Exam 7: Operating Assets

Fabulous Creations The assets section of the company's balance sheets for the years ended December 31, 2020 and 2019, is provided below. -Refer to Fabulous Creations. The company recorded depreciation expense of $344 million for 2019. Calculate the following ratios for 2020. A)If Net Sales were $60,000 for 2020, what would be the fixed asset turnover ratio? B)Average age of property, plant, and equipment

Depreciation has an effect on the company's income taxes.

Equipment purchased at the beginning of the year for $200,000 with a residual value of $20,000 is being depreciated over a 5-year period using the double-declining-balance method. Which of the following statements is correct concerning the financial statements at the end of the year?

If a company is concerned about minimizing its income tax burden, it would use the straight-line depreciation method to accomplish this objective.

You are Chief Financial Officer for Five Star Resorts, Inc. You are reviewing the following transactions: 1. Adding a new patio deck to the resort's upscale restaurant, $180,000 2. Painting the ocean side beach houses, $75,000 3. Purchasing additional golf carts, $25,000 4. Rebuilding the engine in the resort's airport shuttle bus, $10,000 5. Replacing the old air conditioning unit in the golf shop with a more efficient one, $20,000 Your accountant has capitalized all of these items and intends to depreciate them over the appropriate asset's remaining useful life as originally estimated. Indicate whether you agree or disagree with your accountant's treatment of each item. In those cases where you disagree, state the proper treatment of that expenditure. Use the following table:

Match these terms with their correct definition. -Assets such as coal deposits, oil reserves, and mineral deposits

Using different depreciation methods for book purposes versus tax purposes for the same asset is

How does goodwill arise? How is it accounted for and reported on the financial statements?

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

Fireworks City Information for 2020 and 2019 is presented below for this company which uses the straight-line depreciation method. -Refer to Fireworks City. Using the data for 2020, determine the average life of the company's property, plant, and equipment rounded to one decimal place.

Which of the following is an intangible asset?

Match these terms with their correct definition. -Include costs such as legal fees, stock issue costs, accounting and promotional fees

Fabian Woodworks ​ This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020. -Refer to Fabian Woodworks. Based on the information presented above, what method of depreciation will maximize depreciation expense in 2019?

Distinguish between current assets and operating assets.

Assets classified as property, plant, and equipment are reported at

Given below are several accounts and balances: A) Prepare the property plant and equipment section of the balance sheet at December 31, 2020 in the space provided below. B) By how much will net income increase or decrease during 2020 as a result of the above information?

The intangible asset called ____________________ can only exist if one company purchases another business and the cost exceeds the fair market values of the identifiable net assets at the time acquired.

Fireworks City Information for 2020 and 2019 is presented below for this company which uses the straight-line depreciation method. -Refer to Fireworks City. Using the data for 2020, determine the average age of the company's property, plant, and equipment.

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 cash purchase was made on March 8 with terms of 2/10, net 30.

Fabulous Creations The assets section of the company's balance sheets for the years ended December 31, 2020 and 2019, is provided below. -Refer to Fabulous Creations. Explain the impact on net income and cash flows of using straight-line depreciation for financial reporting and accelerated depreciation methods for income tax purposes.