Question 1

A negative free cash flow means that all cash commitments have been met.

Accepted Answer

A) True 
 B)False

Question 2

If a company's free cash flow is $66,000,net cash flows from operating activities total $133,000,purchases of plant assets total $61,000,and the payment of dividends was $20,000,what amount was obtained from the sale of plant assets?

Accepted Answer

A) $7,000 
B) $14,000 
C) $28,000 
D) Impossible to determine from the facts given. 
A) $7,000 
B) $14,000 
C) $28,000 
D) Impossible to determine from the facts given.

Question 3

Suppose an accounting intern mistakenly calculated depreciation expense on the Land account.She assigned it a 50-year life and a residual value of $10,000,000.Using the cost of the land (assume it was $811,000,000)and the straight-line method of depreciation,discuss the dollar effect of this error on pretax earnings and total assets.

Accepted Answer

The depreciable amount would be the $811

Question 4

A company purchases for $48,000 an asset that has a useful life of six years and no salvage value.After two years,the company spends $8,000 for a major overhaul that will extend the machine's useful life four years beyond the original six.Assuming straight-line depreciation,how much depreciation should be taken in year 3?

Accepted Answer

A) $4,000 
B) $5,000 
C) $5,600 
D) $8,000 
A) $4,000 
B) $5,000 
C) $5,600 
D) $8,000

Question 5

A building was purchased for $250,000.It has accumulated depreciation of $40,000 and an expected residual value of $50,000.Assuming the use of straight-line depreciation,its estimated useful life must be

Accepted Answer

A) 15 years. 
B) 10 years. 
C) 5 years. 
D) impossible to determine from the facts given. 
A) 15 years. 
B) 10 years. 
C) 5 years. 
D) impossible to determine from the facts given.

Question 6

A reduction in carrying value as a result of impairment is recorded as a loss.

Accepted Answer

A) True 
 B)False

Question 7

All of the following are needed for the computation of depreciation except

Accepted Answer

A) residual value. 
B) estimated useful life. 
C) cost. 
D) current market value. 
A) residual value. 
B) estimated useful life. 
C) cost. 
D) current market value.

Question 8

Prior to the sale of an asset,depreciation should be updated and recorded.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is not true about depreciation for tax purposes?

Accepted Answer

A) The straight-line method is used for most assets. 
B) The same methods are not acceptable for financial reporting. 
C) Plant assets are written off rapidly. 
D) There is a bonus first-year deduction. 
A) The straight-line method is used for most assets. 
B) The same methods are not acceptable for financial reporting. 
C) Plant assets are written off rapidly. 
D) There is a bonus first-year deduction.

Question 10

Which of the following items is not classified as a natural resource?

Accepted Answer

A) Timberland 
B) A gas reserve 
C) An oil well 
D) Goodwill 
A) Timberland 
B) A gas reserve 
C) An oil well 
D) Goodwill

Question 11

Whether exchanging similar or dissimilar assets,accounting for the transaction is the same.

Accepted Answer

A) True 
 B)False

Question 12

Agnes purchased a computer for $2,240.It has an estimated useful life of four years and an estimated residual value of $240.The entry to record the depreciation charge for the first year using the double-declining-balance method is:

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)

Question 13

One argument in favor of accelerated depreciation is that repair expense is likely to be greater in later years.

Accepted Answer

A) True 
 B)False

Question 14

When an asset is sold,a gain is calculated as the difference between

Accepted Answer

A) sale price and the depreciable cost of the asset sold. 
B) sale price and the carrying value of the asset sold. 
C) carrying value and the residual value of the asset sold. 
D) sale price and the original cost of the asset sold. 
A) sale price and the depreciable cost of the asset sold. 
B) sale price and the carrying value of the asset sold. 
C) carrying value and the residual value of the asset sold. 
D) sale price and the original cost of the asset sold.

