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.

8. On January 1, Year 1, a company sold a machine that it had used for several years for $5,000. The machine originally cost $11,000 and had accumulated depreciation of $4,500 at the time of sale. What gain or loss will be reported on the statement of earnings for the sale of the machine?

a. loss of $6,500

b. loss of $1,500

c. gain of $1,500

d. gain of $5,000