MGT Chapter 9,10,12

On October 10, 2013, Printfast Company sells a commercial printer for $2,350 with a one-year warranty that covers parts. Warranty expense is projected to be 4% of sales. On February 28, 2014, the printer requires repairs. The cost of the parts for the repair is $80 and Printfast pays their technician $150 to perform the repair. What is the warranty liability for this printer at the at the end of 2014? Multiple Choice $14.00. $84.80. $94.00. $0, there is no liability at the end of 2014. $230.00.

$14.00. Explanation $2,350 × 0.04 = $94.00 original estimated warranty liability $94.00 - 80.00 = $14.00 remaining

On January 1, 2013, Lane issues $700,000 of 7%, 15-year bonds at a price of 106¾. The interest payments are made on June 30 and December 31. Lane elects a fiscal year ending September 30. What is the amount that would be recorded as cash paid in the December 31, 2013, journal entry? Multiple Choice $24,500 $22,925 $12,250 $11,462 $13,458

$24,500 Correct Explanation (700,000 × 0.07 × 6/12) = 24,500

On December 1, Martin Company signed a $5,000, 3-month, 6% note payable, with the principle plus interest due on March 1 of the following year. What amount of interest expense is accrued at December 31 on the note? Multiple Choice $0 $25 $50 $75 $300

$25 Correct Explanation $5,000 × 0.06 × 1/12 = $25

A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is: Multiple Choice $50,000. $5,000. $45,000. Zero. This is an operating activity. Zero. This is a financing activity.

$50,000.

A company issues 9%, 20-year bonds with a par value of $750,000. The current market rate is 9%. The amount of interest owed to the bondholders for each semiannual interest payment is. Multiple Choice $0 $33,750 $67,500 $750,000 $1,550,000

$33,750 Correct Explanation $750,000 × 0.09 × ½ year = $33,750

Conner Company borrows $185,600 cash on November 1, 2013, by signing a 120-day, 8% note. What is the total amount of interest that Conner will recognize for this note? Multiple Choice $4,949. $14,848. $2,467. $0, no interest expense is recognized. $1485.

$4,949. Explanation $185,600 × 0.08 × 120/360 = $4,949

A company purchased equipment and signed a seven-year installment loan at 9% annual interest. The annual payments equal $9,000. The present value factor for an annuity for seven years at 9% is 5.0330. What value for this equipment should be recorded on the company's books on the day the contract is signed? Multiple Choice $9,000 $5,033 $63,000 $57,330 $45,297

$45,297 Explanation $9,000 × 5.0330 = $45,297

When originally purchased, a vehicle had an estimated useful life of 8 years. The vehicle cost $23,000 and its estimated salvage value is $1,500. After 4 years of straight-line depreciation, the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value. The depreciation expense in year 5 equals: A. $ 5,375.00. B. $ 2,687.50. C. $ 5,543.75. D. $10,750.00. E. $ 2,856.25.

A. $ 5,375.00.

A depreciable asset currently has a $24,500 book value. The company owning the asset uses straight-line depreciation. They paid $37,000 for this asset and consider it to have a $2,000 salvage value with a seven year useful life. How long has the company owned this asset? A. 2.5 years. B. 2.36 years. C. 2.1 years. D. 7 years. E. Cannot be determined from the given information

A. 2.5 years. 37,000 cost - 24,500 book value = 12,500 accumulated depreciation

Employer payroll taxes: A. Are an added expense beyond the wages and salaries earned by employees. B. Represent the federal taxes withheld from employees. C. Represent the social security taxes withheld from employees. D. Are paid by the employee. E. All of the above

A. Are an added expense beyond the wages and salaries earned by employees.

Uncertainties such as natural disasters: A. Are not contingent liabilities because they are future events not arising out of past transactions or events. B. Are contingent liabilities because they are future events arising from past transactions or events. C. Should be disclosed because of their usefulness to financial statements. D. Are estimated liabilities because the amounts are uncertain. E. Arise out of transactions such as debt guarantees.

