Exam Practice

Suppose that Neuman Exploration Tours has filed a lawsuit against a competitor for an alleged trademark violation. At the end of the year, Neuman's attorney estimates that the company will likely win the lawsuit and be awarded between $1.5 and $2 million, with the most likely amount being $1.8 million. How much should Neuman record as a gain? Multiple Choice $1.5 million. $0. $2.0 million. $1.8 million.

$0.

Express Jet borrows $100 million on October 1 for one year at 6% interest. For what amount does Express Jet report interest payable for the year ended December 31 of the current year (three months later)? Multiple Choice $6 million. $4.5 million. $1.5 million. $0.

$1.5 million.

A company issues 100,000 shares of $1 par value common stock for $17 per share. To record this transaction, the company would credit Common Stock for: Multiple Choice $1,800,000. $100,000. $1,600,000. $1,700,000.

$100,000.

The Open Grill incurred the following costs in acquiring a new piece of land: Purchase price$80,000 Commissions4,800 Liability insurance for the first year1,200 Cost of removing existing building20,000 Sale of salvaged materials(4,000) Total costs$102,000 What is the total capitalized cost of the land? Multiple Choice $100,800. $106,000. $102,000. Incorrect $80,000.

$100,800.

Tasty Inn and Out incurred the following costs related to its purchase of equipment. Purchase price$10,000 Sales tax (7%)700 Annual property insurance500 Shipping200 Initial safety testing1,000 Total costs$12,400 What is the total capitalized cost of the equipment? Multiple Choice $12,400 $10,000 $10,700 $11,900

$11,900

Which of the following represents a characteristic of a liability? Multiple Choice Arising from present obligations to other entities. All of these are characteristics of a liability. A probable future sacrifice of economic benefits. Resulting from past transactions or events.

All of these are characteristics of a liability.

A bond is a formal debt instrument that promises to pay: Multiple Choice A principal amount at the maturity date. A portion of the company's profits each period. Both a principal amount at the maturity date and periodic interest payments. Periodic interest payments.

Both a principal amount at the maturity date and periodic interest payments

Current liabilities Multiple Choice May include contingent liabilities. Include obligations payable within one year or one operating cycle, whichever is shorter. Can be satisfied only with the payment of cash. Are preferred by most companies over long-term liabilities.

May include contingent liabilities.

The purchase of inventory for cash is classified in the statement of cash flows as a(n): Multiple Choice Operating activity. Investing activity. Financing activity. Noncash activity.

Operating activity.

Cash dividends are based on the number of shares: Multiple Choice Authorized and issued. Issued. Outstanding. Authorized.

Outstanding.

We debit Dividends Payable on Multiple Choice Declaration date. Payment date. Record date. Never.

Payment date.

The seller collects sales taxes from the customer at the time of sale and reports the sales taxes as Multiple Choice Sales tax revenue. Sales tax payable. Sales tax expense. Sales tax receivable.

Sales tax payable.

Research and development costs Multiple Choice Are recorded as research and development assets. Should be expensed. Are capitalized and then amortized. Should be included in the cost of the patent they relate to.

Should be expensed.

Which of the following is paid by both the employee and the employer? Multiple Choice State unemployment taxes. FICA taxes. Federal unemployment taxes. Personal income taxes.

FICA taxes.

Using the information below, calculate net cash flows from operating activities: Net income$120,000Receive cash from issuing stock80,000Pay cash for equipment90,000Increase in accounts receivable10,000Depreciation expense30,000Increase in accounts payable5,000Receive cash from sale of land75,000Pay cash dividends20,000 Multiple Choice $115,000. $145,000. $155,000. $190,000.

$145,000.

A company purchased land and building from a seller for $900,000. A separate appraisal reveals the fair value of the land to be $200,000 and the fair value of the building to be $800,000. For what amount would the company record land at the time of purchase? Multiple Choice $200,000. $900,000. Incorrect $180,000. $220,000.

$180,000.

A local Starbucks sells gift cards of $10,000 during the year. By the end of the year, customers have redeemed $8,000 of gift cards. What will be the year-end balance in the Deferred Revenue account? Multiple Choice $8,000. $0. $2,000. $10,000.

