Reference: 10-12 Hanley Company Purchased a Machine for $125,000 That Will Be

question 25

Multiple Choice

Reference: 10-12
Hanley Company purchased a machine for $125,000 that will be depreciated on the straight-line basis over a five-year period with no salvage value. The related cash flow from operations is expected to be $45,000 a year. These cash flows from operations occur uniformly throughout the year.
-The payback method measures:

• A)the cash flow from an investment.
• B)the economic life of an investment.
• C)how quickly investment dollars may be recovered.
• D)the profitability of an investment.

Comprehend the concept of economic value added (EVA) and its calculation.

Identify the quality of a firm's earnings and the influence of accounting practices.

Recognize the ethical considerations and financial implications of managerial decisions on cash flow and earnings.

Distinguish between different accounting standards (IFRS vs. GAAP) and their impact on financial statements.

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Definitions:

Supplies Expense

Supplies expense refers to the cost associated with items consumed or used up in the operation of a business, which are not directly part of the manufactured product.

Income Statement

A financial document that summarizes a company's revenues, expenses, and profits or losses over a specific period.

Prepaid Expense

Expenses paid in advance for goods or services to be received in the future, recorded as an asset on the balance sheet until they are incurred.

Prepaid Insurance

The portion of insurance premiums that have been paid in advance and is recorded as an asset until utilized.