A. Are not contingent liabilities because they are future events not arising out of past transactions or events.

Unearned revenue is initially recognized with a: A. Credit to unearned revenue. B. Credit to revenue. C. Debit to revenue payable. D. Debit to revenue. E. Debit to unearned revenue.

A. Credit to unearned revenue

The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts, such as receipts from customers, and subtracts the major items of operating cash disbursements, such as cash paid for merchandise, is referred to as the: A. Direct method of reporting net cash provided or used by operating activities. B. Cash basis of accounting. C. Classified statement of cash flows. D. Indirect method of reporting net cash provided or used by operating activities. E. Net method of reporting cash flows from operating activities.

A. Direct method of reporting net cash provided or used by operating activities.

The direct method of reporting operating cash flows: A. Is recommended but not required by the FASB. B. Must be used by all companies. C. Is used by most companies. D. Is considered supplementary disclosure. E. Is not recommended by the FASB, but is commonly used

A. Is recommended but not required by the FASB.

The appropriate section in the statement of cash flows for reporting the cash payment of wages is: A. Operating activities. B. Financing activities. C. Investing activities. D. Schedule of noncash investing or financing activity. E. None of these. This is not reported on the statement of cash flows.

A. Operating activities.

An example of an operating activity is: A. Paying wages. B. Purchasing office equipment. C. Borrowing money from a bank. D. Selling stock. E. Paying off a loan.

A. Paying wages.

Contingent liabilities must be recorded if: A. The future event is probable and the amount owed can be reasonably estimated. B. The future event is remote. C. The future event is reasonably possible. D. The amount owed cannot be reasonably estimated. E. All of the above.

A. The future event is probable and the amount owed can be reasonably estimated.

Adidas issued 10-year, 8% bonds with a par value of $200,000, where interest is paid semiannually. The market rate on the issue date was 7.5%. Adidas received $206,948 in cash proceeds. Which of the following statements is true? Multiple Choice Adidas must pay $200,000 at maturity and no interest payments. Adidas must pay $206,948 at maturity and no interest payments. Adidas must pay $200,000 at maturity plus 20 interest payments of $8,000 each. Adidas must pay $206,948 at maturity plus 20 interest payments of $8,000 each. Adidas must pay $200,000 at maturity plus 20 interest payments of $7,500 each.

Adidas must pay $200,000 at maturity plus 20 interest payments of $8,000 each. Correct Explanation Semiannual interest payment: $200,000 × 0.08 × ½ year = $8,000

Amortizing a bond discount: Multiple Choice Allocates a part of the total discount to each interest period. Increases the market value of the Bonds Payable. Decreases the Bonds Payable account. Decreases interest expense each period. Increases cash flows from the bond.

Allocates a part of the total discount to each interest period.

Which of the following is true regarding the effective interest amortization method? Multiple Choice Allocates bond interest expense using a changing interest rate. Allocates bond interest expense using a constant interest rate. Allocates a decreasing amount of interest over the life of a discounted bond. Allocates bond interest expense using the current market rate for each period. Is not allowed by the FASB.

Allocates bond interest expense using a constant interest rate. Correct

An employer's federal unemployment taxes (FUTA) are reported: Multiple Choice Annually. Semiannually. Quarterly. Monthly. Weekly.

Annually.

Employee vacation benefits: Multiple Choice Are estimated liabilities. Are contingent liabilities. Are recorded as an expense when the employee takes a vacation. Are recorded as an expense when the employee retires. Increase net income.

Are estimated liabilities.

Amounts received in advance from customers for future products or services: Multiple Choice Are revenues. Increase income. Are liabilities. Are not allowed under GAAP. Require an outlay of cash in the future.

Are liabilities.

The interest accrued on $3,600 at 7% for 60 days is: A. $ 36. B. $ 42. C. $252. D. $180. E. $420.

B. $ 42. $3,600 x 0.07 x 60/360 = $42

A company purchased a rope braiding machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. It is estimated that the machine could produce 750,000 units of climbing rope over its useful life. In the first year, 105,000 units were produced. In the second year, production increased to 109,000 units. Using the units-of-production method, what is the amount of depreciation that should be recorded for the second year? A. $25,200. B. $26,160. C. $26,660. D. $27,613. E. $53,160.

