Question 1

The depreciable value of an asset,under MACRS,is the ________.

Accepted Answer

Under the Modified Accelerated Cost Recovery System (MACRS), the depreciable value of an asset is its original cost plus any costs associated with its installation. Salvage value is not subtracted under MACRS.

Question 2

Given a financial manager's preference for faster receipt of cash flows,a longer depreciable life is preferred to a shorter one.

Accepted Answer

A longer depreciable life means that the cost of the asset is spread out over a longer period, resulting in slower cash flows. Therefore, a financial manager would prefer a shorter depreciable life to receive cash flows faster.

Question 3

A corporation ________.

Accepted Answer

A corporation can choose to use different depreciation methods for tax purposes and financial reporting purposes as long as they comply with relevant regulations and standards for each. There is no strict mandate for depreciation methods in financial reporting, although certain methods may be more commonly used or preferred by stakeholders.

Question 4

In the statement of cash flows,the cash flows from financing activities result from debt and equity financing transactions; including incurrence and repayment of debt,cash inflow from the sale of stock,and cash outflows to repurchase stock or pay cash dividends.

Accepted Answer

The statement is true, as the cash flows from financing activities include various transactions related to debt and equity financing like incurrence and repayment of debt, issuance of stock, repurchase of stock, and payment of dividends.

Question 5

Depreciation deductions,like any other business expenses,reduce the income that a firm reports on its income statement.

Accepted Answer

Depreciation deductions are a non-cash expense that reduces the value of an asset over time. This reduction in value is subtracted from the income earned by the firm, which lowers the taxable income and reduces the amount of taxes owed. Therefore, like any other business expense, depreciation reduces the income that a firm reports on its income statement.

Question 6

The depreciable value of an asset,under MACRS,is ________.

Accepted Answer

The depreciable value of an asset under MACRS is the full cost including installation costs. The salvage value is not subtracted from the cost of the asset under MACRS.

Question 7

Under MACRS,an asset which originally cost $100,000,incurred installation costs of $10,000,and has an estimated salvage value of $25,000,is being depreciated using a 5-year normal recovery period.What is the depreciation expense in year 1?

Accepted Answer

The answer of Under MACRS,an asset which originally cost $100,000,incurred...

Question 8

Under the basic MACRS procedures,the depreciable value of an asset is its full cost,including outlays for installation.

Accepted Answer

Under basic MACRS procedures, the depreciable basis of an asset is its full cost, including any expenses incurred for installation or improvements.

Question 9

Allocation of the historic costs of fixed assets against the annual revenue they generate is called ________.

Accepted Answer

The allocation of the historic costs of fixed assets against the annual revenue they generate is called depreciation. Depreciation is used to spread the cost of a fixed asset over its useful life, and is an important component of calculating a company's profits and taxes. Arbitraging is the practice of taking advantage of price differences among different markets or instruments, while securitization involves pooling financial assets into a security that can be sold to investors. Amortization is similar to depreciation, but is typically used to allocate the cost of intangible assets, such as patents or trademarks.

Question 10

Under MACRS,an asset which originally cost $10,000 is being depreciated using a 5-year normal recovery period.What is the depreciation expense in year 3?

Accepted Answer

The answer of Under MACRS,an asset which originally cost $10,000...

Question 11

For tax purposes,using MACRS recovery periods,assets in the first four property classes are depreciated by the double-declining balance method using the half-year convention and switching to straight line when advantageous.

Accepted Answer

This statement is true. MACRS recovery periods apply to assets in the first four property classes (which includes most tangible personal property) and the double-declining balance method is used for depreciation in these classes, with a switch to straight line when more advantageous. The half-year convention also applies, which assumes that property is placed in service in the middle of the year for depreciation purposes.

Question 12

Under MACRS,an asset which originally cost $100,000 is being depreciated using a 10-year normal recovery period.The depreciation expense in year 5 is ________.

Accepted Answer

The answer of Under MACRS,an asset which originally cost $100,000...

