Section A - Multiple Choice Questions - Answer ALL (5 x 1 mark = 5 marks) 1. Each payment on a mortgage note payable consists of: a. interest on the original balance of the loan. b. reduction of loan principal only. C. interest on the original balance of the loan and reduction of loan principal. d. interest on the unpaid balance of the loan and reduction of loan principal. 2. The process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset is called as a. Depletion b. Amortization C. Depreciation d. Appreciation 3. Upon formation of a partnership, each partner's initial investment of assets should be recorded at their a. book values. b. cost C. market values. d. appraised values. 4. Bonds sell at a premium when the a. issuing company has a better reputation than other companies in the same business. b. market rate of interest is less than the stated interest rate at the time of issue. c. yield rate of interest is more than the stated rate at the time of issue. d. issuing company agrees to repay the maturity before the due date. 5. Free cash flow provides an indication of a company's ability to: a. generate net income. b. generate cash to pay dividends. c. generate cash to pay account payable. d. generate cash to pay utilities bills