$2,000.

At the beginning of 20X1, a company issues 100,000 shares of 4%, $10 par value, cumulative preferred stock. All remaining shares outstanding are common stock. The company does not pay any dividends in 20X1, but pays dividends of $100,000 at the end of 20X2. How much of the dividend will be paid to common stockholders in 20X2? Multiple Choice $100,000. $60,000. $20,000. $80,000.

$20,000.

Aviation Systems sells its products with a three-year manufacturing warranty. The company's sales revenue is $600,000. Based on prior experience, the company estimates that warranty costs are 5% of sales revenue. Actual warranty costs related to these sales were $5,000 during the year. How much is the estimated warranty liability reported in the balance sheet this year? Multiple Choice $25,000. $10,000. Incorrect $30,000. $ 5,000.

$25,000.

Aviation Systems sells its products with a three-year manufacturing warranty. The company's sales revenue is $600,000. Based on prior experience, the company estimates that warranty costs are 5% of sales revenue. Actual warranty costs related to these sales were $5,000 during the year. How much is the warranty expense reported in the income statement this year? Multiple Choice $30,000. $10,000. $25,000. $5,000.

$30,000.

Express Jet borrows $100 million on October 1 for one year at 6% interest. For what amount does Express Jet report interest expense for the year ended December 31 of the following year? Multiple Choice $1.5 million. $0. $6 million. $4.5 million.

$4.5 million.

Pizza Shop sells toaster ovens with a one-year warranty to fix any defects. For the current year, 100 toaster ovens have been sold. By the end of the year 4 ovens have been fixed for an average of $80 each. Management estimates that 5 more of the 100 sold will need to be fixed next year for an estimated $80 each. For how much should Pizza Shop report warranty liability at the end of the current year? Multiple Choice $400. $320. $0. $720.

$400.

Airline Accessories obtains a $100,000, three-year loan, at 6% interest, with monthly payments of $3,042. What amount would be recorded as interest expense in the second month? Multiple Choice $500. $513. $487. $6,000.

$487.

On October 1, a franchise was purchased for $2,000,000. The franchise agreement is for 10 years. What is the amount of amortization expense by the end of the first year, December 31 (using partial year straight-line amortization)? (Do not round intermediate calculations.) Multiple Choice $0. $50,000. $100,000. $200,000.

$50,000.

Suppose a company issues $500,000 of 4% bonds, due in 5 years, with interest payable semiannually. The bonds are issued at face amount. What would be the balance of Bonds Payable after the first semi-annual interest payment? Multiple Choice $480,000. $500,000. $490,000. $510,000.

$500,000.

A company issues $50,000 of 4% bonds, due in 5 years, with interest payable semiannually. Assuming a market rate of 3%, the bonds issue for $52,306. Calculate the carrying value of the bonds after the first semiannual interest payment. Multiple Choice $52,091. $51,306. $51,521. $49,000.

$52,091.

The Cheese Factory incurred the following costs related to acquiring a new piece of equipment: Purchase price$50,000 Sales tax (8%)4,000 Shipping3,000 Installation2,000 Depreciation during the first month1,000 Total costs$60,000 What is the total capitalized cost of the equipment? Multiple Choice $50,000. $57,000. $59,000. $60,000.

$59,000.

A company issues $50,000 of 4% bonds, due in 5 years, with interest payable semiannually. Assuming a market rate of 3%, the bonds issue for $52,306. Calculate interest expense as of the first semiannual interest payment. Multiple Choice $1,570. $375. $785. $1,000.

$785.

On November 1, 20X1, a company signed a $200,000, 12%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 20X2. What is the amount of interest expense to report in 20X2? Multiple Choice $24,000 $12,000 $8,000 $0

$8,000

A delivery truck was purchased for $60,000 and is expected to be used for 5 years and 100,000 miles. The truck's residual value is $10,000. By the end of the first year, the truck has been driven 16,000 miles. What is the depreciation expense in the first year using activity-based depreciation? Multiple Choice $12,000. $9,600. $10,000. $8,000.

$8,000.

