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.
91. Total asset turnover is calculated by dividing:
A. Gross profit by average total assets.
B. Average total assets by gross profit.
C. Net sales by average total assets.
D. Average total assets by net sales.
E. Net assets by total assets.
92. A company had average total assets of $897,000. Its gross sales were $1,090,000 and its net sales were $1,000,000. The company’s total asset turnover equals:
93. Dell had net sales of $35,404 million. Its average total assets for the period were $14,502 million. Dell’s total asset turnover equals:
94. Land improvements are:
A. Assets that increase the usefulness of land, and like land, are not depreciated.
B. Assets that increase the usefulness of land, but that have a limited useful life and are subject to depreciation.
C. Included in the cost of the land account.
D. Expensed in the period incurred.
E. Also called basket purchases.
95. Plant assets include:
B. Land improvements.
D. Machinery and equipment.
E. All of these.
96. The cost of land can include:
A. Purchase price.
B. Assessments by local governments.
C. Costs of removing existing structures.
D. Fees for insuring the title.
E. All of these.