Review chpt 8-12

QUESTION 11

On the statement of cash flows, cash receipts from the sale of equipment is a (an):

1. operating activity
2. non-cash investing and financing activity
3. financing activity
4. investing activity

QUESTION 12

On January 1, 2021, Entity J issued $2,000,000 of 4% bonds with a five-year term. Interest is payable annually on January 1. The market interest rate was 6%. The issue price was $1,831,509. Entity J uses the effective interest method for amortization of bond discount or premium. What is the interest expense for the first year? Round to the nearest dollar if necessary.

1. $29,891
2. $109,891
3. $80,000
4. 120,000

QUESTION 13

Entity H reports: Building (at cost) $400,000 and Accumulated Depreciation of $198,000. How should this be shown on its classified balance sheet?

1. Book value of $202,000 should be shown under Intangible Assets.
2. Book value of $598,000 should be shown under Property, Plant, and Equipment
3. Building at $400,000 should be shown under Property, Plant, and Equipment, and Accumulated Depreciation of $198,000 should be shown under Current Liabilities.
4. Book value of $202,000 should be shown under Property, Plant, and Equipment

QUESTION 14: Ratios are most useful in identifying

1. relationships.
2. causes.
3. differences.
4. investment opportunities.

QUESTION 15

Entity F lent its customer $15,000 on September 1, 2022 accepting a 6-month, 10% interest-bearing note, with principal and interest payable at maturity. At December 31, 2022, what adjusting entry must Entity F make to accrue interest revenue?

1. Dr. Cash 250
2. Cr. Interest revenue 250
3. Dr. Interest receivable 500
4. Cr. Interest revenue 500
5. Dr. Cash 500
6. Cr. Interest revenue 500
7. Dr. Interest receivable 250
8. Cr. Interest revenue 250

QUESTION 16

A company may prefer to finance an expansion by issuing bonds payable rather than issuing common stock because:

1. current stockholders may not want to purchase more common stock
2. earnings per share might be higher because fewer shares will be outstanding than had the company issued stock.
3. bond interest is tax deductible
4. all of the above

QUESTION 17

The best measure of a company's ability to generate sufficient cash to continue as a going concern is cash flow from:

1. operating activities
2. financing activities
3. investing activities
4. non-cash investing and financing activities

QUESTION 18

Entity I incurred various costs regarding its delivery truck which it purchased two years ago. For the cost that follows, indicate the proper treatment of the cost for financial accounting purposes:A rock shattered the windshield so it was replaced at a cost of $600.

1. Capitalized
2. Expensed
3. Ignored

QUESTION 19

Depreciation and amortization

1. is a process of asset valuation, not cost allocation.
2. should only be taken if the company expects to replace the asset.
3. provides for proper matching of expenses with revenues.
4. results in an accumulation of cash for replacement of the asset.

QUESTION 20

Entity L reported net income of $125,000 for the current year and uses the indirect method to report operating activities cash flow.Merchandise Inventory decreased by $10,000 during the year. Choose the appropriate category on the statement of cash flows to report the decrease in Merchandise Inventory.

1. Cash Flows From Operating Activities-Add to Net Income
2. Cash Flows From Operating Activities-Deduct from Net Income
3. Cash Flows From Investing Activities
4. Cash Flows From Financing Activities
5. Non-cash