11. The depreciable life of an asset is of concern to the financial manager. In general (a) a longer depreciable life is preferred because it will result in a faster receipt of cash flows. (b) a shorter depreciable life is preferred because it will result in a faster receipt of cash flows. (c) a shorter depreciable life is preferred because management can then purchase new assets as the old assets are written off. (d) a longer depreciable life is preferred because management can postpone purchasing new assets since the old assets still have a useful life. 12. The depreciable value of an asset under MACRS is (a) the full cost excluding installation costs. (b) the full cost minus salvage value. (c) the full cost including installation costs. (d) the full cost including installation costs adjusted for the salvage value. 13. 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? (a) $15 000 (b) $12 750 (c) $11 250 (d) $22 000 14. Which of the following is a source of cash flows? (a) Cost of goods sold. (b) Depreciation. (c) Interest expense. (d) Taxes. 15. _________ is an expense that is a legal obligation of the firm. (a) Labor expense. (b) Interest expense. (c) Salaries expense. (d) Rent expense. 16. The first step in preparing a statement of cash flows is to (a) calculate changes in income statement accounts. (b) calculate changes in balance sheet accounts. (c) calculate the depreciation expense. (d) adjust retained earnings. 17. When preparing a statement of cash flows retained earnings adjustments are required so that which of the following are separated on the statement? (a) revenue and cost (b) assets and liabilities (c) depreciation and purchases (d) net profits and dividends. 18. The cash flows from operating activities of the firm include (a) interest expense. (b) cost of raw materials. (c) dividends paid. (d) stock repurchases. 19. The cash flows from operating activities of the firm include (a) labor expense. (b) interest expense. (c) taxes paid. (d) dividends paid. 20. Inputs to the statement of cash flows from the income statement include all of the following EXCEPT (a) net profits after tax. (b) non-cash charges such as depreciation. (c) cash dividends. (d) operating profit.
