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Unformatted text preview: Accounting 284 Exam 3A- Clem Spring 2006 1. Which of the following is false? A) The book value at the end of an asset's useful life will be the same under all the depreciation methods allowed under GAAP. B) The total depreciation in the accumulated depreciation account will be the different at the end of the asset's useful life under all the methods allowed under GAAP. C) The annual depreciation expense will differ under the various depreciation methods. D) Total depreciation over the life of the asset will be equal to the cost of the asset minus the residual value. 2. Eaton Company issued $5 million in bonds. The stated rate of interest was 5% and the market rate 6%. Which of the following statements is true ? A) The bonds were issued at a premium. B) Annual interest expense will exceed the company's actual cash payments for interest. C) Annual interest expense will be $250,000. D) Both B and C are correct. 3. Yahoo! Inc. had a current ratio of 4.15 in 2000 and 2.93 in 2001. Which of the following would cause the ratio to decrease? (Hint: Current ratio = Current Assets ÷ Current Liabilities) A) An increase in cash and equivalents and short-term investments. B) An increase in current assets that exceeded the increase in current liabilities. C) Current assets as a percentage of total assets increased while current liabilities as a percentage of total liabilities and stockholders' equity decreased. D) None of the above would cause the ratio to decrease. 4. A depreciable asset that cost $100,000 had an estimated useful life of 5 years and estimated residual value of $10,000. What is the first year for which depreciation would be greater under the straight-line method than under the double declining-balance (200% acceleration rate)? A) The first year. B) The second year. C) The third year. D) The fourth year. Acct 284 Exam 3 – Spring 2006 Page 2 5. Which of the following is considered a contingent liability?...
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This note was uploaded on 09/23/2009 for the course ACCT 284 taught by Professor Clem during the Spring '08 term at Iowa State.
- Spring '08