71. On January 1, 2010, Wasson Company purchased a delivery vehicle costing $40,000. The vehicle has an estimated 6-year life and a $4,000 residual value. Wasson estimates that the vehicle will be driven 100,000 miles. What is the vehicle's book value as of December 31, 2011 assuming Wasson uses the units-of-production depreciation method and the vehicle was driven 10,000 miles during 2010 and 18,000 miles during 2011? 
A. $29,920
B. $28,800
C. $24,800
D. $25,920

72. Which of the following statements is false? 
A. The book value at the end of an asset's useful life will be the same under all the depreciation methods allowed under GAAP.
B. The balance in the accumulated depreciation account will be the same at the end of an asset's useful life under all the methods allowed under GAAP.
C. Once you select a depreciation method, then you must use this method for all depreciable assets.
D. The annual depreciation expense and year-end book values will differ under the various depreciation methods over the life of the asset.

73. Under what conditions would a company most likely adopt the double-declining-balance method for financial reporting? 
A. They have high technology, robotic equipment in their plant that becomes obsolete quickly and declines in utility to the company more rapidly in the early years of the assets' lives.
B. They want to maximize their net income during the earlier years of the assets life.
C. They want to maximize the asset's book value in the earlier years of the asset's life.
D. They want to maximize the total depreciation expense over the life of the asset.

74. Which of the following statements is correct? 
A. Companies can change the method of depreciating assets from one year to the next.
B. Companies can affect the book value at the end of an asset's life by choosing one method of depreciation over another.
C. Companies can use one method of depreciation for some of their long-lived, productive assets but then use a different method for another group or type of long-lived, productive assets.
D. Companies can minimize an asset's book value in the first year of use by selecting the straight-line depreciation method rather than the double-declining-balance method.

75. Which of the following statements is correct? 
A. Using straight-line depreciation in comparison to an accelerated depreciation method will result in a lower reported amount of total assets at end of the first year of an asset's life.
B. Using accelerated depreciation in the first year of an asset's life will result in a higher net income during the first year compared to using the straight-line depreciation method.
C. Using an accelerated depreciation method will lead to a higher fixed asset turnover ratio for the first year.
D. Using straight-line depreciation in comparison to an accelerated depreciation method will lead to a higher book value at the end of an asset's life.

76. Which of the following statements about the Modified Accelerated Cost Recovery System (MACRS) is correct? 
A. It is similar to the units-of-production depreciation method.
B. It is applied using longer asset lives than the estimated useful lives required by GAAP.
C. It provides a short-term tax benefit because of the higher depreciation expense reported in the early years of an asset's life.
D. It is acceptable for use when preparing financial statements.

77. Which of the following statements about asset impairment is false? 
A. Asset impairment loss is the difference between an asset's net book value and its estimated future cash flows.
B. If an asset is impaired, a loss would be recognized in the period it can be estimated.
C. Impairment will lead to writing down the asset's net book value.
D. Asset impairment occurs when the estimated future cash flows are less than the asset's net book value.

78. A company has some bottling equipment which cost $8.5 million, has a net book value of $4.1 million, estimated future cash flows of $3.7 million, and a fair value of $3.1 million. How much is the asset impairment loss? 
A. $5.4 million
B. $4.1 million
C. $0.4 million
D. $1.0 million

79. A company has some bottling equipment which cost $8.5 million, has a net book value of $4.1 million, estimated future cash flows of $3.7 million, and a fair value of $3.1 million. Which of the following correctly describes the recording of the asset impairment loss? 
A. The loss account is debited for $1.0 million and the asset account is credited for $1.0 million.
B. The loss account is debited for $0.4 million and the asset account is credited for $0.4 million.
C. The loss account is debited for $5.4 million and the asset account is credited for $5.4 million.
D. The loss account is debited for $4.8 million and the asset account is credited for $4.8 million.

80. On December 31, 2010, Hamilton Inc. sold a used industrial crane for $600,000 cash. The original cost of the crane was $5.0 million and its accumulated depreciation equaled $4.2 million on December 31, 2010. What is the gain or loss from the December 31, 2010 equipment sale? 
A. $800,000 gain
B. $800,000 loss
C. $200,000 loss
D. $200,000 gain

71. On January 1, 2010, Wasson Company purchased a delivery vehicle costing $40,000. The vehicle has an estimated 6-year life and a $4,000 residual value. Wasson estimates that the vehicle will be driven 100,000 miles. What is the vehicle's book value as of December 31, 2011 assuming Wasson uses the units-of-production depreciation method and the vehicle was driven 10,000 miles during 2010 and 18,000 miles during 2011? 
A. $29,920
B. $28,800
C. $24,800
D. $25,920

72. Which of the following statements is false? 
A. The book value at the end of an asset's useful life will be the same under all the depreciation methods allowed under GAAP.
B. The balance in the accumulated depreciation account will be the same at the end of an asset's useful life under all the methods allowed under GAAP.
C. Once you select a depreciation method, then you must use this method for all depreciable assets.
D. The annual depreciation expense and year-end book values will differ under the various depreciation methods over the life of the asset.

73. Under what conditions would a company most likely adopt the double-declining-balance method for financial reporting? 
A. They have high technology, robotic equipment in their plant that becomes obsolete quickly and declines in utility to the company more rapidly in the early years of the assets' lives.
B. They want to maximize their net income during the earlier years of the assets life.
C. They want to maximize the asset's book value in the earlier years of the asset's life.
D. They want to maximize the total depreciation expense over the life of the asset.

