9 - Reporting and Analyzing Long-Lived Assets

Question 1

Property, plant, and equipment are sometimes called _______ assets; _______, buildings, and _______; or _______ assets.

Answer 1

Property, plant, and equipment are sometimes called capital assets; land, buildings, and equipment; or fixed assets.

Question 2

Property, plant, and equipment are _______ (have physical substance) long-lived resources that a company controls. They are not intended for ____ to customers and are used for the production and sale of goods or services to customers, for rental to others, or for administrative purposes.

Answer 2

Property, plant, and equipment are tangible (have physical substance) long-lived resources that a company controls. They are not intended for sale to customers and are used for the production and sale of goods or services to customers, for rental to others, or for administrative purposes.

Question 3

Most companies record property, plant, and equipment at historical cost, which includes the following:

PP E F

Answer 3

1. The purchase price, including certain kinds of non-refundable taxes and duties, less any discounts or rebates
2. The expenditures necessary to bring the asset to its required location and to make it ready for its intended use
3. An estimate of any future obligations related to dismantling, removing, or restoring the asset at the end of its useful life

Question 4

Operating expenditures are costs that will benefit only the ____ period.

Answer 4

Operating expenditures are costs that will benefit only the current period.

Question 5

Costs that can be measured and will benefit ______ periods are capitalized (included) in a long-lived asset account and recorded as either property, plant, or equipment.

These are called ______ expenditures.

Answer 5

Costs that can be measured and will benefit future periods are capitalized (included) in a long- lived asset account and recorded as either property, plant, or equipment.

These are called capital expenditures.

Question 6

If there are obligations to dismantle, remove, or restore a long-lived asset when it is retired, these costs must also be _______ and ________ in the cost of the asset.

Known as _______ _______ costs

Answer 6

If there are obligations to dismantle, remove, or restore a long-lived asset when it is retired, these costs must also be estimated and included in the cost of the asset.

Known as asset retirement costs

Question 7

Property, plant, and equipment are often subdivided into four classes:

L LI B E

Answer 7

1. Land, such as a building site
2. Land improvements, such as driveways, parking lots, fences, and underground sprinkler systems
3. Buildings, such as stores, offices, factories, and warehouses
4. Equipment, such as vehicles, computers, office furniture and equipment,
   and machinery

*there are more

Question 8

All costs related to the purchase of land, including _______ costs such as survey, title search, and legal fees, are added to the Land account.

Answer 8

All costs related to the purchase of land, including closing costs such as survey, title search, and legal fees, are added to the Land account.

Question 9

Land improvements are _______ additions made to land, such as driveways, sidewalks, fences, lighting, and parking lots.

Answer 9

Land improvements are structural additions made to land, such as driveways, sidewalks, fences, lighting, and parking lots.

Question 10

Land improvements, unlike land, _______ in service potential over time and require maintenance and eventual replacement. Because of this, land improvements are recorded ________ from land and are _________ over their useful lives.

Answer 10

Land improvements, unlike land, decline in service potential over time and require maintenance and eventual replacement. Because of this, land improvements are recorded separately from land and are depreciated over their useful lives.

Question 11

The cost of a building includes all costs that are directly related to its _______ or _______.

Answer 11

The cost of a building includes all costs that are directly related to its purchase or construction.

Question 12

Operating expenditures generally benefit only the _______ period.

They are required to ________ an asset in its normal operating condition and often _____, although not always annually.

Answer 12

Operating expenditures generally benefit only the current period.

They are required to maintain an asset in its normal operating condition and often recur, although not always annually.

Question 13

Capital expenditures after acquisition include costs that ________ the life of an asset or its productivity or efficiency.

In other words, they are anticipated to provide future economic _________.

Answer 13

Capital expenditures after acquisition include costs that increase the life of an asset or its productivity or efficiency.

In other words, they are anticipated to provide future economic benefits.

Ex. Replace the roof on a building

Question 14

In a lease, a party that owns an asset (the lessor) agrees to allow another party (the lessee) to ______ the asset for an agreed period of _____ at an agreed _____.

