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

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

Question 1

Which of the following costs should NOT be included in the cost of land when accounting for plant assets?

Accepted Answer

Paving the parking lot

Question 2

A company purchases land and a building for a lump-sum price of $$2,800,000. The appraised values are 300$$,000 for the land and $2,700,000 for the building. What amount should be allocated to the land?

Accepted Answer

$280,000

Question 3

Which of the following is a capital expenditure?

Accepted Answer

Adding a new wing to a building

Question 4

Which depreciation method results in the highest depreciation expense in the first year?

Accepted Answer

Double-declining-balance method

Question 5

A machine was purchased for $50,000 with an estimated useful life of 10 years and no residual value. Using the straight-line method, what is the annual depreciation expense?

Accepted Answer

$5,000

Question 6

Which of the following statements about depreciation is TRUE?

Accepted Answer

Depreciation allocates the cost of an asset over its useful life.

Question 7

FedEx sells equipment for $$7,300. The equipment cost 10$$,000, has been depreciated using straight-line over 10 years, and was purchased 3.75 years ago. What is the gain or loss on sale? (No residual value)

Accepted Answer

Gain of $300

Question 8

Which of the following is TRUE regarding the accounting for natural resources?

Accepted Answer

Depletion expense is recorded as the resource is extracted.

Question 9

A patent is acquired for $170,000 and has a useful life of 5 years. What is the annual amortization expense?

Accepted Answer

$34,000

Question 10

Which of the following statements about goodwill is correct?

Accepted Answer

Goodwill is only recorded when purchased in a business combination.

Question 11

If an asset’s net book value is $$100 million, estimated future cash flows are 80 $$million, and fair value is $70 million, what is the impairment loss?

Accepted Answer

$10 million

Question 12

Under U.S. GAAP, how are research and development (R&D) costs treated?

Accepted Answer

Expensed as incurred

Question 13

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

Accepted Answer

ROA = Net profit margin ratio $$	imes$$ Total asset turnover

Question 14

Which depreciation method is most commonly used by companies for financial reporting purposes, according to the provided data?

Accepted Answer

Straight-line

Question 15

A company purchases equipment for $$75,000, with a residual value of 12$$,000 and a useful life of 5 years. Using the straight-line method, what is the annual depreciation expense?

Accepted Answer

$10,000

Question 16

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

Accepted Answer

They are always amortized over their useful lives

Question 17

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

Accepted Answer

Acquisition of equipment

Question 18

Under IFRS, which of the following is TRUE regarding asset impairment?

Accepted Answer

Impairment losses can be reversed in future periods for some assets

Question 19

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

Accepted Answer

SLN

Question 20

Which of the following is an example of an ESG factor that could impact the estimated useful life of a company’s plant asset?

Accepted Answer

A shift toward renewable energy reducing the value of oil and gas equipment

Plant Assets, Natural Resources, and Intangibles: Comprehensive Study Notes

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