5303 Chapter 4 Quiz

Topics: Depreciation, Generally Accepted Accounting Principles, Balance sheet Pages: 6 (903 words) Published: February 3, 2015
1. A corporation

must use the same depreciation method for tax and financial reporting purposes.

must use different depreciation methods for tax and financial reporting purposes.

may use different depreciation methods for tax and financial reporting purposes.

must use different (than for tax purposes), but strictly mandated, depreciation methods for financial reporting purposes. 1 points  
Question 2
1. Allocation of the historic costs of fixed assets against the annual revenue they generate is called

net profits.

gross profits.

depreciation.

amortization.
1 points  
Question 3
1. Given the financial manager's preference for faster receipt of cash flows,

a longer depreciable life is preferred to a shorter one.

a shorter depreciable life is preferred to a longer one.

the manager is not concerned with depreciable lives, because depreciation is a non-cash expense.

the manager is not concerned with depreciable lives, because once purchased, depreciation is considered a sunk cost. 1 points  
Question 4
1. The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method used for ________ purposes.

tax

financial reporting

managerial

cost accounting
1 points  
Question 5
1. The depreciable life of an asset is of concern to the financial manager. In general,

a longer depreciable life is preferred, because it will result in a faster receipt of cash flows.

a shorter depreciable life is preferred, because it will result in a faster receipt of cash flows.

a shorter depreciable life is preferred, because management can then purchase new assets, as the old assets are written off.

a longer depreciable life is preferred, because management can postpone purchasing new assets, since the old assets still have a useful life. 1 points  
Question 6
1. A corporation sold a fixed asset for $100,000. This is

an investment cash flow and a source of funds.

an operating cash flow and a source of funds.

an operating cash flow and a use of funds.

an investment cash flow and a use of funds.
1 points  
Question 7
1. A corporation raises $500,000 in long-term debt to acquire additional plant capacity. This is considered

an investment cash flow.

a financing cash flow.

a financing cash flow and investment cash flow, respectively.

a financing cash flow and operating cash flow, respectively. 1 points  
Question 8
1. A firm's operating cash flow (OCF) is defined as

gross profit minus operating expenses.

gross profit minus depreciation.

EBIT times one minus the tax rate plus depreciation.

EBIT plus depreciation.
1 points  
Question 9
1. All of the following are inflows of cash EXCEPT

a decrease in accounts receivable.

net profits after taxes.

an increase in accounts receivable.

an increase in accruals.
1 points  
Question 10
1. Calculate a firm's free cash flow if it has net operating profit after taxes of $60,000, depreciation expense of $10,000, net fixed asset investment requirement of $40,000, a net current asset requirement of $30,000 and a tax rate of 30%.

$0

$30,000

-$30,000

None of these
1 points  
Question 11
1. Calculate net operating profit after taxes (NOPAT) if a firm has sales of $1,000,000, operating profit (EBIT) of $100,000, interest expense of $50,000, and a tax rate of 30%.

$35,000

$700,000

$70,000

None of these
1 points  
Question 12
1. ________ is an expense that is a legal obligation of the firm.

Labor expense

Interest expense

Salaries expense

Rent expense
1 points  
Question 13
1. Which of the following is a source of cash flows?

Cost of goods sold

Depreciation

Interest expense

Taxes
1 points  
Question 14
1. Under MACRS, an asset which originally cost $100,000, incurred installation costs of $10,000, and has...
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