B. $26,160.

On September 30, the Cash account of Value Company had a normal balance of $5,000. During September, the account was debited for a total of $12,200 and credited for a total of $11,500. What was the balance in the Cash account at the beginning of September? A. A $0 balance. B. A $4,300 debit balance. C. A $4,300 credit balance. D. A $5,700 debit balance. E. A $5,700 credit balance.

B. A $4,300 debit balance.

Land improvements are: A. Assets that increase the usefulness of land, and like land, are not depreciated. B. Assets that increase the usefulness of land, but that have a limited useful life and are subject to depreciation. C. Included in the cost of the land account. D. Expensed in the period incurred. E. Also called basket purchases.

B. Assets that increase the usefulness of land, but that have a limited useful life and are subject to depreciation.

The total cost of an asset less its accumulated depreciation is called: A. Historical cost. B. Book value. C. Present value. D. Current (market) value. E. Replacement cost

B. Book value.

A depreciation method in which a plant asset's depreciation expense for a period is determined by applying a constant depreciation rate each period to the asset's beginning book value is called: A. Book value depreciation. B. Declining-balance depreciation. C. Straight-line depreciation. D. Units-of-production depreciation. E. Modified accelerated cost recovery system (MACRS) depreciation.

B. Declining-balance depreciation.

An estimated liability: A. Is an unknown liability of a certain amount. B. Is a known obligation of an uncertain amount that can be reasonably estimated. C. Is a liability that may occur if a future event occurs. D. Can be the result of a lawsuit. E. Is not recorded until the amount is known for certain

B. Is a known obligation of an uncertain amount that can be reasonably estimated.

A contingent liability: A. Is always of a specific amount. B. Is a potential obligation that depends on a future event arising out of a past transaction or event. C. Is an obligation not requiring future payment. D. Is an obligation arising from the purchase of goods or services on credit. E. Is an obligation arising from a future event.

B. Is a potential obligation that depends on a future event arising out of a past transaction or event.

Once the estimated depreciation expense for an asset is calculated: A. It cannot be changed due to the historical cost principle. B. It may be revised based on new information. C. Any changes are accumulated and recognized when the asset is sold. D. The estimate itself cannot be changed; however, new information should be disclosed in financial statement footnotes. E. It cannot be changed due to the consistency principle.

B. It may be revised based on new information.

On October 29 of the current year, a company concluded that a customer's $4,400 account receivable was uncollectible and that the account should be written off. What effect will this write-off have on this company's net income and total assets assuming the allowance method is used to account for bad debts? A. Decrease in net income; no effect on total assets. B. No effect on net income; no effect on total assets. C. Decrease in net income; decrease in total assets. D. Increase in net income; no effect on total assets. E. No effect on net income; decrease in total assets

B. No effect on net income; no effect on total assets.

Due to an oversight, a company made no adjusting entry for accrued and unpaid employee wages of $24,000 on December 31. This oversight would: A. Understate net income by $24,000. B. Overstate net income by $24,000. C. Have no effect on net income. D. Overstate assets by $24,000. E. Understate assets by $24,000

B. Overstate net income by $24,000.

Which of the following items is reported on the statement of cash flows under financing activities? A. Declaration of a cash dividend. B. Payment of a cash dividend. C. Declaration of a stock dividend. D. Payment of a stock dividend. E. Stock split.

B. Payment of a cash dividend.

A company purchased a POS cash register on January 1 for $5,400. This register has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the second-year of its useful life using the double-declining-balance method? A. $ 500. B. $ 800. C. $ 864. D. $1,000. E. $1,080.

C. $ 864.

A company has inventory of 15 units at a cost of $12 each on August 1. On August 5, they purchased 10 units at $13 per unit. On August 12 they purchased 20 units at $14 per unit. On August 15, they sold 30 units. Using the FIFO perpetual inventory method, what is the value of the inventory at August 12 after the sale? A. $140. B. $160. C. $210. D. $380. E. $590.

