Q1- When a firm purchases its own shares as treasury stock:

Select one:

a. total stockholders' equity is decreased.

b. total stockholders' equity is increased.

c. retained earnings is decreased.

d. paid-in capital is decreased.

Q2- Which of the following is an accurate statement regarding a statement of cash flows?

Select one:

a. Only cash items that affect the income statement are included.

b. Only material cash items that affect the income statement are included.

c. All material operating, investing, and financing activities are included.

d. Immaterial financing activities that affect cash do not need to be included.

Q3- An item that cost $90 is sold for $120. The gross profit ratio for this item is:

Select one:

a. 20%.

b. 25%.

c. 33.3%.

d. 60%.

Q4- The major difference between the indirect and the direct method of a statement of cash flows appears in which the following activities section(s)?

Select one:

a. The investing activities and financing activities sections.

b. The investing activities section only.

c. The operating activities and financing activities sections.

d. The operating activities section only.

Q5- Revenue may be recognized:

Select one:

a. from the sale of a company's own common stock.

b. if a company trades inventory at its usual selling price for newspaper advertising.

c. if management believes the market value of land held for future development has increased during the year.

d. in 2013 from the sale of subscriptions of a magazine to be published in 2014.

Q6- When the periodic inventory system is used:

Select one:

a. operating profit from the sale of an item from inventory is known when the item is sold.

b. gross profit from the sale of an item from inventory is known when the item is sold.

c. cost of goods sold can be calculated by subtracting the ending inventory amount from the sum of beginning inventory and net purchases.

d. a physical inventory must be taken in order to estimate the cost of goods sold.