Question 13

Given a financial manager's preference for faster receipt of cash flows,________.

Accepted Answer

A shorter depreciable life means the asset will be fully depreciated sooner, resulting in lower taxable income and faster receipt of tax savings. This, in turn, leads to faster receipt of cash flows.

Question 14

The Modified Accelerated Cost Recovery System (MACRS)is a depreciation method used for ________ purposes.

Accepted Answer

The MACRS method is specifically designed for tax purposes and is used to calculate the depreciation of assets for tax deductions. It is not typically used for financial reporting, budgeting, or cost accounting purposes.

Question 15

Darling Paper Container,Inc.purchased several machines at a total cost of $300,000.The installation cost for this equipment was $25,000.The firm plans to depreciate the equipment using the MACRS 5-year normal recovery period.Prepare a depreciation schedule showing the depreciation expense for each year.

Accepted Answer

The answer of Darling Paper Container,Inc.purchased several machines at a...

Question 16

In general,________.

Accepted Answer

The answer of In general,________.
...

Question 17

Non-cash charges are expenses that involve an actual outlay of cash during the period but are not deducted on the income statement.

Accepted Answer

Non-cash charges are expenses that do not involve an actual outlay of cash during the period but are deducted on the income statement, such as depreciation or amortization.

Question 18

Under MACRS,an asset which originally cost $100,000 is being depreciated using a 10-year normal recovery period.The depreciation expense in year 11 is ________.

Accepted Answer

The answer of Under MACRS,an asset which originally cost $100,000...

Question 19

Business firms are permitted to systematically charge a portion of the market value of fixed assets as depreciation against annual revenues.

Accepted Answer

The answer of Business firms are permitted to systematically charge...

Question 20

The MACRS depreciation method requires use of the half-year convention.Assets are assumed to be acquired in the middle of the year and only one-half of the first year's depreciation is recovered in the first year.

Accepted Answer

The statement accurately describes the half-year convention used in MACRS depreciation.

Quiz 4: Cash Flow and Financial Planning

The depreciable value of an asset,under MACRS,is the ________.

Given a financial manager's preference for faster receipt of cash flows,a longer depreciable life is preferred to a shorter one.

A corporation ________.

In the statement of cash flows,the cash flows from financing activities result from debt and equity financing transactions; including incurrence and repayment of debt,cash inflow from the sale of stock,and cash outflows to repurchase stock or pay cash dividends.

Depreciation deductions,like any other business expenses,reduce the income that a firm reports on its income statement.

The depreciable value of an asset,under MACRS,is ________.

Under MACRS,an asset which originally cost $100,000,incurred installation costs of $10,000,and has an estimated salvage value of $25,000,is being depreciated using a 5-year normal recovery period.What is the depreciation expense in year 1?

Under the basic MACRS procedures,the depreciable value of an asset is its full cost,including outlays for installation.

Allocation of the historic costs of fixed assets against the annual revenue they generate is called ________.

Under MACRS,an asset which originally cost $10,000 is being depreciated using a 5-year normal recovery period.What is the depreciation expense in year 3?

For tax purposes,using MACRS recovery periods,assets in the first four property classes are depreciated by the double-declining balance method using the half-year convention and switching to straight line when advantageous.

Under MACRS,an asset which originally cost $100,000 is being depreciated using a 10-year normal recovery period.The depreciation expense in year 5 is ________.

Given a financial manager's preference for faster receipt of cash flows,________.

The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method used for ________ purposes.

In general,________.

Non-cash charges are expenses that involve an actual outlay of cash during the period but are not deducted on the income statement.

Under MACRS,an asset which originally cost $100,000 is being depreciated using a 10-year normal recovery period.The depreciation expense in year 11 is ________.

Business firms are permitted to systematically charge a portion of the market value of fixed assets as depreciation against annual revenues.

The MACRS depreciation method requires use of the half-year convention.Assets are assumed to be acquired in the middle of the year and only one-half of the first year's depreciation is recovered in the first year.