C. $210.

The statement of cash flows is: A. Another name for the statement of financial position. B. A financial statement that presents information about changes in equity during a period. C. A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities. D. A financial statement that lists the types and amounts of assets, liabilities, and equity of a business on a specific date. E. A financial statement that lists the types and amounts of the revenues and expenses of a business for an accounting period.

C. A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities.

A statement of cash flows should reconcile the differences between the beginning and ending balances of: A. Net income. B. Equity. C. Cash and cash equivalents. D. Working capital. E. Cash, cash equivalents, and short-term investments.

C. Cash and cash equivalents.

The employer should record payroll deductions as: A. Employee receivables. B. Payroll taxes. C. Current liabilities. D. Wages payable. E. Employee payables

C. Current liabilities.

An adjusting entry could be made for each of the following except: A. Prepaid expenses. B. Depreciation. C. Dividends. D. Unearned revenues. E. Accrued revenues.

C. Dividends.

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is: A. Operating activities. B. Financing activities. C. Investing activities. D. Schedule of noncash investing or financing activity. E. None of these. This is not reported on the statement of cash flows.

C. Investing activities.

A company paid $150,000, plus a 6% commission and $4,000 in closing costs for a property. The property included land appraised at $87,500, land improvements appraised at $35,000, and a building appraised at $52,500. What should be the allocation of this property's costs in the company's accounting records? A. Land $75,000; Land Improvements, $30,000; Building, $45,000. B. Land $75,000; Land Improvements, $30,800; Building, $46,200. C. Land $81,500; Land Improvements, $32,600; Building, $48,900. D. Land $79,500; Land Improvements, $32,600; Building, $47,700. E. Land $87,500; Land Improvements; $35,000; Building; $52,500.

C. Land $81,500; Land Improvements, $32,600; Building, $48,900.

Creditors' claims on the assets of a company are called: A. Net losses. B. Expenses. C. Revenues. D. Equity. E. Liabilities.

E. Liabilities.

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as: A. Financing activities. B. Investing activities. C. Operating activities. D. Direct activities. E. Indirect activities

C. Operating activities.

An example of an investing activity is: A. Paying wages of employees. B. Paying dividends. C. Purchasing land. D. Selling inventory. E. Contribution from owner.

C. Purchasing land.

Which of the following groups of accounts are not balance sheet accounts? A. Assets. B. Liabilities. C. Revenues. D. Equity accounts. E. All of the above are balance sheet accounts

C. Revenues.

A company had expenses other than cost of goods sold of $250,000. Determine sales and gross profit given cost of goods sold was $100,000 and net income was $150,000. A. Sales: $350,000; Gross Profit: $150,000. B. Sales: $350,000; Gross Profit: $50,000. C. Sales: $500,000; Gross Profit: $400,000. D. Sales: $500,000; Gross Profit: $50,000. E. Sales: $400,000; Gross Profit: $500,000.

C. Sales: $500,000; Gross Profit: $400,000. 150,000 net income + 250,000 other expenses = 400,000 gross profit

The matching principle requires: A. That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user. B. The use of the direct write-off method for bad debts. C. The use of the allowance method of accounting for bad debts. D. That bad debts be disclosed in the financial statements. E. That bad debts not be written off.

C. The use of the allowance method of accounting for bad debts

The cash flow on total assets ratio: Multiple Choice Is the same as return on assets. Is the same as profit margin. Can be an indicator of earnings quality. Is highly affected by accounting principles of income recognition and measurement. Is average net assets divided by cash flows from operations.

Can be an indicator of earnings quality.

A statement of cash flows should reconcile the differences between the beginning and ending balances of: Multiple Choice Net income. Equity. Cash and cash equivalents. Working capital. Cash, cash equivalents and short-term investments.

Cash and cash equivalents.

An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes is a(n): Multiple Choice Short-term marketable equity security. Operating activity. Common stock. Cash equivalent. Financing activity.

Cash equivalent. Correct

Another name for temporary accounts is: A. Real accounts. B. Contra accounts. C. Accrued accounts. D. Balance column accounts. E. Nominal accounts

E. Nominal accounts

The main purpose of the wage bracket withholding table is to: Multiple Choice Compute social security withholding. Compute Medicare withholding. Compute federal income tax withholding. Prepare the W-4. Compute gross earnings.

