Fin Acc Practice Exam

An asset was purchased for $120,000 on January 1, year 1 and originally estimated to have a useful life of 10 years with a residual value of $10,000. At the beginning of the third year, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $2,000. Compute the third year depreciation expense using the revised amounts and straight line method. A. $24,000 B. $11,000 C. $24,500 D. $25,000

$24,000

The method of determining depreciation that yields successive reductions in the periodic depreciation charge over the estimated life of the asset A. Double-Declining balance method B. Straight line method C. Units of production method D. Time valuation method

A. Double declining balance method

Which intangible assets are amortized over their useful life? A. Patents B. Trademarks C. Goodwill D. All of the above

A. Patents

Which of the following statements is true? A. The Fixed assets turnover ratio is not useful for comparing different companies B. The fixed asset turnover ratio cannot be compared across time for an individual company C. A larger fixed asset turnover ratio is associated with firms that are more labor intensive and require smaller fixed asset investment D. A smaller fixed asset turnover ratio is associated with firms that are more labor intensive and require smaller fixed asset investment

C. A larger fixed asset turnover ratio is associated with firms that are more labor intensive and require smaller fixed asset investment

The higher the fixed asset turnover, the A. Less efficiently a company is using its fixed asset in generating sales B. More efficiently a company is using its intangible assets in generating sales C. More efficiently a company is using its fixed asset in generating sales D. More efficiently a company is using its current assets in generating sales

C. More efficiently a company is using its fixed assets in generating sales

Factors contributing to a decline in the usefulness of a fixed asset may be divided into which of the following two categories A. Residual and salvage B. Functional and residual C. Physical and functional D. Salvage and functional

C. Physical and functional

Free cash flow is a measure of the operating cash flow available to a company after it: A. Pays dividends and redeems bonds payable B. Invest in needed fixed assets and redeems bonds payable C. Purchases the PPE needed to maintain current production D. Invest in the PPE needed to achieve desired future productive capacity

C. Purchases the PPE needed to maintain current production

Which of the following should be shown on a statement of cash flows under the financing activities section A. The issuance of a long-term note to acquire land B. The purchase of a long-term investment in the common stock of another company C. The payment of cash to retire a long-term note D. The proceeds from the sale of a building

C. The payment of cash to retire a long-term not

On June 1, Scotter Company purchased equipment at a cost of $120,000 That has a depreciable cost of $90,000 and an estimated useful life of 3 years or 30,000 hours. Using straight line depreciation, compute depreciation expense for the first year which end on December 31. A. $12,500 B. $30,000 C. $40,000 D. $17,500

D. 17,500 (90,000/3= 30,000)(30,000/12*7)

A machine with a cost of $75,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000 hours. What is the amount of depreciation for the second full year, using the double-declining-balance method? A. $37,500 B.$17,500 C.$16,667 D.$18,750

D. 18,750