QUESTION 13 The cost of capital is defined as the a. simple average of the interest rates of all debt outstanding. b. simple average of the cost of debt and equity. c weighted average of the interest rates of all debt outstanding. d. weighted average of the cost of debt and equity QUESTION 16 Financial statement elements relating to income are defined in FASB Concepts Statement 6 as follows: a. Gains are increases in equity from ongoing major or central operations of an entity. b. Expenses are outflows of assets or liabilities incurred from peripheral or incidental transactions of an entity. Revenues are inflows or other enhancements of assets or settlements of liabilities from ongoing major or central operations. d. Losses are all decreases in equity other than from transactions with owners. QUESTION 19 In order for a liability to exist, a. there must be a past transaction or event b. the exact amount must be known c. the identity of the party to whom the liability is owed must be known d. there must be an obligation to pay cash in the future. QUESTION 20 Which of the following is NOT correct? a. The operating cycle sometimes is longer than one year in duration b. The operating cycle always is one year in duration c. The operating cycle sometimes is shorter than one year in duration d. The operating cycle is a concept applicable both to manufacturing and retailing enterprises