Compute federal income tax withholding.

A bond sells at a discount when the: Multiple Choice Contract rate is above the market rate. Contract rate is equal to the market rate. Contract rate is below the market rate. Bond has a short-term life. Bond pays interest only once a year.

Contract rate is below the market rate.

A company received cash proceeds of $206,948 on a bond issue with a par value of $200,000. The difference between par value and issue price for this bond is recorded as a: Multiple Choice Credit to Interest Income. Credit to Premium on Bonds Payable. Credit to Discount on Bonds Payable. Debit to Premium on Bonds Payable. Debit to Discount on Bonds Payable.

Credit to Premium on Bonds Payable. Correct

Blanket Corporation sold equipment for cash of $40,500. Accumulated depreciation on the sale date amounted to $34,000 and a loss of $1,800 was recognized on the sale. What was the original cost of the asset? A. $72,300. B. $75,900. C. $ 4,700. D. $76,300. E. $42,300 D. $76,300.

D. $76,300. Value received less book value = gain or loss on the sale

Management Services, Inc. provides services to clients. On May 1, a client prepaid Management Services $60,000 for 6-months services in advance. Management Services' general journal entry to record this transaction will include a A. Debit to Unearned Management Fees for $60,000. B. Credit to Management Fees Earned for $60,000. C. Credit to Cash for $60,000. D. Credit to Unearned Management Fees for $60,000. E. Debit to Management Fees Earned for $60,000.

D. Credit to Unearned Management Fees for $60,000.

Revenues are: A. The same as net income. B. The excess of expenses over assets. C. Resources owned or controlled by a company D. Increases in retained earnings from a company's earning activities. E. The costs of assets or services used.

D. Increases in retained earnings from a company's earning activities

A company's cost of goods sold was $4,000. Determine net purchases and ending inventory given goods available for sale were $11,000 and beginning inventory was $5,000. A. Net Purchases: $15,000; Ending Inventory: $7,000. B. Net Purchases: $10,000; Ending Inventory: $15,000. C. Net Purchases: $9,000; Ending Inventory: $6,000. D. Net Purchases: $6,000; Ending Inventory: $7,000. E. Net Purchases: $16,000; Ending Inventory: $20,000

D. Net Purchases: $6,000; Ending Inventory: $7,000. 11,000 -5,000 = 6,000 net purchases

Given the following items and costs as of the balance sheet date, determine the value of Faltron Company's merchandise inventory. $1,000 goods sold by Faltron to another company. The goods are in transit and shipping terms are FOB destination. $2,000 goods sold by another company to Faltron. The goods are in transit and shipping terms are FOB destination. $3,000 owned by Faltron but in the possession of another company the consignee. Damaged goods owned by Faltron which originally cost $4,000 but which now have a $500 net realizable value. A. $10,000. B. $6,500. C. $5,500. D. $5,000. E. $4,500.

E. $4,500. 1,000 + 3,000 + 500

A cash equivalent is an investment that: A. Is readily convertible to a known amount of cash. B. Is sufficiently close to its maturity date so its market value is unaffected by interest rate changes. C. Generally is within 3 months of its maturity date. D. Is highly liquid. E. All of the above

E. All of the above

Incidental and necessary costs of inventory: A. Can be assigned to each inventory unit. B. May be immaterial. C. Can be allocated to cost of goods sold. D. Are subject to the cost-to-benefit constraint when deciding how to account for them. E. All of the above

E. All of the above

Preparation of the statement of cash flows involves: A. Computing the net increase or decrease in cash. B. Computing and reporting net cash provided or used by operations. C. Computing and reporting net cash provided or used by investing activities. D. Computing and reporting net cash provided or used by financing activities. E. All of the above

E. All of the above

During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is: A. Specific identification method. B. Average cost method. C. Weighted-average method. D. FIFO method. E. LIFO method.

