Plant Assets Quiz

Plant assets are defined as:

• Tangible assets used in a company’s operations that have a useful life of more than one accounting period.

• Current assets.

• Assets that are physically consumed when used.

• Intangible assets used in the operations of a business that have a useful life of more than one accounting period.

One characteristic of plant assets is that they are:

• Current assets.

• Used in operations.

• Natural resources.

• Long-term investments.

• Intangible.

Which of the following is not a relevant factor in computing depreciation?

• Cost.

• Salvage value.

• Useful life.

• Depreciation method.

• Market value.

Depreciation:

• Measures the decline in market value of an asset.

• Measures physical deterioration of an asset.

• Is the process of allocating the cost of a plant asset to expense while it is in use.

• Is an outflow of cash from the use of a plant asset.

• Is applied to land.

The useful life of a plant asset is:

• The length of time it is used in a company's operations.

• Never related to its physical life.

• Its productive life, but not to exceed one year.

• Determined by the FASB.

• Determined by law.

The term inadequacy refers to:

• The inability of a plant asset to meet its demands.

• An asset reaching its book value.

• An asset that does not have a salvage value.

• The condition where the salvage value is too small to replace the asset.

• The process of depletion.

What does the term "obsolescence," as it relates to the useful life of an asset, refer to?

• The halfway point of an asset’s useful life.

• The process of becoming outdated and no longer used.

• The inability of a company's plant assets to reach its book value.

• An asset's salvage value becoming less than its replacement cost.

The modified accelerated cost recovery system (MACRS):

• Is not acceptable for financial reporting.

• Is an outdated system that is no longer used by companies.

• Is required for financial reporting.

• Is identical to units of production depreciation.

The calculation of total asset turnover is:

• Gross profit divided by average total assets.

• Average total assets divided by gross profit.

• Net sales divided by average total assets.

• Average total assets multiplied by net sales.

Land improvements are:

• Additions that increase the usefulness of land and are not depreciated.

• Additions to land that have limited useful lives.

• Included in the cost of the land account.

• Expensed in the period incurred.