Assume that,prior to preparing adjusting entries at the end of the year,Caterpillar Corporation has a fixed asset turnover ratio of 3.4 based on average net fixed assets of $500,000,000.Which of the following year-end adjustments would cause Caterpillar's fixed asset turnover ratio to increase?
A)Caterpillar accrues and capitalizes $50,000 for self-constructed assets.
B)Caterpillar accrues a liability for ordinary repair costs in the amount of $50,000.
C)Caterpillar writes down an impaired piece of equipment by $50,000.
D)Caterpillar increases the sales returns & allowances by $50,000.

Question

Quizplus · Accepted Answer

Writing down impaired equipment would decrease net fixed assets resulting in a higher turnover ratio.

Assume That,prior to Preparing Adjusting Entries at the End of the Year,Caterpillar