Q: Which formula correctly calculates the rate of return on assets (ROA)?

$$\text{ROA} = \frac{\text{Net Income}}{\text{Average Total Assets}}$$

Question 1

Which of the following costs should NOT be included in the cost of land when acquired for use in a business?

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 land using the relative-sales-value method?

Accepted Answer

$280,000

Question 3

Which of the following is a capital expenditure?

Accepted Answer

Replacement of a truck’s engine to extend its useful life

Question 4

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

Accepted Answer

Double-declining-balance method

Question 5

A truck was purchased 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?

$$	ext{Depreciation Expense} = \frac{	ext{Cost} - 	ext{Residual Value}}{	ext{Useful Life}}$$

Accepted Answer

$8,000

Question 6

FedEx sells equipment for $$7,300. The equipment originally cost 10$$,000, has accumulated depreciation of $$3,750, and no residual value. What is the gain or loss on the sale?

$$	ext{Gain/Loss} = 	ext{Cash Received} - (	ext{Cost} - 	ext{Accumulated Depreciation})$

Accepted Answer

Gain of $1,050

Question 7

Which of the following statements about depreciation for tax purposes is correct?

Accepted Answer

Accelerated depreciation methods provide faster tax deductions, reducing taxable income in early years.

Question 8

A company changes the estimated useful life of a machine from 10 years to 14 years after 4 years of use. The machine cost $$50,000 and has no residual value. What is the new annual depreciation expense?

$$	ext{Book Value after 4 years} = \$$50,000 - (\50$$,000/10 	imes 4)$$
$$	ext{New Depreciation Expense} = \frac{	ext{Book Value}}{	ext{New Useful Life Remaining}}$

Accepted Answer

$3,000

Question 9

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

Accepted Answer

Depletion expense is recorded as the resource is extracted.

Question 10

Which of the following intangible assets is NOT amortized but instead tested annually for impairment?

Accepted Answer

Trademark with an indefinite life

Question 11

A company acquires another company for $$10 million. The acquired company has assets with a market value of 9 $$million and liabilities of $$2 million. What amount of goodwill should be recorded?

$$	ext{Goodwill} = 	ext{Purchase Price} - (	ext{Assets} - 	ext{Liabilities})$

Accepted Answer

$3 million

Question 12

Which of the following best describes an asset impairment under U.S. GAAP?

Accepted Answer

When the asset’s net book value exceeds estimated future cash flows

Question 13

FedEx has a long-term asset with a net book value of $$100 million, estimated future cash flows of 80 $$million, and a fair value of $$70 million. What is the impairment loss to be recorded?

$$	ext{Impairment Loss} = 	ext{Net Book Value} - 	ext{Fair Value}$

Accepted Answer

$30 million

Question 14

Which formula correctly calculates the rate of return on assets (ROA)?

Accepted Answer

$$	ext{ROA} = \frac{	ext{Net Income}}{	ext{Average Total Assets}}$$

Question 15

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

Accepted Answer

Acquisition of new equipment

Question 16

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

Accepted Answer

SLN

Question 17

Under IFRS, which of the following is a key difference from U.S. GAAP in accounting for property, plant, and equipment?

Accepted Answer

IFRS allows for the reversal of impairment losses for some assets.

Question 18

A company extracts 3,000,000 barrels of oil from a reserve purchased for $$100,000,000 with an estimated 10,000,000 barrels. What is the depletion rate per barrel?

$$	ext{Depletion Rate} = \frac{	ext{Cost}}{	ext{Estimated Total Barrels}}$

Accepted Answer

$10.00

Question 19

Which of the following best describes the DuPont Analysis for ROA?

Accepted Answer

ROA = Net profit margin ratio × Total asset turnover

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

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