81. Thomas Enterprises purchased a depreciable asset on October 1, 2008 at a cost of $100,000.
The asset is expected to have a salvage value of $15,000 at the end of its five-year useful life. If the asset is depreciated on the double-declining-balance method, the asset’s book value on December 31, 2010 will be:
82. Based on the information provided in question #81, Thomas Enterprises should recognize what amount of depreciation expense in 2012?
83. Lomax Enterprises purchased a depreciable asset for $22,000 on March 1, 2008. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset’s salvage value is $2,000, what will be the amount of accumulated depreciation on this asset on December 31, 2011?
84. Based on the information provided in question # 83, Lomax Enterprises should recognize depreciation expense in 2011 in the amount of:
85. The following information is available on a depreciable asset owned by First Bank & Trust:
The asset’s book value is $70,000 on October 1, 2010. On that date, management determines that the asset’s salvage value should be $5,000 rather than the original estimate of $10,000. Based on this information, the amount of depreciation expense the company should recognize during the last three months of 2010 would be:
86. Many companies use an accelerated depreciation method because:
A. It is required by the tax code.
B. It is required by financial reporting rules.
C. It yields larger depreciation expense in the early years of an asset’s life.
D. It yields a higher income in the early years of the asset’s useful life.
E. The results are identical to straight-line depreciation.
87. The modified accelerated cost recovery system (MACRS):
A. Is included in the U.S. federal income tax rules for depreciating assets.
B. Is an out-dated system that is no longer used by companies.
C. Is required for financial reporting.
D. Is identical to units of production depreciation.
E. All of these.
88. The straight-line depreciation method and the double-declining-balance depreciation method:
A. Produce the same total depreciation over an asset’s useful life.
B. Produce the same depreciation expense each year.
C. Produce the same book value each year.
D. Are acceptable for tax purposes only.
E. Are the only acceptable methods of depreciation for financial reporting.
89. Total asset turnover is used to evaluate:
A. The efficiency of management’s use of assets to generate sales.
B. The necessity for asset replacement.
C. The number of times operating assets were sold during the year.
D. The cash flows used to acquire assets.
E. The relation between asset cost and book value.
90. A total asset turnover ratio of 3.5 indicates that:
A. For every $1 in sales, the firm acquired $3.50 in assets during the period.
B. For every $1 in assets, the firm produced $3.50 in net sales during the period.
C. For every $1 in assets, the firm earned gross profit of $3.50 during the period.
D. For every $1 in assets, the firm earned $3.50 in net income.
E. For every $1 in assets, the firm paid $3.50 in expenses during the period.