1. Expenditures capitalized as long-lived assets usually comprise those expenditures which:
a. Are made for normal repairs to sustain usefulness of the asset over number of years
b. Are for items that have a physical life of more than a year, regardless of their cost
c. Are material and that have an economic benefit to entity only in the current year
d. Are material and that have an economic benefit to entity that extends beyond the current year
2. Present value concept is widely applied in business because:
a. Inflation erodes purchasing power of money
b. Money has value over time
c. Accounting for operating leases needs its use
d. Most obligations are settled within a year
3. Many companies use accelerated depreciation for tax purposes because:
a. It is easier to compute than straight-line depreciation
b. It reflects the amount of cash used in depreciation
c. It results in lower taxable income than straight-line depreciation
d. It is used for determining net income reported to stockholders
4. The payment of current liability will:
a. Decrease net income
b. Decrease working capital
c. Increase working capital
d. Not affect working capital
5. When borrowing money, most significant objective of borrower should be to minimize monthly payments
a. True
b. False