Which of the following best describes a company with a high price-earnings ratio? Multiple Choice A company with poor future prospects. A company that pays large dividends. All of the other answers are typical characteristics of companies with high price-earnings ratios. A company whose earnings are expected to grow.

A company whose earnings are expected to grow.

Douglas County Fairgrounds retires a $50 million bond issue when the carrying value of the bonds is $52 million, but the market value of the bonds is only $47 million. The entry to record the retirement will include: Multiple Choice No gain or loss on retirement. A credit of $5 million to gain on early extinguishment. A debit of $5 million to loss on early extinguishment. A debit to cash for $47 million.

A credit of $5 million to gain on early extinguishment.

When a product or service is delivered to a customer that previously paid in advance, the delivery is recorded as: Multiple Choice A debit to an asset and a credit to a revenue account. A debit to a revenue and a credit to an asset account. A debit to a liability and a credit to a revenue account. A debit to a revenue and a credit to a liability account.

A debit to a liability and a credit to a revenue account.

When a customer pays in advance for a product or service, the advance payment received by the company is recorded as: Multiple Choice A debit to a liability and a credit to a revenue account. A debit to a revenue and a credit to an asset account. A debit to an asset and a credit to a revenue account. A debit to an asset and a credit to a liability account.

A debit to an asset and a credit to a liability account.

0/0.38points awarded ItemScored Item 30 Equipment originally costing $65,000 has accumulated depreciation of $25,000. If the equipment is sold for $30,000, the company should record: Multiple Choice A loss of $35,000. A gain of $10,000. A loss of $10,000. No gain or loss.

A loss of $10,000.

Which of the following is not a primary source of long-term debt financing? Multiple Choice Accounts payable. Bonds. Notes payable. Leases.

Accounts payable.

If equipment is retired, which of the following accounts would be debited? Multiple Choice Equipment. Depreciation expense. Accumulated depreciation. Cash.

Accumulated depreciation.

Which of the following typically represents an advantage of leasing over purchasing an asset with an installment note? Multiple Choice Leasing generally requires less cash upfront. All of the answer choices are advantages of leasing. Leasing typically offers greater flexibility and lower costs in disposing of an asset. Lease payments often are lower than installment payments.

All of the answer choices are advantages of leasing.

Which of the following expenditures should be recorded as an asset? Multiple Choice Unsuccessful legal defense of an intangible asset. An addition which increases future benefits. Maintenance that maintain current benefits. Repairs that maintain current benefits.

An addition which increases future benefits.

The market interest rate of a bond is: Multiple Choice A government-issued rate based on general economic conditions. The amount of principal to be returned to the bondholder at the maturity date. An implied rate based on the price investors pay to purchase a bond in return for the right to receive the face amount at maturity and periodic interest payments over the remaining life of the bond. The rate specified in the bond contract used to calculate the cash payments for interest.

An implied rate based on the price investors pay to purchase a bond in return for the right to receive the face amount at maturity and periodic interest payments over the remaining life of the bond.

Which of the following is not a current liability? Multiple Choice Current portion of long-term debt. Deferred revenue with services to be provided to a customer in nine months. An unused line of credit. Notes payable due in six months.

An unused line of credit.

Which of the following expenditures should be recorded as an asset? Multiple Choice Repair of a machine. Architecture fees during the construction period of a new building. Property taxes incurred on an existing building. Depreciation during the first year of an existing building.

Architecture fees during the construction period of a new building.

Allied Partners filed suit against Big Sky, Incorporated, seeking damages for patent infringement. Big Sky's legal counsel believes it is probable that Big Sky will settle the lawsuit for an estimated amount in the range of $500,000 to $700,000, with all amounts in the range considered equally likely. How should Big Sky report this litigation? Multiple Choice As a disclosure only. No liability is reported. As a liability for $500,000 with disclosure of the range. As a liability for $600,000 with disclosure of the range. As a liability for $700,000 with disclosure of the range.

As a liability for $500,000 with disclosure of the range.

To capitalize an expenditure means to record the expenditure as a(n): Multiple Choice Liability. Expense. Dividend. Asset.