Answer 14

In a lease, a party that owns an asset (the lessor) agrees to allow another party (the lessee) to rent the asset for an agreed period of time at an agreed price.

Question 15

Some advantages of leasing an asset rather than purchasing it include the following:

R F T

Answer 15

1. Reduced risk of obsolescence.
2. 100% financing.
3. Income tax advantages.

Question 16

When depreciation expense on the _______ and _______ expense on the loan are recorded and no _____ expense is recorded, it is known as a finance lease.

Answer 16

When a lease is accounted for in this way, it is known as a finance lease.

Question 17

If the risks and rewards of ownership are _______ transferred to the ______, then the lease is accounted for as an operating lease.

Answer 17

If the risks and rewards of ownership are not transferred to the lessee, then the lease is accounted for as an operating lease.

Question 18

Note that under ASPE, a finance lease is also commonly known as a _______ lease.

Answer 18

Note that under ASPE, a finance lease is also commonly known as a capital lease.

Question 19

Companies often ______ costs when they renovate leased property. These costs are charged to a separate account called _________ __________.

Answer 19

Companies often incur costs when they renovate leased property. These costs are charged to a separate account called Leasehold Improvements.

Question 20

__________ is the systematic allocation of the cost of property, plant, and equipment over the asset’s useful life.

Answer 20

Depreciation is the systematic allocation of the cost of property, plant, and equipment over the asset’s useful life.

Question 21

Depreciation is recorded in an ________ ________ _______ that ______ Depreciation Expense and _____ Accumulated Depreciation.

Answer 21

Depreciation is recorded in an adjusting journal entry that debits Depreciation Expense and credits Accumulated Depreciation.

Question 22

Depreciation Expense is an _______ _______ account while Accumulated Depreciation appears on the statement of ______ ______ as a contra asset account to the relevant property, plant, or equipment account.

Answer 22

Depreciation Expense is an income statement account while Accumulated Depreciation appears on the statement of financial position as a contra asset account to the relevant property, plant, or equipment account.

Question 23

Depreciation begins when the asset is _____ for ______ and ends when it is _______.

Answer 23

Depreciation begins when the asset is available for use and ends when it is derecognized (removed from the accounts).

Question 24

It is important to understand that depreciation is a _______ of allocating ______, not a process of determining an asset’s _______ ______.

Answer 24

It is important to understand that depreciation is a process of allocating cost, not a process of determining an asset’s current value.

Question 25

Depreciation neither _____ ____ nor _____ cash to replace the asset.

Answer 25

Depreciation neither uses up nor provides cash to replace the asset.

Question 26

Accumulated depreciation represents the total amount of the asset’s _____ that has been ______ to ______ to date: it has no effect on ______.

Answer 26

Accumulated depreciation represents the total amount of the asset’s cost that has been allocated to expense to date: it has no effect on cash.

Question 27

Cash is neither ______ nor _______ by the adjusting entry to record depreciation:

______ Depreciation Expense;
______ Accumulated Depreciation.

Answer 27

Cash is neither increased nor decreased by the adjusting entry to record depreciation:

debit Depreciation Expense;
credit Accumulated Depreciation.

Question 28

Consider three factors when calculating depreciation.

C UL RV

Answer 28

• Cost
• Useful Life
• Residual Value

Question 29

Residual value is management’s estimate of the _______ that a company would ______ from the ______ of the asset at the end of its useful life.

Answer 29

Residual value is management’s estimate of the amount that a company would obtain from the disposal of the asset at the end of its useful life.

• This portion of the asset’s cost is not depreciated, since the amount is expected to be recovered at the end of the asset’s useful life.

Question 30

The difference between a depreciable asset’s cost and its residual value is called the __________ _________.

Answer 30

The difference between a depreciable asset’s cost and its residual value is called the depreciable amount

Question 31

Depreciable amount is the _____ _______ to be ________ over the useful life.

Answer 31

Depreciable amount is the total amount to be depreciated over the useful life.

Question 32

Under ASPE, the term ________ is often used instead of depreciation, and because of this the depreciable amount is also known as the _________ _______.

