1. When interest expense is calculated using the effective-interest amortization method, interest

1. When interest expense is calculated using the effective-interest amortization method, interest

1. When interest expense is calculated using the effective-interest amortization method, interest expense on a bond that pays interest annually, is equal toA. the actual amount of interest paid.B. the carrying value of the bonds payable multiplied by the effective interest rate.C. the maturity value of the bonds payable multiplied by the effective interest rate.D. the carrying value of the bonds payable multiplied by the stated interest rate2. Treasury stock:A. does not appear on the balance sheet.B. is a contra-equity account.C. is an asset account.D. is recorded as additional paid-in capital3. A stock dividend:A. is the same thing as a stock split.B. will reduce stockholders equity just like a cash dividend.C. will not change any of the accounts within stockholders equity.D. will reduce retained earnings just like a cash dividend.4. The effect of a stock dividend is to:A. decrease total assets and stockholders equity.B. change the composition of stockholders equity.C. decrease total assets and total liabilities.D. increase the market value per share of common shares.5. The ROE ratio measures:A. the return stockholders receive in dividends for each dollar of their investment.B. the return stockholders receive in dividends and stock price growth for each dollar of their investment.C. the amount earned by the company on each dollar contributed by stockholders and earnings reinvested in the company.D. the amount earned by the company on each dollar obtained from equity and debt financing6. Which of the following statements regarding cash flows from investing activities is true?A. The proceeds from sales of investments are reported as cash inflows from investing activities.B. Cash flows from investing activities are calculated by making adjustments to net income.C. Cash paid to acquire long-lived assets is reported as a cash inflow from investing activities.D. Cash received from issuing a long-term payable is reported as a cash inflow from investing activities.7. Which of the following would be included in cash flows from investing activities?A. Cash proceeds from sales.B. Cash received from an issuance of bonds.C. Dividends paid to stockholders.D. Cash used to purchases of equipment8. If the calculation of net cash flows from operating activities starts with net income, the company:A. is using the net income method.B. will remove the effects of all noncash items included in the calculation of net income.C. is using the direct methodD. will add all noncash items not included in the calculation of net income9. Cash flows from investing activities include cash:A. inflows and outflows reflecting revenues and expenses.B. outflows from the sale of long-term investments.C. inflows from the sale of long-term investments.D. inflows from the sale of a companys own stock to its stockholders10. When the direct method is used to determine the net cash flow from operating activities, other operating expenses are converted into cash outflows by:A. adding changes in prepaid expenses and accrued liabilities to other expenses.B. subtracting increases in prepaid expenses and subtracting decreases in accrued liabilities from other expenses.C. adding increases in prepaid expenses and adding decreases in accrued liabilities to other expenses.D. subtracting changes in prepaid expenses and accrued liabilities from other expenses11. The retained earnings account has a beginning balance of $321,975 and an ending balance of $356,413. Net income is $40,251. Which of the following statements is true?A. $5,813 would be subtracted when determining cash flows from financing activities. B. $40,251 would be added when determining cash flows from financing activities.C. $34,438 would be added when determining cash flows from financing activities.D. $321,975 would be added when determining cash flow from operating activities12. At certain times of the year, many retail companies experience a rapid increase in inventory as they prepare for a period of high sales. All other things equal, this would cause:A. both the quality of income ratio and the capital acquisitions ratio to fall.B. the quality of income ratio to fall while the capital acquisitions ratio would remain the same.C. the quality of income ratio to rise while the capital acquisitions ratio would remain the same.D. both the quality of income ratio and the capital acquisitions ratio to rise13. If a company uses the indirect method to determine net cash flows from operating activities:A. gains must be added to net income and losses subtracted from net income B. gains and losses must be added to net income.C. gains must be subtracted from net income and losses added to net income D. gains and losses must be subtracted from net income.14. The repayment of the principal of a loan which had been used to finance the purchase of equipment should be reported on the statement of cash flows as aA. cash outflow from investing activities B. cash outflow from operating activities.C. cash outflow from financing activities.D. noncash transaction in a supplemental disclosure.For each of the following transactions, indicate whether operating (O), investing (I), or financing activities (F) are affected and whether the effect is a cash inflow (+) or outflow (), or (NE) if the transaction has no effect on cash.1. Purchased new equipment by signing a promissory note.2. Recorded and paid income taxes to the federal government.3. Issued shares of stock for cash.4. Prepaid rent for the following period.5. Recorded an adjusting entry for expiration of a prepaid expense.6. Paid cash to purchase new equipment.7. Issued long-term debt for cash.8. Collected payments on account from customers.9. Recorded and paid salaries to employees.


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