Asset

To capitalize an expenditure means to record the expenditure as a(n): Multiple Choice Liability. Expense. Dividend. Asset.

Asset.

Outdoor Adventures issues bonds at a discount. On the maturity date, the bonds' carrying value will be Multiple Choice At face amount. Above face amount. Below face amount. Above or below face amount depending on current market interest rates.

At face amount.

The asset's cost less accumulated depreciation is called: Multiple Choice Book value. Net fair value. Replacement cost. Residual value.

Book value.

The repayment of a note payable is classified in the statement of cash flows as a(n): Multiple Choice Operating activity. Investing activity. Financing activity. Noncash activity.

Financing activity.

The acid-test ratio is Multiple Choice Cash and current investments divided by current liabilities. Cash, current investments, and accounts receivable divided by current liabilities. Current assets divided by current liabilities. Cash, current investments, accounts receivable, and inventory divided by current liabilities.

Cash, current investments, and accounts receivable divided by current liabilities.

We can identify operating activities from income statement information and changes in: Multiple Choice Stockholders' equity accounts. Long-term asset accounts. Current asset and current liability accounts. Long-term liability accounts.

Current asset and current liability accounts.

Suppose a company issues $500,000 of 4% bonds, due in 5 years, with interest payable semiannually. The bonds are issued at face amount. What would the company record at the time of issuance? Multiple Choice Debit Cash $500,000; credit Bonds Payable $500,000. Debit Cash $400,000; debit Interest Expense $100,000; credit Bonds Payable $500,000. Debit Cash $500,000; credit Bonds Payable $400,000; credit Interest Payable $100,000. Debit Cash $500,000; debit Interest Expense $100,000; credit Bonds Payable $500,000; credit Interest Payable $100,000.

Debit Cash $500,000; credit Bonds Payable $500,000.

Travel Planners, Incorporated borrowed $5,000 from First State Bank and signed a promissory note. What entry should Travel Planners record? Multiple Choice Debit Notes Receivable, $5,000; Credit Cash, $5,000. Incorrect Debit Cash, $5,000; Credit Notes Receivable, $5,000. Debit Cash, $5,000; Credit Notes Payable, $5,000. Debit Notes Payable, $5,000; Credit Cash, $5,000.

Debit Cash, $5,000; Credit Notes Payable, $5,000.

On the date of dividend declaration, which of the following entries is recorded? Multiple Choice Debit Dividends Payable; Credit Cash. Debit Dividends; Credit Cash. No entry is recorded. Debit Dividends; Credit Dividends Payable.

Debit Dividends; Credit Dividends Payable.

Suppose a company issues $500,000 of 4% bonds, due in 5 years, with interest payable semiannually. The bonds are issued at face amount. What would the company record at the time of the first semi-annual interest payment? Multiple Choice Debit Interest Expense $10,000; credit Cash $10,000. Debit Interest Expense $20,000; credit Cash $20,000. Debit Bonds Payable $20,000; credit Cash $20,000. Debit Bonds Payable $10,000; credit Cash $10,000.

Debit Interest Expense $10,000; credit Cash $10,000.

A company purchased new equipment for $31,000 with a two-year installment note requiring 5% interest. The required monthly payment is $1,360. Which of the following is the current journal entry to record for the first month's payment? Multiple Choice Debit Interest Expense $1,360; credit Cash $1,360. Debit Notes Payable $1,360; credit Cash $1,360. Debit Interest Expense $129; debit Notes Payable $1,231; credit Cash $1,360. Debit Interest Expense $68; debit Notes Payable $1,292; credit Cash $1,360.

Debit Interest Expense $129; debit Notes Payable $1,231; credit Cash $1,360.

On November 1, 20X1, a company signed a $200,000, 12%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 20X2. The company should record the following adjusting entry at December 31, 20X1: Multiple Choice Debit Interest Expense and credit Interest Payable, $4,000. Debit Interest Expense and credit Interest Payable, $12,000. Debit Interest Expense and credit Cash, $12,000. Debit Interest Expense and credit Cash, $4,000.

Debit Interest Expense and credit Interest Payable, $4,000.

