6.The average age of plant and equipment is:

A)   1.40 years.

B)   3.09 years.

C)   2.23 years.

D)   5.32 years.

7.An analyst will most likely use the average age of depreciable assets to estimate the company’s:

A)   future dividend payments.

B)   near-term financing requirements.

C)   cash flows.

D)   earnings potential.

8.Two companies in the same industry are similar in all aspects except that the average age of the depreciable assets for Company B is 10 times greater than the average age of the depreciable assets for Company A. Which of the following statements is least likely true? Company B will have:

A)   lower depreciation expense.

B)   higher earnings.

C)   higher taxes.

D)   a competitive advantage in the future.

9.In industries where there are rapid changes in technology related to production processes, which of the following characteristics will most likely indicate that a firm has a competitive advantage?

A)   High earnings per share.

B)   Low depreciation expense.

C)   Low capital expenditures.

D)   Low average age of equipment.

10.A manufacturing firm reports the following in its financial statements:

§       Gross plant and equipment $2,700,000

§       Depreciation expense $235,000

§       Accumulated depreciation $1,850,000

The average depreciable life of plant and equipment is:

A)   7.87 years.

B)   3.62 years.

C)   11.49 years.

D)   19.36 years.

11.The average age of plant and equipment is:

A)   1.33 years.

B)   3.62 years.

C)   11.49 years.

D)   7.87 years.

答案和详解如下：

6.The average age of plant and equipment is:

A)   1.40 years.

B)   3.09 years.

C)   2.23 years.

D)   5.32 years.

The correct answer was B)

The average age = accumulated depreciation / depreciation expense

3.09 = $725,000 / $235,000

7.An analyst will most likely use the average age of depreciable assets to estimate the company’s:

A)   future dividend payments.

B)   near-term financing requirements.

C)   cash flows.

D)   earnings potential.

The correct answer was B)

Average age of depreciable assets is useful for two reasons:

1.  to assess how competitive the corporation will be going forward (older assets are less efficient).

2.  to estimate financing required for major capital expenditures in the near-term to replace depreciated assets.

8.Two companies in the same industry are similar in all aspects except that the average age of the depreciable assets for Company B is 10 times greater than the average age of the depreciable assets for Company A. Which of the following statements is least likely true? Company B will have:

A)   lower depreciation expense.

B)   higher earnings.

C)   higher taxes.

D)   a competitive advantage in the future.

The correct answer was D)

Average age of depreciable assets is useful for two reasons:

1.  to assess how competitive the corporation will be going forward (older assets are less efficient).

2.  to estimate financing required for major capital expenditures to replace depreciated assets. 

Company B’s assets are mostly depreciated.  Therefore, depreciation expense will be lower and if all other aspects are similar, the earnings and taxes for Company B will be higher.

9.In industries where there are rapid changes in technology related to production processes, which of the following characteristics will most likely indicate that a firm has a competitive advantage?

A)   High earnings per share.

B)   Low depreciation expense.

C)   Low capital expenditures.

D)   Low average age of equipment.

The correct answer was D)

Average age of depreciable assets is useful for two reasons:

1.         to assess how competitive the corporation will be going forward (older assets are less efficient).

2.         estimate financing required for major capital expenditures to replace depreciated assets.

While low capital expenditures may result in higher earnings and lower depreciation expenses in the short run, in the long run, the company may find itself at a comparative disadvantage if technological changes are rapidly increasing. EPS is not comparable between companies.

10.A manufacturing firm reports the following in its financial statements:

§       Gross plant and equipment $2,700,000

§       Depreciation expense $235,000

§       Accumulated depreciation $1,850,000

The average depreciable life of plant and equipment is:

A)   7.87 years.

B)   3.62 years.

C)   11.49 years.

D)   19.36 years.

The correct answer was C)

The average depreciable life = Gross investment / Depreciation expense

11.49 = $2,700,000 / $235,000

11.The average age of plant and equipment is:

A)   1.33 years.

B)   3.62 years.

C)   11.49 years.

D)   7.87 years.

The correct answer was D)    

The average age = accumulated depreciation / depreciation expense

7.87 = $1,850,000 / $235,000