Answer 32

Under ASPE, the term amortization is often used instead of depreciation, and because of this the depreciable amount is also known as the amortizable cost.

Question 33

Depreciation is generally calculated using one of these three methods:

S B U

Answer 33

1. Straight-line* Most common in Canada
2. Diminishing-balance
3. Units-of-production

Question 34

Under the straight-line method depreciation per year is calculated by dividing the asset’s _______ ______ by its _____ ____ in years.

Answer 34

Under the straight-line method depreciation per year is calculated by dividing the asset’s depreciable amount by its useful life in years.

Question 35

It is necessary to ______ the annual depreciation for the part of the year when the asset is available for use, if it is bought during the year and not on Jan 1.

Answer 35

It is necessary to prorate the annual depreciation for the part of the year when the asset is available for use, if it is bought during the year and not on Jan 1.

Normally calculated to the nearest month.

Question 36

The _______ method is applied to assets that are used uniformly and have a constant decline in usefulness, such as office furniture and fixtures, and buildings.

Answer 36

The straight-line method is applied to assets that are used uniformly and have a constant decline in usefulness, such as office furniture and fixtures, and buildings.

Question 37

The diminishing-balance method is also sometimes called the _______-balance method.

Answer 37

The diminishing-balance method is also sometimes called the declining- balance method.

Question 38

The diminishing-balance method produces a ________ annual _________ expense over the asset’s _____ _____, resulting in ______ levels of depreciation in the early years of an asset’s useful life.

Answer 38

The diminishing-balance method produces a decreasing annual depreciation expense over the asset’s useful life, resulting in higher levels of depreciation in the early years of an asset’s useful life.

Question 39

Diminishing-balance method uses the asset’s _______ ______, not the ________ ______ (cost − residual value), to calculate depreciation.

Answer 39

Diminishing-balance method uses the asset’s carrying amount, not the depreciable amount (cost − residual value), to calculate depreciation.

Question 40

A depreciation rate that is often used is double the straight-line rate. This method is referred to as the _______- ______-______ method.

Answer 40

A depreciation rate that is often used is double the straight-line rate.

Question 41

double-diminishing-balance method 3 steps:

SL
M
C

Answer 41

1. Determine the straight-line depreciation rate by taking 100% and dividing it by the useful life in years.
2. Multiply the straight-line depreciation rate by the appropriate multiplier (for example, double) to determine the diminishing-balance depreciation rate.
3. Multiply the carrying amount of the asset at the beginning of the period by the diminishing-balance depreciation rate.

Question 42

The units-of-production method is also sometimes called the ______-of-______ method.

Answer 42

The units-of-production method is also sometimes called the units-of-activity method.

Question 43

When using the units-of-production method, we do the following:

U
D/U
D*P

Answer 43

1. Estimate the units of production in total over the asset’s entire useful life.
2. Divide the depreciable amount (cost less residual value) by the estimated units of production to determine the depreciable amount per unit.
3. Multiply the depreciable amount per unit by the units of production during the period and the result is the depreciation expense.

Question 44

Equation for Straight-line Depreciation:

Answer 44

Find

Question 45

Equation for Diminishing-balance Depreciation:

Answer 45

(Cost - Accumulated Depreciation) x Depreciation Rates(Straight-Line Rate) x Multiplier

Question 46

Equation for Units-of-production Depreciation:

Answer 46

Find it

Question 47

Straight-line depreciation results in the ________ amount of expense each year on the income statement.

Answer 47

Straight-line depreciation results in the same amount of expense each year on the income statement.

Question 48

Diminishing-balance results in ________ expenses, and therefore lower ______ _______, in the early years of the asset’s useful life.

It also results in lower expenses and higher net income in later years.

Answer 48

Diminishing-balance results in higher expenses, and therefore lower net income, in the early years of the asset’s useful life.

It also results in lower expenses and higher net income in later years.

Question 49

Results for the units-of-production method ______ each year depending on the actual usage of the asset.