Travel Planners, Incorporated borrowed $5,000 from First State Bank and signed a promissory note. What entry should Travel Planners record when the note is repaid? Multiple Choice Debit Cash, $5,000; Credit Notes Receivable, $5,000. Debit Notes Payable, $5,000; Credit Cash, $5,000. Debit Cash, $5,000; Credit Notes Payable, $5,000. Debit Notes Receivable, $5,000; Credit Cash, $5,000.

Debit Notes Payable, $5,000; Credit Cash, $5,000.

Suppose a company purchases 2,000 shares of its own $1 par value common stock for $16 per share. Which of the following is recorded at the time of the purchase? Multiple Choice Debit Treasury Stock for $32,000. Debit Common Stock for $30,000. Debit Common Stock for $32,000. Debit Treasury Stock for $2,000.

Debit Treasury Stock for $32,000.

Which of the following is not an advantage of debt financing? Multiple Choice The ownership interest of current stockholders is unchanged. Interest is tax deductible. The cost of borrowing may be lower than the return on equity. Debt financing often has no maturity date.

Debt financing often has no maturity date.

When treasury stock is purchased, what is the effect on total shareholders' equity? Multiple Choice Decrease. No effect. Increase. Cannot be determined from the given information.

Decrease.

Which of the following correctly describes the nature of depreciation? Multiple Choice Depreciation represents the allocation of the cost of property, plant, and equipment over its service life. Depreciation represents the valuation of an intangible asset over its service life. Depreciation represents the valuation of property, plant, and equipment over its service life. Depreciation represents the allocation of the cost of an intangible asset over its service life.

Depreciation represents the allocation of the cost of property, plant, and equipment over its service life.

Which of the following depreciation methods typically results in the highest depreciation expense during the first year of an asset's life? Multiple Choice Double-declining-balance method. Activity-based method. Each method will result in the same depreciation during the first year. Straight-line method.

Double-declining-balance method.

Which of the following increases an employer's payroll costs? Multiple Choice Employer's FICA contribution. FICA withholding from the employee. Employee federal income tax. Employee state income tax.

Employer's FICA contribution.

What is the primary reason for declaring a stock split? Multiple Choice Lower the trading price of a stock into a more acceptable trading range. Increase stockholders' equity. Decrease stockholders' equity. Increase the share price.

Lower the trading price of a stock into a more acceptable trading range.

Assuming a current ratio of 1.0 and an acid-test ratio of 0.75, how will the borrowing of cash to be paid back in five years affect each ratio? Multiple Choice Decrease the current ratio and decrease the acid-test ratio. Increase the current ratio and increase the acid-test ratio. Increase the current ratio and decrease the acid-test ratio. No change to the current ratio and decrease the acid-test ratio.

Increase the current ratio and increase the acid-test ratio.

Retained earnings Multiple Choice Has a normal debit balance. Is equal to the balance in cash. Increases stockholders' equity. Decreases stockholders' equity.

Increases stockholders' equity.

When treasury stock is resold, total stockholders' equity: Multiple Choice The effect depends on the relationship between the purchase price and resale price. Does not change. Decreases. Increases.

Increases.

Which of the following is not included in calculating the acid-test ratio? Multiple Choice Accounts payable. Inventory. Current investment in marketable securities. Accounts receivable.

Inventory.

Which of the following definitions describes a term bond? Multiple Choice Secured only by the "full faith and credit" of the issuing corporation. Matures on a single date. Matures in installments. Supported by specific assets pledged as collateral by the issuer.

Matures on a single date.

Bonds issued at a premium are: Multiple Choice Issued at face value. Issued below face value. Riskier bonds sold at a bargain price. Issued above face value.

Issued above face value.

A company's capital structure refers to: Multiple Choice Its mixture of current versus long-term assets. Its mixture of paid-in capital versus retained earnings. Its mixture of current versus long-term liabilities. Its mixture of liabilities and stockholders' equity.

Its mixture of liabilities and stockholders' equity

Which of the following company types is more likely to have a high dividend yield? Multiple Choice Younger companies. Small, growth companies. Larger, more mature companies. Companies with a small amount of cash.

