1. Retained earnings _______.

A. is not cash

B.does not represent capital earned by profitable operations

C.is not an element of shareholders' equity

D.is not a separate account in shareholders' equity

2.Sheffield Company had $42,000 of net income in 2020. Equity at the beginning of the year was $1,200,000 and at the end of the year was $1,600,000. Sheffield has no preferred shares. Calculate the rate of return on common shareholders' equity. Round to three decimal places.

0.032, 0.030, 0.035, 0.035

3. On January 1, 2020, Thames Company purchases property and signs a 6-year mortgage note for $ at 4%. The blended monthly payment is $980, where of the payments made in 2020 went towards interest.

Assuming Thames Company's year-end is December 31, how much of the annual payments made during 2020 went towards reducing the principal?

$11,760, $2,226, $9,534, $980

4. When a company sells a segment of its business, the gain or loss on the disposal is shown as _______.

A.

part of income from continuing operations

B.

part of discontinued operations

C.

an extraordinary item

D.

a prior-period adjustment

5. Which of the following is true about shareholders' investment risk?

A.

Shareholders can lose only the market value of their shares.

B.

Shareholders can lose only the par value of their shares.

C.

The risk is limited to the cost of their investment.

D.

Shareholders can lose everything, as they are personally liable.