Q: Which of the following best describes the DuPont Analysis for Return on Assets (ROA)?

$$ROA = \text{Net profit margin ratio} \times \text{Total asset turnover}$$

Q: Which of the following is a correct formula for calculating book value?

$$\text{Book Value} = \text{Cost} - \text{Accumulated Depreciation}$$

Question 1

Which of the following costs should NOT be included in the cost of land when preparing a company's balance sheet?

Accepted Answer

Cost of paving the parking lot

Question 2

A company purchases land and a building together for $$2,800,000. The appraised values are 300$$,000 for the land and $2,700,000 for the building. What amount should be allocated to the building using the relative-sales-value method?

Accepted Answer

$2,520,000

Question 3

Which of the following is a capital expenditure?

Accepted Answer

Major engine overhaul that extends the truck's useful life

Question 4

A company purchases equipment for $$41,000 with an estimated residual value of 1$$,000 and a useful life of 5 years. Using the straight-line method, what is the annual depreciation expense?

Accepted Answer

$8,000

Question 5

Which depreciation method is best suited for assets that generate more revenue earlier in their useful life?

Accepted Answer

Double-declining-balance method

Question 6

FedEx sells equipment on September 30 for $$7,300 cash. The equipment cost 10$$,000, had no residual value, and was depreciated straight-line over 10 years. If accumulated depreciation at the time of sale is $3,750, what is the gain or loss on the sale?

Accepted Answer

Gain of $1,050

Question 7

Which of the following statements about asset impairment is correct under U.S. GAAP?

Accepted Answer

Impairment is recognized if net book value exceeds estimated future cash flows, and the loss is the difference between net book value and fair value.

Question 8

A company acquires a patent for $170,000 and estimates its useful life to be 5 years. What is the annual amortization expense?

Accepted Answer

$34,000

Question 9

Which of the following is TRUE regarding the accounting for research and development (R&D) costs under U.S. GAAP?

Accepted Answer

R&D costs are expensed as incurred.

Question 10

A company purchases an oil reserve for $100,000,000 containing 10,000,000 barrels of oil. If 3,000,000 barrels are extracted, what is the depletion expense for the period?

Accepted Answer

$30,000,000

Question 11

Which of the following best describes goodwill?

Accepted Answer

The excess of the purchase price over the fair value of net identifiable assets acquired in a business combination.

Question 12

Which of the following transactions would be classified as an investing activity on the statement of cash flows?

Accepted Answer

Cash paid for the purchase of equipment

Question 13

A company changes the estimated useful life of a machine from 10 years to 15 years after 4 years of use. What is the correct way to account for this change?

Accepted Answer

Prospectively, by spreading the remaining book value over the new estimated useful life.

Question 14

Which of the following is NOT a characteristic of intangible assets?

Accepted Answer

They have physical substance.

Question 15

Under the double-declining-balance (DDB) method, what is the depreciation rate for an asset with a 5-year useful life?

Accepted Answer

40%

Question 16

Which of the following best describes the DuPont Analysis for Return on Assets (ROA)?

Accepted Answer

$$ROA = 	ext{Net profit margin ratio} 	imes 	ext{Total asset turnover}$$

Question 17

Which of the following is TRUE regarding the treatment of leased assets under current accounting standards?

Accepted Answer

Both the right-to-use asset and the lease liability are recorded on the balance sheet.

Question 18

Which of the following is a correct formula for calculating book value?

Accepted Answer

$$	ext{Book Value} = 	ext{Cost} - 	ext{Accumulated Depreciation}$$

Question 19

Which Excel function would you use to calculate straight-line depreciation for an asset?

Accepted Answer

SLN

Plant Assets, Natural Resources, and Intangibles: Financial Accounting Study Notes

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