11 A company that has a large investment in property, plant and equipment and that fails to systematically replace those assets generally reports a decreasing return on assets over the useful life of its asset base. True False 12 Expenditures on PP&E that increase future service potential should be added to the remaining unexpired cost of the asset and be charged to expense over the estimated remaining period of benefit. True False

11 A company that has a large investment in property, plant and equipment and that fails to systematically replace those assets generally reports a decreasing return on assets over the useful life of its asset base. True False 12 Expenditures on PP&E that increase future service potential should be added to the remaining unexpired cost of the asset and be charged to expense over the estimated remaining period of benefit. True False

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter12: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 12.2.2P: Differential analysis report for machine replacement proposal Catalina Tooling Company is...

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True or False _____ PAS 16 defines depreciation as "the decrease in the value of an asset." ______ According to PAS 16, items of PPE are initially measured at cost and subsequently measured using either the cost model or the fair value model. _______ an entity acquires an asset for P120k. The asset is estimated to have a useful life of 10 years and a residual value P20K. tHE STRAIGHT LINE DEPRECIATION RATE BASED ON DEPRECIABE AMOUNT IS 10% _______ An entity acquires an asset for P1M. A P200k residual value is estimated for the asset. Ar the end of the asset's useful life, the accumulated depreciation wil be equal to P1M. _______ A machine acquired on the 20th of Julyv(and ready for its intended use as at this date) would most likely be depreciated starting on the 1st of August. _______ A change in the depreciation method, useful life or residual value of a PPE is accounted for retrospectively.
1. Which of the statements is incorrect concerning the depreciation methods? a) Under the output method, the cost per unit of production is constant. b) The straight-line method is particularly appropriate where the asset is expected to decline in usefulness as a function of time and the expected use pattern of the asset is fairly constant over time. c) The sum of the years' digits method provides for a decreasing depreciation charge. d) First-year depreciation under the double declining balance method is computed as the depreciable amount multiplied by double the straight-line rate. e) None of the choices is incorrect 2. All of the following statements are true, except: a) Property acquired in exchange for shares or other securities of the enterprise should be recorded at its fair value or the fair value of the securities, whichever is more clearly evident b) When property is acquired in exchange for another, its cost is usually determined by reference to the fair value of the asset…
36 ______________ spreads the depreciable cost evenly over the estimated useful life of the asset. a. None of the given options b. Straight-line method c. Declining-balance method d. Units of production method Clear my choice
Which of the following will cause a company to show a lower amount of amortization ofintangible assets in the first year after acquisition?A. A higher residual valueB. A higher amortization rateC. A shorter useful life
Which of the following will maximize net income by minimizing depreciation expense in the first year of the asset’s life? a. Short service life, high residual value, and straightline depreciation.b. Long service life, high residual value, and straightline depreciation.c. Short service life, low residual value, and doubledeclining- balance depreciation.d. Long service life, high residual value, and doubledeclining- balance depreciation.
______21. The acquisition costs of property, plant, and equipment should include all normal, reasonable and necessary costs to get the asset in place and ready for use. ____ 22. An estimate of the amount which an asset can be sold at the end of its useful life is called residual value. ____ 23. Federal unemployment taxes are paid by the employer and the employee. ____ 24. When minor errors occur in the estimates used in the determination of depreciation, the amounts recorded for depreciation expense in the past should be corrected. ____ 25. Residual value is not relevant when calculating the annual depreciation expense using the double declining-balance method (do not consider the calculation for the final year). True and False questions
Differential analysis report for machine replacement proposal Catalina Tooling Company is considering replacing a machine that has been used in its factory for two years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows: Annual nonmanufacturing operating expenses and revenue are not expected to be affected by the purchase of the new machine. Instructions List other factors that should be considered before a final decision is reached.
An accelerated depreciation method that takes more expense in the first few years of the assets life is ________. A. units-of-production depreciation B. double-declining-balance depreciation C. accumulated depreciation D. straight-line depreciation
All equipment costs will continue to be depreciated on a straight-line basis. For simplicity, ignore income taxes and the time value of money. Q.Assume that the capital expenditures to replace and upgrade the production equipment are as given in the original exercise, but that the production and sales quantity is not known. For what production and sales quantity would TechGuide (i) upgrade the equipment or (ii) replace the equipment?
What is proper time or time period over which to match the cost of an intangible asset with revenues if it is likely that the benfit of the asset will last fro an indefinite period? a. 40 yrs b. 50 yrs c. immediately d. at such time as reduction in value can be quantitatively determined e. either a or b f. none from the choices given
7. When the residual value of plant and machinery has drastically changed, the entity should a. Change the annual depreciation for the current year and future years b. Retrospectively change the depreciation charge based on the revised residual value c. Ignore the effect of the change on annual depreciation d. Change the depreciation charge and treat it as a correction of error 8. Which of the following is among those listed under PAS 29 as indicators of hyper-inflation? a. People prefer to keep their wealth in monetary assets b. The cumulative inflation rate over five years exceeds or is100% c. The people prefer to keep their wealth in relatively stable foreign currency d. All of the statements are indicators of hyperinflation 9. An entity uses periodic inventory system and neglected to record a purchase of merchandise on account at year end. This merchandise was omitted from the year end physical…
Indicate whether each of the following statements is true or false. Depreciation, depletion, and amortization all involve the allocation of the cost of property, plant and equipment (PPE) to expense. Answer An accelerated depreciation method is appropriate when the asset’s economic usefulness is the same each year Answer The declining-balance method does not deduct the residual value in computing the depreciation base. Answer