Patterson Company has the following information of one of its vehicles purchased on January 1, 1992:Vehicle cost $50,000Useful life, years, estimated 5Useful life, miles, estimated 100,000Salvage value, estimated $10,000Actual miles driven:1992 30,0001993 10,0001994 15,0001995 25,0001996 12,000No estimates were changed during the life of the asset. The 1994 depreciation expense using the sum-of-years'-digits (SYD) method was ________.
Answer(s): B
SYD depreciation is calculated on a constant depreciable base equal to $40,000 ($50,000 original cost -10,000 salvage value), multiplied by the SYD fraction. The denominator is the sum of the digits of the total years of the expected useful life (1+2+3+4+5=15). The SYD fraction's numerator equals the remaining years. For 1994, the fraction is 3/15, and depreciation expense is $8,000 ($40,000 X 3/15).
Under the accrual basis of accounting, which of the following statements is true?
Answer(s): D
Valuation of PP&E and natural resources emphasizes all of the following accounting objectives except ________.
The financials portray historical information; they do not paint a picture of today.
A firm has a net profit margin of 25%. Its total asset turnover equals 1.3 and equity turnover equals 2.1. The firm's ROE and financial leverage equal ________.
Answer(s): C
ROE = net income/equity = (net income/sales)*(sales/equity) = net profit margin * equity turnover = 25%*2.1 = 52.5% Financial Leverage = Total assets/equity = (total assets/sales)*(sales/equity) = (1/asset turnover)*(equity turnover) = 2.1/1.3 = 1.62.
When compared to the percentage-of-completion method, the completed contract method
Answer(s): A
The completed contract method reports larger total assets because it accumulates inventory.
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