Question 12

Under the indirect method, when preparing the statement of cash flows, a decrease in the merchandise inventory account balance is

		added to net income.
		added to cost of goods sold.
		subtracted from cost of goods sold.
		subtracted from net income.

3 points

Question 13

Which of the following would be an example of a cash inflow from financing activities?

		interest paid on loans
		the issue of bonds for cash
		the sale of equipment
		the sale of investments in equity securities

3 points

Question 14

Capital resulting from the retention of earnings should be entered in an account with an appropriate title such as

		Capital stock.
		Capital Equity.
		Retained Earnings.
		Appropriated Retained Earnings.

3 points

Question 15

When a stock dividend is declared, the journal entry will include a debit to

		Retained Earnings.
		Stock Dividends Payable.
		Stock Dividends.
		Stock Dividends Distributable.

3 points

Question 16

A proportionate distribution of shares of a corporations own stock to its stockholders is called a(n)

		stock dividend.
		appropriation.
		cash dividend.
		appropriation.

3 points

Question 17

Under the direct method, the financing section of the statement of cash flows

		starts with cash sales.
		is always identical to the financing section under the indirect method.
		includes the addition of the accumulated depreciation balance.
		includes the issuance of stock for noncash assets.

3 points

Question 18

Shares of stock reacquired by the issuing company are called

		par value stock.
		stock subscription.
		treasury stock.
		no-par value stock.

3 points

Question 19

Bonds that give the holder the option of exchanging the bonds for capital stock of the corporation are called

		convertible bonds.
		debenture bonds.
		callable bonds.
		coupon bonds.

3 points

Question 20

Which of the following would be an example of cash outflows from investing activities?

		cash paid for new equipment
		cash paid for dividends
		cash paid for inventory
		cash paid for interest on a mortgage

3 points

Question 21

When 365 is divided by the accounts receivable turnover, the amount is expressed in

		dollars.
		a percentage.
		ratio.
		days.

3 points

Question 22

The adjusting entry required for bonds issued at a discount would require

		a debit to Bond Interest Expense, a credit to Discount on Bonds Payable, and a credit to Bond Interest Payable.
		a debit to Bond Interest Expense, a debit to Discount on Bonds Payable, and a credit to Cash.
		a debit to Bond Interest Expense, a debit to Discount on Bonds Payable, and a credit to Bond Interest Payable.
		a debit to Bond Interest Expense and a credit to Cash.

3 points

Question 23

The premium on bonds payable account would be classified as a(n)

		current liability.
		contra-liability.
		adjunct-liability.
		contra-asset.

3 points

Question 24

The rate of interest specified on the bond is referred to as the

		debenture rate.
		market rate.
		par rate.
		stated rate.

3 points

Question 25

Treasury stock is shown on the balance sheet as which of the following

type of account?

		Asset
		Contra-stockholders' equity
		Liability
		Contra-liability