Exam 7: Operating Assets

A construction company purchased a piece of equipment with a price of $100,000 on March 1 of the current year. The amounts are related to the equipment purchase. Match the items and explain how each item should be accounted for. (Choices may be used more than once.) -The company financed the equipment purchase with a bank loan. Interest of $3,000 was paid on the loan during the year.

If a company's asset turnover ratio decreased from 2019 to 2020, which of the following conclusions can be made?

Describe the relationship between the depreciation method chosen and income taxes paid in the early years of asset life.

Many companies use MACRS (Modified Accelerated Cost Recovery System) depreciation for

Match these terms with their correct definition. -Consist of the long-lived assets that are owned by a business

Select the account to which each of the following costs would be debited. (Choices may be used more than once.) -The sales taxes paid related to a machine purchased.

Which of the following accounts would not be reported in the Property, Plant, and Equipment section of a balance sheet?

Select the account to which each of the following costs would be debited. (Choices may be used more than once.) -The costs to pave a parking lot.

Depreciation is a process by which

Capitalizing an expenditure rather than recording it as a revenue expenditure

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) -Patents

An impairment is a temporary decline in the future benefit or service potential of an asset.

Which of the following costs related to the purchase of production equipment would be considered a revenue expenditure?

An accumulated ________ account is used when writing off natural resources.

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. (Choices may be used more than once.) -This method minimizes taxable income

Research and development costs are

Select the account to which each of the following costs would be debited. (Choices may be used more than once.) -The transportation charges related to the acquisition costs of a new piece of machinery.

The ______________ depreciation method is the GAAP depreciation method used most frequently.

Falling Leaves Lawn Care ​ This company purchased new excavating equipment at the beginning of 2019. The equipment has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2019. The equipment was used 20,000 hours during 2019 and 24,000 hours during 2020. The number of expected hours over 5 years is 100,000. -Refer to Falling Leaves Lawn Care. The company wants to use the depreciation method that will result in the highest depreciation expense for 2019. Which method should be used?

Equipment with a residual value of $50,000 at the end of 10 years was acquired at the beginning of 2019 for $500,000. Assuming the use of the straight-line depreciation method, the journal entry to record depreciation expense for 2021 will have a debit to