Answer 49

Results for the units-of-production method vary each year depending on the actual usage of the asset.

Question 50

Over the entire useful life, total depreciation is ____ _______ regardless of the method of depreciation.

All methods allocate the same ______ _______ of asset ____ to depreciation expense.

Answer 50

Over the entire useful life, total depreciation is the same regardless of the method of depreciation.

All methods allocate the same total amount of asset cost (the depreciable amount) to depreciation expense.

Question 51

Depreciation expense has an inverse relationship with ___ _______.

Answer 51

Depreciation expense has an inverse relationship with net income.

• and carrying amount

Question 52

When an item of property, plant, and equipment includes individual components that have different useful lives, we need to account for the components (if material) ______ rather than for the asset as a ______.

Answer 52

When an item of property, plant, and equipment includes individual components that have different useful lives, we need to account for the components (if material) separately rather than for the asset as a whole.

Question 53

According to the CRA, companies must deduct the income tax version of depreciation, which is known as ______ _____ ______. In determining _ _ _, normally only the diminishing-balance method of depreciation is permitted.

Answer 53

According to the CRA, companies must deduct the income tax version of depreciation, which is known as capital cost allowance (CCA). In determining CCA, normally only the diminishing-balance method of depreciation is permitted.

• Grouped classes and management estimates are removed from these calculations.

Question 54

An impairment test involves determining an ________ of the asset’s ________ amount.

Answer 54

An impairment test involves determining an estimate of the asset’s recoverable amount.

Question 55

An impairment loss is also known as a _________.

Answer 55

An impairment loss is also known as a writedown.

Question 56

Impairment losses are typically recorded by _______ an Impairment Loss account.

Answer 56

Impairment losses are typically recorded by debiting an Impairment Loss account.

Question 57

Impairment losses are not reversed under _____, but can be reversed under _____.

Answer 57

Impairment losses are not reversed under ASPE, but can be reversed under IFRS.

Question 58

Impairment loss usually gives rise to a ______ of values rather than one ________ amount.

Answer 58

Impairment loss usually gives rise to a range of values rather than one correct amount.

*unethical behaviour of overstating can occur: “big-bath” accounting

Question 59

Under the revaluation model, the carrying amount of property, plant, and equipment is adjusted to reflect their _______ ________.

Answer 59

Under the revaluation model, the carrying amount of property, plant, and equipment is adjusted to reflect their recoverable amount.

Question 60

Revaluation gains or write-ups are also recorded, are not recorded on the income statement. Instead, they must be recorded in other __________ income on the statement of _________ income.

Answer 60

Revaluation gains or write-ups are also recorded, are not recorded on the income statement. Instead, they must be recorded in other comprehensive income on the statement of comprehensive income.

• Cost-Model Method

Question 61

Reasons why periodic depreciation may need to be revised during an asset’s useful life.

CA IL UR E

Answer 61

1. Capital expenditures during the asset’s useful life. (fixes, maintenance, etc.)
2. Impairment losses. (will reduce carrying amount)
3. Changes in the estimated useful life or residual value. (review each year)
4. Changes in the pattern in which the asset’s economic benefits are consumed.

Question 62

Revising depreciation is known as a change in ______ _____.

Answer 62

Revising depreciation is known as a change in accounting estimate.

Question 63

Changes in accounting estimates are made in _____ and ______ years but not to prior periods.

Answer 63

Changes in accounting estimates are made in current and future years but not to prior periods.

*Prospective Treatment

Question 64

When a change in depreciation is made,

(1) there is no adjustment of ______ recorded depreciation expense, and
(2) only depreciation expense for ______ and _____ years is revised.

Answer 64

When a change in depreciation is made,

(1) there is no adjustment of previously recorded depreciation expense, and
(2) only depreciation expense for current and future years is revised.

Why? Original calculations were based on the best information we had at the time.

Question 65

Four steps when recording derecognition of property, plant, or equipment:

Answer 65

Step 1: Update depreciation.
Step 2: Calculate the carrying amount.
Step 3: Calculate the gain or loss.
Step 4: Record the disposal.

