acct 2302 final exam practice #1

Question 1

For a recent year a corporation’s financial statements reported the following:
Net Income
$100,000
Depreciation
10,000
Increase in AR
30,000
Decrease in AP
15,000

What amount will the corporation report as Net Cash Provided by Operating Activities on the cash flow statement
$65,000
$125,000
$155,000
None of the above

Answer 1

$65,000

Question 2

In a​ department, 35,000 units are completed and transferred out and 17,400 remain in ending WIP at 85​% complete. If an equivalent unit costs $9.00 for direct​ materials, what is the value of materials transferred​ out?
$156,600
$158,400
$133,110
$315,000

Answer 2

$315,000

35,000 units * $9.00/unit = $315,000

Question 3

The NPV method assumes that cash flows are reinvested at
a) the discount rate used in the analysis
b) the internal rate of return
c) the rate that would cause the payback method to show a NPV greater than zero
d) the rate that would cause the payback method to show a NPV equal the project’s IRR adjusted for taxes

Answer 3

a) the discount rate used in the analysis

Question 4

In the equipment replacement decisions, which one of the following does not affect the decision-making process?
a) current disposal price of the old equipment
b) operating costs of the old equipment
c) original fair value of the old equipment
d) operating costs of the new equipment

Answer 4

a) current disposal price of the old equipment

Question 5

Which of the following is the strength of the payback method?
a) it considers cash flows for all years of the project
b) it distinguishes cash inflows from cash outflows
c) it considers the time value of money
d) it is easy to understand

Answer 5

d) it is easy to understand

Question 6

Which of the following is not a typical cash flow related to equipment purchase and replacement decisions?
a) Increased operating costs
b) Overhaul of equipment
c) Salvage value of equipment when project is complete
d) Depreciation expense

Answer 6

d) Depreciation expense

Question 7

The cash payback period is computed by dividing the cost of the capital investment by the
a) Annual net income
b) Net annual cash inflow
c) Present value of cash inflow
d) Present value of the net income

Answer 7

b) Net annual cash inflow