Which of the following is the least likely reason as to why a firm’s management would

mated to have a 3 year life and a residual value of €5,000. If the company depreciates the asset using the double declining balance method, the depreciation expense that the company will report for the third year is closest to:

A. €555.

B. €3,328.

C. €3,705.

ting in the same industry:

Although the companies have different levels of sales and assets, they are all experiencing sales growth at about the same rate and use the same type of equipment in the manufacturing process. All three companies also use the same depreciation method. Which company is least likely to require major capital expenditures in the near future? Company:

A. 1.

B. 2.

C. 3.

ccepted accounting principles). It expected to be the sole supplier for a state-wide school milk program and had production facilities valued at $28.4 million. Recently several other companies were also granted milk-supply contracts throughout the state and the company now estimates that it will only be able to generate cash flows of $3 million per year for the next 7 years with its facilities. The firm has a cost of capital of 10%.

The impairment loss (in $-millions) on the production facilities will most likely be reported in the company’s financial statements as a:

A. 13.8 reduction in operating cash flows. .

B. 13.8 impairment loss in the income statement

C. 7.4 reduction in the balance sheet carrying amount.

lly accepted accounting principles) are identical exceptas to how soon they judge a project to be technologically feasible. One firm does so very early in the development cycle while the other usually waits until just before the project is released to manufacturing. Compared to the company that judges technological feasibility early, the one that waits until closer to manufacturing willmost likely report lower:

A. financial leverage.

B. total asset turnover.

C. cash flow from operations.

rklifts, etc.) for €50 million, which were valued by an appraiser as follows: Land €10 million, building €35 million, and equipment €5 million. The company incurred the following additional costs in getting the warehouse ready to use:

€2.0 million for repairs to the building’s roof and windows

€0.5 million to modify the interior layout to meet their needs (moving walls and doors, inserting and removing partitions, etc.)

€0.1 million on an orientation and training session for employees to familiarize them with the facility

The cost to be capitalized to the building account (in millions) for accounting purposes is closest to:

A. €37.0.

B. €37.5.

C. €38.5.

o its owners in a spin-off. The most appropriate way to account for the assets until the distribution occurs is to classify them as:

A. held for sale with no depreciation taken.

B. held for use until disposal with no deprecation taken.

C. held for use until disposal with depreciation continuing to be taken.

d equipment if incurred during construction of a new facility?

A. Interest costs during construction.

B. Expenses associated with classified advertising to recruit new employees.

C. Shipping costs for an assembly required for customizing new equipment.

anies have incurred expenses of approximately $250 million in the current year to expand their production facilities. Company A is highly leveraged. Company B does not have any outstanding debt and paid the $250 million from internal cash reserves. The most likely effect of the difference in the capital structures of the two companies will be:

A. Company A will report higher asset balances related to the facilities under construction.

B. The companies will report the same asset balances related to the facilities under construction.

C. Company A’s interest coverage ratio will be lower than it would have been if the company had expensed all interest.

Which of the following would most likely be lower in the early years of an asset’s life using accelerated depreciation methods rather than straight-line depreciation?

A. Investing cash flow

B. Shareholder’s equity

C. Cash flow from operations

An analyst has gathered the following information from the current year fixed asset disclosures of three competing companies:

Based on this information, which company is depreciating its building over the longest average period?

A. Company X.

B. Company Y.

C. Company Z.