74. Which of the following statements is correct? 
A. Companies can change the method of depreciating assets from one year to the next.
B. Companies can affect the book value at the end of an asset's life by choosing one method of depreciation over another.
C. Companies can use one method of depreciation for some of their long-lived, productive assets but then use a different method for another group or type of long-lived, productive assets.
D. Companies can minimize an asset's book value in the first year of use by selecting the straight-line depreciation method rather than the double-declining-balance method.

75. Which of the following statements is correct? 
A. Using straight-line depreciation in comparison to an accelerated depreciation method will result in a lower reported amount of total assets at end of the first year of an asset's life.
B. Using accelerated depreciation in the first year of an asset's life will result in a higher net income during the first year compared to using the straight-line depreciation method.
C. Using an accelerated depreciation method will lead to a higher fixed asset turnover ratio for the first year.
D. Using straight-line depreciation in comparison to an accelerated depreciation method will lead to a higher book value at the end of an asset's life.

76. Which of the following statements about the Modified Accelerated Cost Recovery System (MACRS) is correct? 
A. It is similar to the units-of-production depreciation method.
B. It is applied using longer asset lives than the estimated useful lives required by GAAP.
C. It provides a short-term tax benefit because of the higher depreciation expense reported in the early years of an asset's life.
D. It is acceptable for use when preparing financial statements.

77. Which of the following statements about asset impairment is false? 
A. Asset impairment loss is the difference between an asset's net book value and its estimated future cash flows.
B. If an asset is impaired, a loss would be recognized in the period it can be estimated.
C. Impairment will lead to writing down the asset's net book value.
D. Asset impairment occurs when the estimated future cash flows are less than the asset's net book value.

78. A company has some bottling equipment which cost $8.5 million, has a net book value of $4.1 million, estimated future cash flows of $3.7 million, and a fair value of $3.1 million. How much is the asset impairment loss? 
A. $5.4 million
B. $4.1 million
C. $0.4 million
D. $1.0 million

79. A company has some bottling equipment which cost $8.5 million, has a net book value of $4.1 million, estimated future cash flows of $3.7 million, and a fair value of $3.1 million. Which of the following correctly describes the recording of the asset impairment loss? 
A. The loss account is debited for $1.0 million and the asset account is credited for $1.0 million.
B. The loss account is debited for $0.4 million and the asset account is credited for $0.4 million.
C. The loss account is debited for $5.4 million and the asset account is credited for $5.4 million.
D. The loss account is debited for $4.8 million and the asset account is credited for $4.8 million.

80. On December 31, 2010, Hamilton Inc. sold a used industrial crane for $600,000 cash. The original cost of the crane was $5.0 million and its accumulated depreciation equaled $4.2 million on December 31, 2010. What is the gain or loss from the December 31, 2010 equipment sale? 
A. $800,000 gain
B. $800,000 loss
C. $200,000 loss
D. $200,000 gain

176.From the following information, compute the ratios indicated and place the proper numbers in the spaces provided. Assume the average for the year is the same as the ending balances for the balance sheet accounts. Round percentages to one decimal place, and show your work.

Westwood Corporation

Balance Sheet

December 31, 20x8

Assets

Cash

$  15,000

Marketable securities

10,000

Accounts receivable (net)

20,000

Inventory

30,000

Prepaid expenses

8,000

Property, plant, and equipment

  117,000

Total assets

$200,000

Liabilities and Stockholders' Equity

Current liabilities

$  30,000

Long-term liabilities

50,000

Stockholders' equity

   120,000

Total liabilities and stockholders' equity

$200,000

Westwood Corporation

Income Statement

For the Year Ended December 31, 20x8

Net sales

$160,000

Cost of goods sold

  120,000

Gross margin

$  40,000

Operating expenses

Selling and administrative expenses

$ 16,000

Interest expense

8,000

Income taxes expense

    4,000

   28,000

Net income

$  12,000

Westwood had 4,000 shares of common stock issued and outstanding. The market price of common stock at year end was $15.00 per share. Dividends paid in 20x8 were $0.60 per share.

Current ratio

Asset turnover

Quick ratio

Return on assets

Receivable turnover

Return on equity

Days' sales uncollected

Debt to equity ratio

Inventory turnover

Interest coverage ratio

Profit margin

Days' inventory on hand

Dividends yield

Price/earnings (P/E) ratio

177.Financial statements for Boston Corporation are presented below.

Boston Corporation

Comparative Balance Sheet

December 31

Assets

              20x8

                20x7

Cash

$   120,000

$   110,000

Accounts receivable (net)

135,000

95,000

Inventory

270,000

240,000

Property, plant, and equipment (net)

     750,000

     800,000

Total assets

$1,275,000

$1,245,000

Liabilities and Stockholders' Equity

Accounts payable

$   152,000

$   208,000

Accrued liabilities

12,000

16,000

Bonds payable, 10 percent

160,000

160,000

Common stock, $10 par

     500,000

     500,000

Retained earnings

     451,000

        361,000

Total liabilities and stockholders' equity

$1,275,000

$1,245,000

Boston Corporation

Income Statement

For the Year Ended December 31, 20x8

Net sales

$1,200,000

Cost of goods sold

    700,000

Gross margin

$  500,000

Operating expenses

Depreciation expense

$  70,000

Interest expense

10,000

Other expenses

  260,000

   340,000

Income before income taxes

$ 160,000

Income taxes expense

     40,000

Net income

$ 120,000

Note: Dividends of $0.60 per share were declared and paid during 20x8. The market price of the stock on December 31, 20x8 was $18.00 per share.

Compute the following for 20x8 and place your answers in the spaces provided. Round answers to two decimal places. Show your work.

Current ratio

Payables turnover

Receivable turnover

Days' inventory on hand

Inventory turnover

Interest coverage ratio

Asset turnover

Return on equity

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