______1. a._____ T or F Certificates of deposit, commercial paper and U.S. Treasury Bills with original maturity of 3 months or less are examples of highly liquid investments and are classified as cash equivalents. (if false, identify and correct error)

b. _____ T or F Depreciation expense reduces operating income in the Income Statement, but it does not require the use of cash. It is reported in the Statement of Cash Flow, within the Financing Activities section, as a separately stated item: addition to net income (if false, identify and correct error)

_____2. Baby May Company had sales of $38,000, increase in accounts payable of $18,000, decrease in accounts receivable of $2,000, increase in inventories of $6,000, and depreciation expense of $13,000. What was the cash collected from customers?

a.	$38,000
b.	$40,000
c.	$36,000
d.	$46,000
e.	$44,000

_____3. Baby December Company had operating expense of $24,000, including depreciation and amortization expense of $3,000 reported in the income statement. Assuming there are no other transactions to be concerned with: What was the cash paid for operating expenses?

a.	$24,000
b.	$21,000
c.	$27,000
d.	$0
e.	$3,000

_____4. All of the follow are operating activities, except:

1. Cash payments for operating expenses
2. Cash collected from customers using credit terms
3. Cash payments for dividends paid to shareholders
4. Cash receipts for interest earned on notes receivable
5. Cash payments for interest expense on notes payable