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BMAL 590 ACCOUNTING Exam Questions and Answers (Graded A)
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BMAL 590 ACCOUNTING Exam Questions and Answers
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BMAL 590 ACCOUNTING ExamQuestions and Answers
Decisions to install new equipment, replace old equipment, and purchase or construct a
new building are examples of - Answers -Capital investment analysis
Which of the following are present value methods of analyzing capital investment
proposals? - Answers -Net present value and internal rate of return
By converting dollars to be received in the future into current dollars, the present value
methods take into consideration that money - Answers -has a time value
The primary advantages of the average rate of return method are its ease of
computation and the fact that - Answers -it emphasizes the amount of income earned
over the life of the proposal
Which of the following can be used to place capital investment proposals involving
different amounts of investment on a comparable basis for purposes of net present
value analysis? - Answers -Present value index
An analysis of a proposal by the net present value method indicated that the present
value exceed the amount to be invested. Which of the following statements best
describe the results of this analysis? - Answers -The proposal is desirable and the rate
of return expected from the proposal exceeds the minimum rate used for the analysis
In general, present value methods of analyzing capital investments are more desirable
than methods ignoring present value because - Answers -The present value methods
consider that a dollar today is worth more than a dollar in the future due to the potential
earning power of that dollar
Which method of evaluating capital investment proposals uses the concept of present
value to compute a rate of return? - Answers -Internal rate of return
When several alternative investment proposals of the same amount are being
considered, the one with the largest net present value is the most desirable. If the
alternative proposal involve different amounts of investment, it is useful to prepare a
relative ranking of the proposals by using a(n) - Answers -Present value index
Which method of evaluating capital investment proposals uses present value concepts
to compute the rate of return from the net cash flows expected from capital investment
proposals? - Answers -Internal rate of return
, The present value index is computed using which of the following formulas? - Answers -
Total present value of net cash flow/Amount to be invested
Which of the following is a present value method of analyzing capital investment
proposals? - Answers -Net present value
An analysis of a proposal by the net present value method indicated that the present
value of future cash flows exceeded the amount to be invested. Which of the following
statements best describes the results of this analysis? - Answers -The proposal is
desirable and the rate of return expected from the proposal exceeds the minimum rate
used for the analysis
All of the following are factors that may complicate capital investment analysis EXCEPT
- Answers -Sunk cost
Which of the following provisions of the Internal Revenue Code can be used to reduce
the amount of the income tax expense arising from the capital investment projects? -
Answers -Depreciation deduction
Periods in time that experience increasing price levels are known as periods of -
Answers -Inflation
The process by which management allocate available investment funds among
competing investment proposals is called - Answers -Capital rationing
In capital rationing, an initial screening of alternative proposals is usually performed by
establishing minimum standards. Which of the following evaluation methods are
normally used? - Answers -Cash payback method and average rate of return method
In capital rationing, alternative proposals that survive initial and secondary screening
are normally evaluated in terms of - Answers -Nonfinancial factors
The basic financial statements do NOT include the - Answers -Tax return
Which of the following is NOT an element of the financial accounting system? - Answers
-A set of rules for the stock exchange
Which of the following accounts is a stockholders' equity account? - Answers -Retained
earnings
The stockholders' equity will be reduced by which of the following accounts? - Answers -
Dividends
The gross increases in stockholders' equity attributable to business activities are called -
Answers -Revenues
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