Question Details

A loss on disposal of a capital asset is reported in the financial statements



1.	On July 1, 2001 Lars Kennels sells equipment for $22,000. The equipment originally cost $60,000, had an estimated 5-year life and an expected residual value of $10,000. The accumulated amortization account had a balance of $35,000 on January 1, 2001, using the straight-line method. The gain or loss on disposal is
		a.	$3,000 gain.
		b.	$2,000 loss.
		c.	$3,000 loss.
		d.	$2,000 gain.
	2.	A loss on disposal of a capital asset is reported in the financial statements
		a.	in the Other Revenues and Gains section of the income statement.
		b.	in the Other Expenses and Losses section of the income statement.
		c.	as a direct increase to the capital account on the balance sheet.
		d.	as a direct decrease to the capital account on the balance sheet.

	3.	Gains and losses on disposal of capital assets occur
		a.	rarely.
		b.	frequently.
		c.	every time a capital asset is disposed of.
		d.	only if the net book value is zero.

	4.	Two commonly used ratios to assess the profitability of total assets are
		a.	asset turnover and current ratio.
		b.	asset turnover and receivables turnover.
		c.	return on assets and quick ratio.
		d.	return on assets and asset turnover.

	5.	Asset turnover is calculated as
		a.	Net Sales ÷ Average Total Assets.
		b.	Net Income ÷ Average Total Assets.
		c.	Net Sales ÷ Owner- Equity.
		d.	Net Income ÷ Owner- Equity.





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