Exam 7: Operating Assets

-Refer to Fireworks City. Determine the asset turnover ratio for 2013.

Farley Mills purchased new machinery at the beginning of 2012 for $200,000. The machines had an estimated life of 5 years, an estimated residual value of $25,000, and were depreciated using the straight-line method. At the beginning of 2013, the machines were sold for $150,000 because management was unhappy with their performance.Determine the following amounts:

-Refer to Fabulous Creations. In the notes to the financial statements, the company indicates that it uses different depreciation methods for different types of plant and equipment assets. Explain why the company might follow this policy.

Natural resources can be replaced or restored only by an act of nature.

-Refer to Fireworks City. During the year, the company sold some equipment that had an original cost of $60,000. Which statement is true concerning transactions that must have occurred during the period?

An expenditure that does not increase the future economic benefits of the asset is referred to as a capital expenditure.

FASB allows companies to use different depreciation methods so they can capture declining service potential of an operating asset.

A contra account called ____________________ is used to depreciate property, plant, and equipment.

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) a.Balance Sheet--Property, Plant, and Equipment b.Balance Sheet--Intangible Assets c.Balance Sheet--Current Assets d.Balance Sheet--Other Assets e.Income Statement--Operating Section f.Income Statement--Other Revenue and Expense Section -Research and development costs

Match these terms with their correct definition. a.Book value e.Depreciation b.Cost f.Impairment c.Depletion g.Involuntary disposal d.Depreciable cost h.Residual value -Situation where an asset is lost or destroyed through theft, acts of nature, or by accident

A company purchased equipment at the beginning of 2013 for $21,000 and decided to depreciate it over a 5-year period using the straight-line method. The equipment's residual value was estimated at $1,000. The estimated fair market value at the end of 2013 was $20,000. Which of the following statements is correct at December 31, 2013?

Operating assets with no physical properties are called

Match the items and explain how each item should be accounted for. (Choices may be used more than once.) a.This item should be included as part of the cost of the equipment.b.This item should be considered a revenue expenditure. -During the installation, the equipment was damaged and repair costs of $2,000 were incurred.