# Question: 1 Vertical analysis of fixed assets and depreciation a calculates fixed

1. Vertical analysis of fixed assets and depreciation:
a. calculates fixed assets as a percentage of total assets.
b. calculates depreciation expense as a percentage of revenues.
c. calculates the change in fixed assets as a percentage of the prior year's fixed assets balance.
d. both "a" and "b" are correct.
2. The results of the fixed asset turnover ratio communicates to management:
a. how quickly a fixed asset is depreciated.
b. how many fixed assets were bought in the current period.
c. how much depreciation expense was recorded compared to total fixed assets.
d. how effectively a company is using its fixed assets to produce revenue.
3. The average useful life of a company's fixed assets is calculated by the formula:
a. Average Useful Life 5 Total Useful Lives of Assets/ Cost of Fixed Assets.
b. Average Useful Life 5 Depreciation Expense/ Cost of Fixed Assets.
c. Average Useful Life 5 Costs of Fixed Assets/ Accumulated Depreciation.
d. Average Useful Life 5 Costs of Fixed Assets/ Depreciation Expense.
4. Which of the following statements is true?
i. Cash paid for fixed assets is normally reported as a separate line item on the statement of cash flows
ii. Capital expenditures are normally reported as a cash outflow in the operating section of the statement of cash flows
a. i only
b. ii only
c. Both i and ii
d. Neither i nor ii
5. Which of the following is not an intangible asset?
a. Patent
b. Goodwill
c. Franchise
d. All of the above are intangible assets
6. Company A purchases Company B for a total of \$2,800,000. Company B has total assets of \$2,500,000, total liabilities of \$400,000, and total equity of \$2,100,000. How much Goodwill will Company A record as a result of the purchase of Company B?
a. \$0
b. \$300,000
c. \$400,000
d. \$700,000
7. Which of the following statements is true?
a. All intangible assets have an indefinite life
b. Spreading the cost of an intangible asset over its estimated useful life is called depreciation
c. The cost of an externally acquired intangible asset is its purchase price
d. Internally generated intangible assets cannot be recorded as an asset

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