Larger, more mature companies.

An advantage of leasing an asset rather than purchasing the asset is: Multiple Choice Leased assets are more likely to generate additional profits than are purchased assets. Leases are not reported as liabilities in the balance sheet. Leases typically require less cash upfront to begin using the asset. Lease payments are tax deductible while depreciation on a purchased asset is not.

Leases typically require less cash upfront to begin using the asset.

Which of the following statements regarding liabilities is true? Multiple Choice Liabilities result from future transactions. Liabilities represent probable future sacrifices of benefits. Liabilities are all reported as current in the balance sheet. Liabilities are always payable in cash.

Liabilities represent probable future sacrifices of benefits.

Which of the following statements regarding liabilities is not true? Multiple Choice Liabilities result from future transactions. Liabilities are reported in the balance sheet for almost every business. Liabilities represent probable future sacrifices of benefits. Liabilities can be for services rather than cash.

Liabilities result from future transactions.

Federal and state income taxes withheld by employers from their employees' payroll are initially recorded with a credit to a(n): Multiple Choice Asset. Liability. Revenue. Expense.

Liability.

Which of the following will maximize net income by minimizing depreciation expense in the first year of the asset's life? Multiple Choice Long service life, high residual value, and double-declining-balance depreciation. Short service life, high residual value, and straight-line depreciation. Long service life, high residual value, and straight-line depreciation. Short service life, low residual value, and double-declining-balance depreciation.

Long service life, high residual value, and straight-line depreciation.

We can identify investing activities from additional information and changes in: Multiple Choice Current asset and current liability accounts. Stockholders' equity accounts. Long-term asset accounts. Long-term liability accounts.

Long-term asset accounts.

If bonds are issued at a discount, interest expense will be Multiple Choice Higher than cash interest paid. Lower or higher depending on current market interest rates. Equal to cash interest paid. Lower than cash interest paid.

Lower than cash interest paid.

Smith Company filed suit against Western, Incorporated, seeking damages for patent infringement. Smith's legal counsel believes it is probable that Western will have to pay $125,000, although no final settlement has yet been reached. How should Smith report this litigation? Multiple Choice No asset or gain is reported. As both an asset and a gain for $125,000. Incorrect As a gain for $125,000. As an asset for $125,000.

No asset or gain is reported.

Assuming a current ratio of 1.00 and an acid-test ratio of 0.75, how will the purchase of short-term investments with cash affect each ratio? Multiple ChoiceNo change to the current ratio or acid-test ratio. No change to the current ratio and decrease the acid-test ratio. Decrease the current ratio and decrease the acid-test ratio. Increase the current ratio and increase the acid-test ratio.

No change to the current ratio and decrease the acid-test ratio.

Which of the following statements is not true relating to cash flow analysis? Multiple Choice Cash return on assets can be separated to examine two important business strategies: cash flow to sales and asset turnover. Cash return on assets indicates the amount of operating cash flow generated for each dollar invested in assets. To maximize cash flow from operations, a company strives to increase both cash flow per dollar of sales and sales per dollar of assets invested. Positive cash flow from operations is not important to a company's survival in the long-run.

Positive cash flow from operations is not important to a company's survival in the long-run.

Return on assets is equal to: Multiple Choice Profit margin divided by asset turnover. Profit margin minus asset turnover. Profit margin plus asset turnover. Profit margin times asset turnover.

Profit margin times asset turnover.

Which of the following is an example of a cash inflow from a financing activity? Multiple Choice Receipt of cash from the sale of inventory. Receipt of cash from the collection of a note receivable. Receipt of cash from the issuance of common stock. Receipt of cash from the sale of equipment.

Receipt of cash from the issuance of common stock.

A contingent liability that is probable and can be reasonably estimated must be Multiple Choice Disclosed. Not disclosed. Paid. Recorded.

Recorded.

Both cash dividends and stock dividends Multiple Choice Reduce total assets. Incorrect Reduce total liabilities. Reduce retained earnings. Reduce total stockholders' equity.

Reduce retained earnings.

