BUSINESS

Question 12  of 37

Which of the following depreciation methods allocates a fixed amount of depreciation to each ± miles driven, copies made, or some other number of components?

 

Straight-line

Declining-balance

Units-of-production

All of the above

 

Question 13  of 37

Which of the following depreciation methods writes off more depreciation near the start of an asset’s life than in later years?

 

Units-of-production

Straight-line

Declining-balance

All of the above

 

Question 14  of 37

Which of the following is the purpose of accumulated depreciation?

 

Accumulated depreciation’s purpose is to provide details about the cost expiration of natural assets.

Accumulated depreciation’s purpose is to provide details about the cost expiration of plant assets.

Accumulated depreciation is an expense.

Accumulated depreciation’s purpose is to provide details about the cost expiration of intangible assets.

 

Question 15  of 37

Table 10.1

On January 1, 2011, Zane Manufacturing Company purchased a machine for $40,000. The company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000 hours in 2011 and 12,000 in 2012.

Refer to Table 10.1. What is depreciation expense for 2011, if the company uses double-declining balance depreciation?

 

$6,667

$6,000

$12,000

$13,333

 

Question 16  of 37

Table 10.1

On January 1, 2011, Zane Manufacturing Company purchased a machine for $40,000. The company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000 hours in 2011 and 12,000 in 2012.

Refer to Table 10.1. What is depreciation expense for 2012, if the company uses double-declining balance depreciation?

 

$8,889

$6,000

$13,333

$10,000

 

Question 17  of 37

A company purchased a computer on July 1, 2009. The computer has an estimated useful life of 5 years and will have no salvage value. It is estimated that the computer can be used for 5,000 hours. The computer was used for 450 hours during 2009. If the goal is to reduce taxable income to the lowest amount, which method should be elected and how much depreciation can be deducted in 2009?

 

Double declining-balance, $2,000

Straight-line, $1,000

Units-of-production, $900

None of the above

 

Question 18  of 37

Which of the following items is included in the journal entry if a company sells equipment at a price greater than its book value?

 

A credit to accumulated depreciation

A debit to equipment for its book value

A credit to gain on sale of equipment

A debit to loss on sale of equipment

 

Question 19  of 37

Which of the following items is included in the journal entry if a company sells equipment at a price less than its book value?

 

A debit to equipment for its book value

A credit to gain on sale of equipment

A credit to accumulated depreciation

A debit to loss on sale of equipment

 

Question 20  of 37

Which of the following items should be depleted?

 

Natural resources

Land

Intangible property

Tangible property, plant, and equipment other than land

 

Question 21  of 37

Which of the following is the proper accounting treatment for a purchased patent?

 

A purchased patent must be capitalized and amortized over 70 years or less.

A purchased patent must be capitalized and amortized over 20 years or less.

A purchased patent must be expensed.

A purchased patent must be capitalized and expensed each year to the extent that the value has declined.

 

Question 22  of 37

Case 17.4

The following is a summary of information presented on the income statements of Haley Publications and Johnston Publications for December 31, 2007.

Haley PublicationsJohnston Publications

Account2007%2007%

Net sales revenue$487,000100.00%$500,000100.00%

Cost of goods sold400,00082.14%395,00079.00%

Gross profit87,00017.86%105,00021.00%

Selling and general expenses30,0006.16%50,00010.00%

Income from operations57,00011.70%55,00011.00%

Income tax expense17,1003.51%16,5003.30%

Net income$39,9008.19%$38,5007.70%

 

Refer to Case 17.4. Which company has the better relationship between gross profit and net sales revenue?

 

The companies have the same relationship between gross profit and net sales revenue.

Haley Company has the better relationship between gross profit and net sales revenue.

Johnston Company has the better relationship between gross profit and net sales revenue.

It is impossible to determine which company has the better relationship between gross profit and net sales revenue using the information presented.

 

Question 23  of 37

Which of the following types of analysis include common-size financial statements?

 

Common-size financial statements are a type of ratio analysis.

Common-size financial statements are a type of trend analysis.

Common-size financial statements are a type of vertical analysis.

Common-size financial statements are a type of horizontal analysis.

 

Question 24  of 37

Which of the following is the formula to compute day’s sales in receivable?

 

The formula is net credit sales / average inventory.

The formula is net credit sales / average net accounts receivable.

The formula is average net accounts receivable / one day’s sales.

The formula is cost of goods sold / average inventory.

 

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