5. You are Chief Financial Officer for Five Star Resorts, Inc. You are reviewing the following transactions: i) adding a new patio deck to the resorts oceanside bar, $180,000 ii) annual painting of the oceanfront beach houses, $75,000

Refer to Five Star Resorts, Inc. What is the appropriate accounting treatment of the cost of painting the oceanfront beach houses?

	a.	The cost of painting the oceanfront beach houses should be capitalized and depreciated over the remaining useful life of the beach houses as originally estimated.
	b.	The cost of painting the oceanfront beach houses should be capitalized and depreciated over a new extended life of the beach houses.
	c.	The cost of painting the oceanfront beach houses should be expensed in the period incurred.
	d.	The cost of painting the oceanfront beach houses should be deducted immediately from retained earnings.

6. What is the effect of extending the collection period for accounts receivable?

	a.	The collection cost will be reduced.
	b.	The company should expand operations with its excess cash.
	c.	Cash flows from operations may be higher than expected for the companys sales.
	d.	Bad debt expense will generally be higher.

7. Which of the following is a characteristic of depreciation expense?

	a.	It is a cash outflow from operations.
	b.	It is a cash outflow from investing activities.
	c.	It is a cash outflow from financing activities.
	d.	It is a non cash outflow.