1. In order for a capital asset to be presented on a company's balance sheet, all of the following criteria must be met except:
A. the company must control the asset.
B. the company must own the asset.
C. the asset must be tangible or intangible.
D. the asset is not bought and sold in the ordinary course of business.
2. Firms whose assets consist of a significant amount of property plant and equipment are known as being:
A. risky.
B. highly leveraged.
C. capital intensive.
D. credit worthy.
3. All of the following would be classified as capital assets except:
A. buildings in current use.
B. land purchased for resale.
C. machinery.
D. tools used in production.
4. Which of the following is not a tangible capital asset?
A. Buildings
B. Land
C. Patent
D. Equipment
5. Most companies value capital assets on the balance sheet at:
A. net realizable value.
B. replacement cost.
C. market value.
D. historical cost.
6. Why is fair value not normally used to value capital assets?
A. Because it is less comparable than historical cost.
B. Because it is less relevant than historical cost.
C. Because it is less consistent than historical cost.
D. Because it is less reliable than historical cost.
7. If a company were going to pledge its capital assets to a bank as collateral for a loan, which method of valuing the assets would be more useful to the bank?
A. Fair value
B. Replacement cost
C. Net book value
D. Historical cost
8. Which method of valuing capital assets is more relevant for tax purposes?
A. Net realizable value
B. Replacement cost
C. Market value
D. Historical cost
9. The amount at which an asset could be sold between knowledgeable arm's length parties is known as?
A. Fair value
B. Replacement cost
C. Net book value
D. Historical cost
10. If a user wanted to predict the future cash flows of the company, which method of valuing capital assets would be more useful?
A. Net realizable value
B. Replacement cost
C. Market value
D. Historical cost