Question 9 Lynch Printing Company determines that a printing press used in its o

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Question 9

Lynch Printing Company determines that a printing press used in its operations has suffered a permanent impairment in value because of technological changes. An entry to record the impairment should _________.

Question 9 options:

A.   recognize an extraordinary loss for the period

B.    include a credit to the equipment accumulated depreciation account

C.    include a credit to the equipment account

D.   not be made if the equipment is still being used

Question 10

Which of the following principles best describes the conceptual rationale for the methods of matching depreciation expense with revenues?

Question 10 options:

A.   Associating cause and effect

B.    Systematic and rational allocation

C.    Immediate recognition

D.   Partial recognition

Question 11

A major objective of Modified Accelerated Cost Recovery System (MACRS) for tax depreciation is to ____________.

Question 11 options:

A.   reduce the amount of depreciation deduction on business firms' tax returns

B.    assure that the amount of depreciation for tax and book purposes will be the same

C.    help companies achieve a faster write-off of their capital assets

D.   require companies to use the actual economic lives of assets in calculating tax depreciation

Question 12

The asset turnover ratio is computed by dividing _____________.

Question 12 options:

A.   net income by ending total assets

B.    net income by average total assets

C.    net sales by ending total assets

D.   net sales by average total assets

Explanation / Answer

1. D. Include a credit to the equipment account.

Because if the impairment losses are irreversible journal entry would be

impairment losses a/C Dr.

To equipment a/C.

Accumlated impairment losses a/C Dr.

To impairment losses

2. B. Systematic and rational allocation of depreciation expense as the depreciation expense is allocated using MACRS schedule or any other suitable method.

3. C. Help companies achieve a faster write off of assets.

4. D. Asset turnover ratio= Net sales/average total assets.

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