E. LIFO method.

A company's transactions with its creditors to borrow money and/or to repay the principal amounts of loans are reported as cash flows from: Multiple Choice Operating activities Investing activities Financing activities Direct activities Indirect activities

Financing activities

The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is: Multiple Choice Operating activities. Financing activities. Investing activities. Schedule of noncash investing or financing activity. None of these as this is not reported on the statement of cash flows.

Financing activities. Correct

The annual federal unemployment tax return is: Multiple Choice Form 940. Form 1099. Form 104. Form W-2. Form W-4.

Form 940.

The Federal Insurance Contributions Act (FICA) requires that each employer file a: Multiple Choice W-4. Form 941. Form 1040. Form 1099. Form 521B.

Form 941.

The accounting principle that requires significant noncash financing and investing activities be reported on the statement of cash flows is the: Multiple Choice Historical cost principle Materiality principle Full disclosure principle Going concern principle Business entity principle

Full disclosure principle Correct

Which of the following statements is true? For the issuer: Multiple Choice Interest paid on bonds is tax deductible. Interest paid on bonds is not tax deductible. Dividends paid to stockholders are tax deductible. Bonds are assets. Bonds always decrease return on equity.

Interest paid on bonds is tax deductible.

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is: Multiple Choice Operating activities. Financing activities. Investing activities. Schedule of noncash investing or financing activity. None of these as this is not reported on the statement of cash flows.

Investing activities.

The carrying value of a long-term note payable: Multiple Choice Is computed as the future value of all remaining future payments, using the market rate as interest. Is the face value of the long-term note less the total of all future interest payments. Is computed as the present value of all remaining future payments, discounted using the market rate of interest at the time of issuance. Is computed as the present value of all remaining interest payments, discounted using the note's rate of interest. Decreases each time period the discount on the note is amortized.

Is computed as the present value of all remaining future payments, discounted using the market rate of interest at the time of issuance.

The direct method of reporting operating cash flows: Multiple Choice Is recommended but not required by the FASB. Must be used by all companies. Is used by most companies. Is considered supplementary disclosure. Is not recommended by the FASB, but is commonly used.

Is recommended but not required by the FASB.

To provide security to creditors and to reduce interest costs, bonds and notes payable can be secured by: Multiple Choice Safe deposit boxes Mortgages Equity The FASB Debentures

Mortgages

Liabilities: Multiple Choice Must be certain. Must sometimes be estimated. Must be for a specific amount. Must always have a definite date for payment. Must involve an outflow of cash

Must sometimes be estimated.

The first line item in the operating activities section of a spreadsheet for a statement of cash flows prepared using the indirect method is: Multiple Choice Cash. Cash received from customers. Increase (decrease) in accounts receivable. Net income. Adjustments to net income.

Net income.

A discount on bonds payable: Multiple Choice Occurs when a company issues bonds with a contract rate less than the market rate. Occurs when a company issues bonds with a contract rate more than the market rate. Increases the Bond Payable account. Decreases the total bond interest expense. Is not allowed in many states to protect creditors.

Occurs when a company issues bonds with a contract rate less than the market rate.

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as: Multiple Choice Financing activities Investing activities Operating activities Direct activities Indirect activities

Operating activities

The appropriate section in the statement of cash flows for reporting the cash payment of wages is: Multiple Choice Operating activities. Financing activities. Investing activities. Schedule of noncash investing or financing activity. None of these as this is not reported on the statement of cash flows.

Operating activities.

The appropriate section in the statement of cash flows for reporting the receipt of cash dividends from investments in securities is: Multiple Choice Operating activities. Financing activities. Investing activities. Schedule of noncash investing or financing activity. None of these as this is not reported on the statement of cash flows.

Operating activities.

If a company borrows money from a bank, the interest paid on this loan should be reported on the statement of cash flows as a(n): Multiple Choice Operating activity. Investing activity. Financing activity. Noncash investing and financing activity. None of these. This is not reported in the statement of cash flows.

Operating activity.

Under IFRS, cash outflows for interest expense are classified as Multiple Choice Operating. Investing. Financing. Operating or investing, assuming that the classification is applied consistently across all periods. Investing or financing, depending upon who is the recipient of the interest paid.

