Question 1

1. Which of the following would be an example of a cash inflow from financing activities?
2. interest paid on loans
3. the issue of bonds for cash
4. the sale of equipment
5. the sale of investments in equity securities

3 points

Question 2

1. The rate of interest specified on the bond is referred to as the
2. debenture rate.
3. market rate.
4. par rate.
5. stated rate.

3 points

Question 3

1. When a stock dividend is distributed, the account to be debited would be
2. Capital Stock.
3. Retained Earnings.
4. Stock Dividends Distributable.
5. Paid-In Capital in Excess of Par.

3 points

Question 4

1. The ability to earn a satisfactory return on investments is called
2. liquidity
3. leverage
4. profitability
5. turnover

3 points

Question 5

1. Dividing the net income for the year by the average capital for the year is the calculation for the
2. return on equity.
3. current ratio.
4. quick ratio.
5. return on retained earnings.

3 points

Question 6

1. If bonds are issued at a discount, the amortization of the discount over the life of the bonds causes the
2. interest expense to decrease each period.
3. interest expense to increase each period.
4. carrying value of the bonds to decrease.
5. cash paid to increase.

3 points

Question 7

1. Bonds that give the holder the option of exchanging the bonds for capital stock of the corporation are called
2. convertible bonds.
3. debenture bonds.
4. callable bonds.
5. coupon bonds.

3 points

Question 8

1. When a stock dividend is declared, the journal entry will include a debit to
2. Retained Earnings.
3. Stock Dividends Payable.
4. Stock Dividends.
5. Stock Dividends Distributable.

3 points

Question 9

1. Shares of stock reacquired by the issuing company are called
2. par value stock.
3. stock subscription.
4. treasury stock.
5. no-par value stock.

3 points

Question 10

1. The premium on bonds payable account would be classified as a(n)
2. current liability.
3. contra-liability.
4. adjunct-liability.
5. contra-asset.

3 points

Question 11

1. Under the direct method, the financing section of the statement of cash flows
2. starts with cash sales.
3. is always identical to the financing section under the indirect method.
4. includes the addition of the accumulated depreciation balance.
5. includes the issuance of stock for noncash assets.

3 points

Question 12

1. The entry to record the payment of a cash dividend will include a
2. debit to Cash.
3. debit to Retained Earnings.
4. credit to dividends payable.
5. credit to Cash.

3 points

Question 13

1. Treasury stock is shown on the balance sheet as which of the following type of account?
2. Asset
3. Contra-stockholders' equity
4. Liability
5. Contra-liability

3 points

Question 14

1. Which of the following would be an example of cash outflows from investing activities?
2. cash paid for new equipment
3. cash paid for dividends
4. cash paid for inventory
5. cash paid for interest on a mortgage

3 points

Question 15

1. Under the indirect method, when preparing the statement of cash flows, a decrease in the merchandise inventory account balance is
2. added to net income.
3. added to cost of goods sold.
4. subtracted from cost of goods sold.
5. subtracted from net income.

3 points

Question 16

1. When 365 is divided by the accounts receivable turnover, the amount is expressed in
2. dollars.
3. a percentage.
4. ratio.
5. days.

3 points

Question 17

1. The ability to earn a satisfactory return on investments is called
2. turnover.
3. liquidity.
4. leverage.
5. profitability.

3 points

Question 18

1. A proportionate distribution of shares of a corporation's own stock to its stockholders is called a(n)
2. stock dividend.
3. appropriation.
4. cash dividend.
5. appropriation.

3 points

Question 19

1. The total number of shares the corporation is allowed to issue is called
2. issued stock.
3. authorized stock.
4. treasury stock.
5. outstanding stock.

3 points

Question 20

1. Which of the following is not true about the quick ratio?
2. It is equal to or less than the current ratio
3. It measures liquidity
4. It includes all working capital accounts
5. It is the same as the acid-test ratio

3 points

Question 21

1. Which of the following is a cash inflow from operating activities?
2. the proceeds from the issuance of stock
3. additional investments by the owners
4. interest received on loans made to other companies
5. the proceeds from issuing notes payable

3 points

Question 22

1. Capital resulting from the retention of earnings should be entered in an account with an appropriate title such as
2. Capital stock.
3. Capital Equity.
4. Retained Earnings.
5. Appropriated Retained Earnings.

3 points

Question 23

1. The corporate form of organization offers which of the following disadvantages?
2. limited liability of owners
3. transferable ownership units
4. ease of raising capital
5. government regulation

3 points

Question 24

1. Which of the following is used to measure leverage?
2. current ratio
3. ratio of liabilities to stockholders' equity
4. quick ratio
5. accounts receivable turnover

3 points

Question 25

1. The adjusting entry required for bonds issued at a discount would require
2. a debit to Bond Interest Expense, a credit to Discount on Bonds Payable, and a credit to Bond Interest Payable.
3. a debit to Bond Interest Expense, a debit to Discount on Bonds Payable, and a credit to Cash.
4. a debit to Bond Interest Expense, a debit to Discount on Bonds Payable, and a credit to Bond Interest Payable.
5. a debit to Bond Interest Expense and a credit to Cash.

3 points