Working capital is calculated as _____ current assets minus current liabilities. equity minus liabilities current assets minus current liabilities total assets minus total liabilities current liabilities minus current assets

current assets minus current liabilities

JT Engineering installs a fence around its office building. How should JT depreciate the cost of this improvement? It should not depreciate the cost because it is an improvement to the land. It should depreciate the cost over the estimated life of the office building. It should depreciate the cost over the estimated life of the fence. It should depreciate the cost over the first year of the improvement's life.

It should depreciate the cost over the estimated life of the fence.

Which of the following purchases by RL Enterprises is best described as an investment? The purchase of a parcel of land in a heavily populated area with the hope that the land will increase in value. The cost of installing a streetlight in front of the company's office building to make it easier to enter and exit the parking lot. The construction of an addition to the existing office space that adds 8,000 square feet to the building. The installation of trees, plants, sod, and a small pond on the company property to improve its aesthetic appeal.

The purchase of a parcel of land in a heavily populated area with the hope that the land will increase in value.

In which of the following circumstances would a parcel of land be least likely to experience depreciation? Failure by members of a waterfront community to install structures to prevent soil erosion. Land management decisions by a farmer that result in inadequate crop rotation and fertilization. Subdivision of a large tract of land by a developer who plans to build a housing addition. Natural disasters such as fires or droughts that damage or destroy the land or its natural resources.

Subdivision of a large tract of land by a developer who plans to build a housing addition.

Which of the following best describes the major argument for using a full-costing approach with constructed assets? Failure to allocate overhead costs understates income of the current period. Failure to allocate overhead costs understates the initial cost of the asset and results in an inaccurate future allocation. Failure to allocate overhead costs overstates current expenses. Failure to allocate overhead costs overstates the initial cost of the asset and results in an inaccurate future allocation.

Failure to allocate overhead costs understates the initial cost of the asset and results in an inaccurate future allocation.

Which of the following costs is typically depreciated over its estimated life? Salvage receipts from the demolition of an old building. The cost of a private driveway. The assumption of any liens and mortgages. Closing costs and recording fees.

The cost of a private driveway.

Ahrens Enterprises plans to demolish a building and build a new factory. How should Ahrens treat the demolition costs? It should capitalize the demolition as part of the cost of the new factory. It should write off the demolition as a loss in the year the building is razed. It should depreciate the demolition over the period from the date of acquisition to the date the building is razed. It should capitalize the demolition as part of the cost of land.

It should capitalize the demolition as part of the cost of land.

Which of the following describes a commonality of fixed assets and raw materials? Both fixed assets and raw materials are classified as inventory. Both fixed assets and raw materials possess physical substance. Both fixed assets and raw materials are considered intangible assets. Both fixed assets and raw materials are subject to depreciation.

Both fixed assets and raw materials possess physical substance.

Which of the following is one of the major characteristics of property, plant, and equipment? The asset can be used in operations for at least 5 years. The asset is long-term in nature and usually depreciated. The asset lacks physical substance. The asset is acquired for resale.

The asset is long-term in nature and usually depreciated.

Which of the following statements about the balance sheet are true regarding its role in providing information about liquidity and long-term solvency? The balance sheet is primarily used for tax reporting purposes. Balance sheets are not useful for assessing financial flexibility. A balance sheet only provides information about a company's profitability. A classified balance sheet provides useful information about liquidity and long-term solvency.

A classified balance sheet provides useful information about liquidity and long-term solvency.

Which of the following would be reported as a current asset on a company's balance sheet? Bonds payable due in 5 years Machinery intended for use over the next seven years Paid-in capital from shareholders A nine-month insurance policy paid in advance

A nine-month insurance policy paid in advance

Which of the following would be considered a long-term asset for a company? A nine-month insurance policy paid in advance Accounts receivable due within 30 days Cash on hand Machinery the company intends to use over the next seven years

Machinery the company intends to use over the next seven years

Which of the following is a long-term liability that a company might report? Accounts payable due in 30 days Bonds payable that are due in 5 years Short-term bank loans Accrued wages

Bonds payable that are due in 5 years

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