Operating or investing, assuming that the classification is applied consistently across all periods.

Which of the following items is reported on the statement of cash flows under financing activities? Multiple Choice Declaration of a cash dividend. Payment of a cash dividend. Declaration of a stock dividend. Payment of a stock dividend. Stock split.

Payment of a cash dividend.

Which one of the following is representative of typical cash flows from operating activities? Multiple Choice Proceeds from collecting the principal amount of loans. Repayment of principal on loans. Proceeds from the issuance of bonds and notes payable. Payments by a merchandiser to acquire equity securities of other companies. Receipts of cash sales.

Receipts of cash sales.

The indirect method for the preparation of the operating activities section of the statement of cash flows: Multiple Choice Separately lists each major item of operating cash receipts. Separately lists each major item of operating cash payments. Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities. Is required if the company is a merchandiser. Must not be used in all circumstances.

Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities.

The deferred income tax liability: Multiple Choice Represents income tax payments that are deferred until future years because of temporary differences between GAAP rules and tax accounting rules. Is a contingent liability. Can result in a deferred income tax asset. Is never recorded. Is recorded whether or not the difference between taxable income and financial accounting income is permanent or temporary.

Represents income tax payments that are deferred until future years because of temporary differences between GAAP rules and tax accounting rules.

Accounting standards: Multiple Choice Allow companies to omit the statement of cash flows from a complete set of financial statements if cash is an insignificant asset. Require that companies omit the statement of cash flows from a complete set of financial statements if the company has no investing activities. Require that companies include a statement of cash flows in a complete set of financial statements. Allow companies to include the statement of cash flows in a complete set of financial statements if the cash balance makes up more than 50% of the current assets. Allow companies to omit the statement of cash flows from a complete set of financial statements if the company has no financing activities.

Require that companies include a statement of cash flows in a complete set of financial statements.

The purchase of long-term assets by issuing a note payable for the entire amount is reported on the statement of cash flows in the: Multiple Choice Operating activities. Financing activities. Investing activities. Schedule of noncash financing and investing activities. None of these as this is not reported on the statement of cash flows.

Schedule of noncash financing and investing activities.

The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for common stock is: Multiple Choice Operating activities. Financing activities. Investing activities. Schedule of noncash investing or financing activity. None of these as this is not reported on the statement of cash flows.

Schedule of noncash investing or financing activity.

The direct method for the preparation of the operating activities section of the statement of cash flows: Multiple Choice Separately lists each major item of operating cash receipts and cash payments. Reports adjustments to reconcile net income to net cash provided or used by operating activities in the statement. Reports an amount of cash flows from operations different from the amount determined using the indirect method. Is required if the company is a merchandiser. Is required by the FASB.

Separately lists each major item of operating cash receipts and cash payments.

A bond traded at 102½ means that: Multiple Choice The bond pays 2.5% interest. The bond traded at $1,025 per $1,000 bond. The market rate of interest is 2.5%. The bonds were retired at $1,025 each. The market rate of interest is 2½% above the contract rate.

The bond traded at $1,025 per $1,000 bond

If an issuer sells a bond at any other date than the interest payment date: Multiple Choice This means the bond sells at a premium. This means the bond sells at a discount. The issuing company will report a loss on the sale of the bond. The issuing company will report a gain on the sale of the bond. The buyer normally pays the issuer the purchase price plus any interest accrued since the last interest payment date.

The buyer normally pays the issuer the purchase price plus any interest accrued since the last interest payment date.

The amount of federal income taxes withheld from an employee's paycheck is determined by: Multiple Choice The employee's annual earnings rate and number of withholding allowances. The employer's merit rating. The employee's annual earnings rate and merit rating. Multiplying gross pay by 6.2%. The employee's credit rating.

The employee's annual earnings rate and number of withholding allowances.

A bondholder that owns a $1,000, 10%, 10-year bond has: Multiple Choice Ownership rights in the company who issued the bond. The right to receive $10 per year until maturity. The right to receive $1,000 at maturity. The right to receive $10,000 at maturity. The right to receive dividends of $1,000 per year.

The right to receive $1,000 at maturity.