Question 66

The specific asset account (land, etc.) is _______ with a _______ equal to the cost of the asset disposed of while the related Accumulated Depreciation account is _______ with a ______ for the portion of the account pertaining to the derecognized asset.

Answer 66

Step 4:Record the disposal.

The specific asset account (land, etc.) is decreased with a credit equal to the cost of the asset disposed of while the related Accumulated Depreciation account is decreased with a debit for the portion of the account pertaining to the derecognized asset.

Question 67

What happens if a company is still using a fully depreciated asset?

Answer 67

The asset and its accumulated depreciation are not derecognized and continue to be reported on the statement of financial position, without further depreciation, until the asset is retired or sold.

Question 68

________ assets involve rights, privileges, and/or competitive advantages that are not _____ _______.

Answer 68

Intangible assets involve rights, privileges, and/or competitive advantages that are not physical things.

Question 69

Criteria for Intangible Assets:

S C

Answer 69

(1) it can be separated from the company and sold, whether or not the company intends to do so, or
(2) it is based on contractual or legal rights, regardless of whether or not it can be separated from the company.

Question 70

_______ cannot be separated from a company and sold nor is it based on contractual or legal rights.

Answer 70

Goodwill cannot be separated from a company and sold nor is it based on contractual or legal rights.

Question 71

Similar to property, plant, and equipment, intangible assets are recorded at _____.

Answer 71

Similar to property, plant, and equipment, intangible assets are recorded at cost.

Question 72

You can use the ____ or ______ model when accounting for an intangible asset subsequent to acquisition.

Answer 72

You can use the cost or revaluation model when accounting for an intangible asset subsequent to acquisition.

Question 73

_______ assets are categorized as having either a finite (limited) life or an indefinite (unlimited) life.

Answer 73

Intangible assets are categorized as having either a finite (limited) life or an indefinite (unlimited) life.

Question 74

If an intangible asset has a finite life, its cost must be _______ ________ to an expense over its useful life. We called this ________.

Answer 74

If an intangible asset has a finite life, its cost must be systematically allocated to an expense over its useful life. We called this depreciation.

Question 75

Under ASPE, ________ is often the word used to describe both depreciation of property, plant, and equipment and amortization of intangible assets.

Answer 75

Under ASPE, amortization is often the word used to describe both depreciation of property, plant, and equipment and amortization of intangible assets.

Question 76

Intangible assets with ______ lives are not amortized.

Answer 76

Intangible assets with indefinite lives are not amortized.

Question 77

For an intangible asset with a finite life, its amortizable amount (its ____ less its _____ value) should be allocated over the shorter of:

(1) UL
(2) LL

Answer 77

For an intangible asset with a finite life, its amortizable amount (its cost less its residual value) should be allocated over the shorter of:

(1) the estimated useful life and
(2) the legal life.

Question 78

Intangible assets, by their nature, rarely have any _______ value, so the amortizable amount is normally ______ to the cost.

Answer 78

Intangible assets, by their nature, rarely have any residual value, so the amortizable amount is normally equal to the cost.

Question 79

A patent is an exclusive right issued by the Canadian Intellectual Property
Office of Industry Canada that allows the patent holder to manufacture, sell, or otherwise ______ an ______ for a period of 20 years from the date of the application.

Answer 79

A patent is an exclusive right issued by the Canadian Intellectual Property
Office of Industry Canada that allows the patent holder to manufacture, sell, or otherwise control an invention for a period of 20 years from the date of the application.

Question 80

A patent cannot be renewed, but a patent’s legal life can be ______ if the patent holder obtains new patents for _______ or other _______ in the basic ______.

Answer 80

A patent cannot be renewed, but a patent’s legal life can be extended if the patent holder obtains new patents for improvements or other changes in the basic design.

Question 81

The cost of a patent should be _______ over its 20-year legal life or its useful life, whichever is shorter.

Answer 81

The cost of a patent should be amortized over its 20-year legal life or its useful life, whichever is shorter.

Question 82

A copyright is granted by the Canadian Intellectual Property Office, giving the owner the exclusive right to _____ and ____ an artistic or published work.