Which of the following expenditures should be recorded as an expense? Multiple Choice Replacing a major component of an existing asset. Repairs and maintenance that maintain current benefits. Successful legal defense of an intangible asset. Adding a major new component to an existing asset.

Repairs and maintenance that maintain current benefits.

Which of the following is not reported as an intangible asset in the balance sheet? Multiple Choice Goodwill. Research and development. Patents. Trademarks.

Research and development.

Which of the following shows activity over a period of time? Multiple Choice Statement of stockholders' equity. Both the stockholders' equity section in the balance sheet and the statement of stockholders' equity. Neither the stockholders' equity section in the balance sheet nor the statement of stockholders' equity. Stockholders' equity section in the balance sheet.

Statement of stockholders' equity.

The statement of stockholders' equity: Multiple Choice All of the other answers are correct. Lists the balances of each asset and each liability, and reports the difference as stockholders' equity. Lists the balance of each revenue and each expense, and reports the difference as net income. Summarizes the changes in the balance in each stockholders' equity account over a period of time.

Summarizes the changes in the balance in each stockholders' equity account over a period of time.

In each succeeding payment on an installment note: Multiple Choice The amounts paid for both interest and principal increase proportionately. The amount that goes to interest expense is unchanged. The amount that goes to interest expense decreases. The amount that goes to interest expense increases.

The amount that goes to interest expense decreases.

Bonds issued at face amount will have an issue price equal to: Multiple Choice The bonds' principal amount less future interest payments. The bonds' principal amount plus future interest payments. The bonds' interest payments only. The bonds' principal amount only.

The bonds' principal amount only.

The net cash flows from operating, investing, and financing activities will equal: Multiple Choice The change in cash reported in the balance sheet from this year versus last year. The change in stockholders' equity for the year. Net income minus dividends for the year. The ending balance of cash this year.

The change in cash reported in the balance sheet from this year versus last year.

Which of the following is true in comparing the current ratio with the acid-test ratio? Multiple Choice The denominator in the ratios will differ. Sometimes the current ratio will be larger and sometimes the acid-test ratio will be larger. The current ratio will always be at least as large as the acid-test ratio. The acid-test ratio will always be at least as large as the current ratio.

The current ratio will always be at least as large as the acid-test ratio.

Financial leverage is best measured by which of the following ratios? Multiple Choice The debt to equity ratio. The return on equity ratio. The times interest earned ratio. The return on assets ratio.

The debt to equity ratio.

Which of the following statements is true regarding the amortization of intangible assets? Multiple Choice In recording amortization, Accumulated Amortization is always credited. The expected residual value of most intangible assets is zero. Intangible assets with a limited useful life are not amortized. The service life of an intangible asset is always equal to its legal life.

The expected residual value of most intangible assets is zero.

Which of the following is true for bonds issued at a discount? Multiple Choice The stated interest rate and the market interest rate are equal. The stated interest rate and the market interest rate are unrelated. The stated interest rate is greater than the market interest rate. The market interest rate is greater than the stated interest rate.

The market interest rate is greater than the stated interest rate.

If a company issues par-value stock, the amount credited to common stock will be: Multiple Choice The amount the board of directors chooses to assign to the shares. The difference between the market and the par value per share times the total number of shares issued. The par value per share times the number of shares issued. The total market value of all the shares issued.

The par value per share times the number of shares issued.

The price of a bond is equal to Multiple Choice The present value of the face amount plus the present value of the stated interest payments. The present value of the interest only. The future value of the face amount plus the future value of the stated interest payments. The present value of the face amount only.

The present value of the face amount plus the present value of the stated interest payments.

Which of the following ratios measures a company's ability to pay interest relative to the company's profits? Multiple Choice The inventory turnover ratio. The debt to equity ratio. Incorrect The times interest earned ratio. The return on assets ratio.

The times interest earned ratio.

Which of the following is not deducted from an employee's salary in most states? Multiple Choice Income taxes. Unemployment taxes. FICA taxes. Employee portion of insurance and retirement payments.

Unemployment taxes.

We record interest expense on a note payable in the period in which Multiple Choice We pay cash and incur interest. We incur interest. We pay cash or incur interest. We pay cash for interest.

We incur interest.