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Exam 8: Capital Assets

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Question 61

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How is the purchase of a capital asset with cash recorded in the cash flow statement?

A) As an increase in cash from investing activities.
B) As a decrease in cash from investing activities.
C) As a decrease in cash from operating activities.
D) As depreciation in the calculation of cash from operating activities, over time.

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Question 62

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The amount of depreciation expense reported in any period is a function of four factors: the asset's cost, useful life and residual value and the depreciation method used.Identify which of those factors management can influence, and explain how management could use each one you identified to increase or decrease income in a period and over the life of the asset.

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Management can influence all four factor...

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Question 63

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Which of the following would allow a company to report higher net income in earlier periods?

All of the following terms can be used for the process of allocating the cost of a capital asset to expense over time except?

A general description of the depreciation methods applicable to major classes of depreciable assets:

If managers are concerned about the level of income their company reports, which method of depreciation are they most likely to use?

Which of the following is the correct journal entry for the sale of a machine for $10,000 that had originally cost $25,000 and had $12,000 of accumulated depreciation on the date of sale? A. Dr. Cash $\quad 10,000$ $\quad$ Dr. Accumulated depreciation $\quad 12,000$ $\quad$ Cr. Machine $\quad 22,000$ B. Dr. Cash $\quad 10,000$ $\quad$ Dr. Accumulated depreciation $\quad 12,000$ $\quad$ Dr. Loss on sale $\quad 3,000$ $\quad$$\quad$ Cr. Machine $\quad 25,000$ C. Dr. Cash $\quad 10,000$ $\quad$ Dr. Accumulated depreciation $\quad 12,000$ $\quad$ Dr. Gain on sale $\quad 3,000$ $\quad$$\quad$ Cr. Machine $\quad 25,000$ D. Dr. Cash $\quad 10,000$ $\quad$ Dr. Loss on sale $\quad 15,000$ $\quad$$\quad$ Cr. Machine $\quad 25,000$