Answer 82

A copyright is granted by the Canadian Intellectual Property Office, giving the owner the exclusive right to reproduce and sell an artistic or published work.

Question 83

Copyrights are valid for the ____ the creator plus ___ years (with some extensions for sound recordings).

Answer 83

Copyrights are valid for the life of the creator plus 50 years (with some extensions for sound recordings).

Question 84

Generally, a copyright’s ______ life is significantly shorter than its ______ life, and the copyright is therefore ______ over its useful life.

Answer 84

Generally, a copyright’s useful life is significantly shorter than its legal life, and the copyright is therefore amortized over its useful life.

Question 85

______ costs are not intangible assets on their own, but may lead to patents, copyrights, or other intangible assets.

Answer 85

Research and development (R&D) costs are not intangible assets on their own, but may lead to patents, copyrights, or other intangible assets.

Question 86

When a company develops intangible assets _______, two accounting problems arise:

(1) It is sometimes difficult to determine the costs related to a specific project; and
(2) it is hard to know if future benefits will be generated, and if so, when.

Answer 86

When a company develops intangible assets internally rather than acquiring them from another party, two accounting problems arise:

(1) It is sometimes difficult to determine the costs related to a specific project; and
(2) it is hard to know if future benefits will be generated, and if so, when.

Question 87

R&D costs are expensed and recorded in the account ______ _______.

Answer 87

R&D costs are expensed and recorded in the account Research Expenses.

Question 88

Development phase begins when certain criteria are met that indicate that the project being developed will have ______ ______.

Answer 88

Development phase begins when certain criteria are met that indicate that the project being developed will have future benefit.

Question 89

Criteria to be met for Development Phase:

F C S R MC M

Answer 89

1. The project is technically feasible.
2. The company intends to complete development.
3. The product developed can be used or sold by the company.
4. The company has adequate resources to complete development.
5. The company can reliably measure the costs incurred.
6. A market exists for the product that will provide future economic benefits.

Question 90

Future expenditures on the project that specifically relate to its development will be capitalized and recorded in the asset account __________ Costs.

Answer 90

Future expenditures on the project that specifically relate to its development will be capitalized and recorded in the asset account Development Costs.

Question 91

A ________ is a word, phrase, jingle, or symbol that distinguishes or identifies a particular business or product.

Answer 91

A trademark (trade name) is a word, phrase, jingle, or symbol that distinguishes or identifies a particular business or product.

Question 92

A _________ is a contractual arrangement under which the franchisor grants the ________ the right to sell certain products, to provide specific services, or to use certain trademarks or trade names, usually within a designated geographic area.

Answer 92

A franchise is a contractual arrangement under which the franchisor grants the franchisee the right to sell certain products, to provide specific services, or to use certain trademarks or trade names, usually within a designated geographic area.

Question 93

________, which grant the holder operating rights, are another type of intangible asset.

Answer 93

Licences, which grant the holder operating rights, are another type of intangible asset.

Ex. Bus line, taxi service; the use of public land for telephone, power, and cable television lines; and the use of airwaves for wireless devices, radio, or TV broadcasting.

Question 94

Goodwill is an asset representing the ______ ______ ______ arising from the purchase of a business that are not individually identified and separately recognized.

Answer 94

Goodwill is an asset representing the future economic benefits arising from the purchase of a business that are not individually identified and separately recognized.

Question 95

Goodwill represents the value of ________ _______ such as exceptional management, a desirable location, good customer relations, skilled employees, high-quality products, fair pricing policies, and harmonious relations with labour unions.

Answer 95

Goodwill represents the value of favourable attributes such as exceptional management, a desirable location, good customer relations, skilled employees, high-quality products, fair pricing policies, and harmonious relations with labour unions.

Question 96

Unlike other assets, which can be sold individually in the marketplace, goodwill can be identified only with the _____ as a ______.

Answer 96

Unlike other assets, which can be sold individually in the marketplace, goodwill can be identified only with the business as a whole.