Question 15

The amount of depletion of a coal mine in a year may differ from the depletion expense in the same year because

Accepted Answer

A) depletion expense includes other costs in addition to depletion. 
B) depletion is based on the passage of time,whereas depletion expense is not. 
C) the mine is not in operation all year. 
D) some coal is unsold at the end of the year. 
A) depletion expense includes other costs in addition to depletion. 
B) depletion is based on the passage of time,whereas depletion expense is not. 
C) the mine is not in operation all year. 
D) some coal is unsold at the end of the year.

Question 16

McCloud Company purchased a machine for $15,500.The machine is expected to last four years and has a residual value of $1,500.The entry to record depreciation expense at the end of the first year using the straight-line method is:

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)

Question 17

A natural resource is expensed in the year it is extracted rather than when it is sold.

Accepted Answer

A) True 
 B)False

Question 18

If net cash flows from operating activities total $115,000,net cash flows from financing activities total $50,000,net cash flows from investing activities total $60,000,purchases of plant assets total $30,000,dividends total $12,000,and sales of plant assets total $17,000,the free cash flow equals

Accepted Answer

A) $90,000. 
B) $174,000. 
C) $116,000. 
D) $56,000. 
A) $90,000. 
B) $174,000. 
C) $116,000. 
D) $56,000.

Question 19

Which of the following would be considered a capital expenditure?

Accepted Answer

A) Business vehicle tune-up 
B) Equipment maintenance 
C) Installation of an air-conditioning system 
D) Professional deep cleaning of display room carpet 
A) Business vehicle tune-up 
B) Equipment maintenance 
C) Installation of an air-conditioning system 
D) Professional deep cleaning of display room carpet

Question 20

Which of the following items would be considered a revenue expenditure?

Accepted Answer

A) Plant assets 
B) Routine maintenance 
C) Addition 
D) Betterment 
A) Plant assets 
B) Routine maintenance 
C) Addition 
D) Betterment

Exam 9: Long-Term Assets

A negative free cash flow means that all cash commitments have been met.

If a company's free cash flow is $66,000,net cash flows from operating activities total $133,000,purchases of plant assets total $61,000,and the payment of dividends was $20,000,what amount was obtained from the sale of plant assets?

A building was purchased for $250,000.It has accumulated depreciation of $40,000 and an expected residual value of $50,000.Assuming the use of straight-line depreciation,its estimated useful life must be

A reduction in carrying value as a result of impairment is recorded as a loss.

All of the following are needed for the computation of depreciation except

Prior to the sale of an asset,depreciation should be updated and recorded.

Which of the following statements is not true about depreciation for tax purposes?

Which of the following items is not classified as a natural resource?

Whether exchanging similar or dissimilar assets,accounting for the transaction is the same.

Agnes purchased a computer for $2,240.It has an estimated useful life of four years and an estimated residual value of $240.The entry to record the depreciation charge for the first year using the double-declining-balance method is:

One argument in favor of accelerated depreciation is that repair expense is likely to be greater in later years.

When an asset is sold,a gain is calculated as the difference between

The amount of depletion of a coal mine in a year may differ from the depletion expense in the same year because

McCloud Company purchased a machine for $15,500.The machine is expected to last four years and has a residual value of $1,500.The entry to record depreciation expense at the end of the first year using the straight-line method is:

A natural resource is expensed in the year it is extracted rather than when it is sold.

If net cash flows from operating activities total $115,000,net cash flows from financing activities total $50,000,net cash flows from investing activities total $60,000,purchases of plant assets total $30,000,dividends total $12,000,and sales of plant assets total $17,000,the free cash flow equals

Which of the following would be considered a capital expenditure?

Which of the following items would be considered a revenue expenditure?

Uses of Accounting Information and the Financial Statements

Measurement Concepts: Recording Business Transactions

Measuring Business Income: Adjusting the Accounts

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Current Liabilities and Fair Value Accounting

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems: Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

Cost-Volume-Profit Analysis

The Budgeting Process

Flexible Budgets and Performance Analysis

Standard Costing and Variance Analysis

Short-Run Decision Analysis

Capital Investment Analysis

Pricing Decisions, including Target Costing and Transfer Pricing

Quality Management and Measurement

Accounting for Unincorporated Businesses

Accounting for Investments

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