect receivables for them. A True B False

How should ordinary repairs be recognized? A as investment expenditures B as capital expenditures C as revenue expenditures D as production expenditures

A permanent decline in the ___________ of an asset is referred to as an impairment. A amortization B depreciation C cost D market value

Which of the following is true? A Previously recorded depreciation expenses are NOT corrected when a change in estimate is made for the current year. B Previously recorded depreciation expenses are corrected when a change in estimate is made for the current year. C Depreciation expenses can be revised for prior, current, and future years. D Depreciation expenses can be revised for prior and current years but not future years.

Expenditures that occur frequently during the period of ownership are A capital investments B additions and improvements C capital expenditures D ordinary repairs