Question

1. Accumulated depreciation is deducted when calculating net income?

a0 true

b) false

2. Which of the following expenses will have no effect on the cash flow of a firm?

a) salaries expense

b) cost of goods sold

c) depreciation expense

d) interest expense

3. Carrying value of an asset is the cost of the asset that has already been expensed?

a) True

b) False

4. Which of the following would be the most useful in determining if a company has sufficient resources to continue operations in the short term?

a) the return on assets ratio

b) the cash from operating activities

c) the cash from financing activities

d) the profit margin ratio

5. Cost of goods sold should be matched up with the revenue generated on each year's statement of income because of the?

a) cash basis of accounting

b) revenue recognition criteria

c) actual basis of accounting

d) accrual basis of accounting

Answer 1

Question 1

Correct answer---------------False

Depreciation is deducted when net income is calculated not accumulated depreciation.

Accumulated depreciation is deducted from cost of asset to calculate carrying value of asset.

Question 2

Correct answer---------------c) depreciation expense

Depreciation expense is a non cash expense hence it has no effect on cash flow.

Question 3

Correct answer---------------True.

Carrying value is cost of asset minus accumulated depreciation. Carrying value is a sunk cost that has already been expensed.

Question 4

Correct answer---------------b) the cash from operating activities.

.

The cash from operations is used for day to day operations.

Question 5

Correct answer---------------b) revenue recognition criteria