Question 97

Because goodwill cannot be separated from the company and is not separately identifiable, goodwill is not considered an _______ asset and is reported separately in the _______ section of the statement of ________ position.

Answer 97

Because goodwill cannot be separated from the company and is not separately identifiable, goodwill is not considered an intangible asset and is reported separately in the assets section of the statement of financial position.

Question 98

Goodwill is recorded only when it is purchased, not when it is internally generated.

Answer 98

Goodwill is recorded only when it is purchased, not when it is internally generated.

Question 99

Property, plant, and equipment, Intangible assets, and Goodwill have an impact on three financial statements:

Answer 99

Property, plant, and equipment, Intangible assets, and Goodwill have an impact on three financial statements:

the statement of financial position,
income statement, and
statement of cash flows

Question 100

Long-lived assets are normally reported in the statement of ______ position under the headings “Property, Plant, and Equipment,” “Intangible Assets,” and “Goodwill.”

Answer 100

Long-lived assets are normally reported in the statement of financial position under the headings “Property, Plant, and Equipment,” “Intangible Assets,” and “Goodwill.”

Question 101

Depreciation expense, gains and losses on disposal, and impairment losses are presented in the __________ expenses section of the income statement.

Answer 101

Depreciation expense, gains and losses on disposal, and impairment losses are presented in the operating expenses section of the income statement.

Question 102

The cash flows from the purchase and sale of long-lived assets are reported in the investing activities section of the statement of ____ ______.

Answer 102

The cash flows from the purchase and sale of long-lived assets are reported in the investing activities section of the statement of cash flows.

Question 103

Return on assets ratio measures overall _________.

Equation = ____ _____ / ______

Answer 103

Return on assets ratio measures overall profitability.

Return on assets ratio = net income / average total assets

Question 104

Asset turnover ratio indicates how ________ a company uses its assets; that is, how many dollars of sales are generated by each _______ invested in _______.

Answer 104

Asset turnover ratio indicates how efficiently a company uses its assets; that is, how many dollars of sales are generated by each dollar invested in assets.

Question 105

asset turnover (ratio) = ______ ÷ _______

Answer 105

asset turnover = net sales ÷ average total assets

Question 106

return on assets = _______ ÷ ________

Answer 106

return on assets = net income ÷ average total assets

Question 107

Profit margin = ______ ÷ __________

Answer 107

Profit margin = net income ÷ net sales

Question 108

IFRS: Leases that are essentially the purchase of an asset are called ______ leases.

ASPE: Leases that are essentially the purchase of an asset are known as ______ leases.

Answer 108

IFRS: Leases that are essentially the purchase of an asset are called finance leases.

ASPE: Leases that are essentially the purchase of an asset are known as capital leases.

Question 109

IFRS: __________ is used to describe cost allocation for property, plant, and equipment.

ASPE: __________ may be used instead of depreciation for property, plant, and equipment.

Answer 109

IFRS: Depreciation is used to describe cost allocation for property, plant, and equipment.

ASPE: Amortization may be used instead of depreciation for property, plant, and equipment.

Question 110

IFRS: Choice of _____ model or _____ model.

ASPE: Only _____ model allowed.

Answer 110

IFRS: Choice of cost model or revaluation model.

ASPE: Only cost model allowed.

Question 111

IFRS: Must determine each _____ if indicators of impairment are present and, if so, perform an impairment test. Reversals of impairment losses are ______.

ASPE: Impairment tests differ between IFRS and ASPE. Reversals of impairment losses are ______.

Answer 111

IFRS: Must determine each year if indicators of impairment are present and, if so, perform an impairment test. Reversals of impairment losses are allowed.

ASPE: Impairment tests differ between IFRS and ASPE. Reversals of impairment losses are not allowed.

Question 112

IFRS: Must provide a reconciliation of the ______ and _______ carrying amounts of each class of long-lived assets.

ASPE: Reconciliation not required? Y/N

Answer 112

IFRS: Must provide a reconciliation of the opening and closing carrying amounts of each class of long-lived assets.

ASPE: Reconciliation not required. N