Question 1
1. Upon the date of declaration of a dividend, the corporation has incurred a liability for the dividend .
True
False

Question 2
1. A corporation generally distributes its entire net income to its stockholders.
True
False

Question 3
1. Cash dividends reduce the stockholders' equity in the corporation.
True
False

Question 4
1. When an appropriation of retained earnings is made, total retained earnings decreased.
True
False

Question 5
1. When a dividend is paid in cash, it is known as a

liquidating dividend
dividend payable
cash dividend
property dividend

Question 6
1. If the interest rate on bonds is higher than the current market rate, they will sell at

a discount
a premium
face value
maturity value

Question 7
1. Bondholders have which of the following relationships with a corporation?

They are creditors.
They are owners
They become members of the board.
They are silent managers.

Question 8
1. Bond Interest Payable is reported as a(n)

current liability on the income statement.

current liability on the balance sheet.

adjunct-liability on the balance sheet.

contra-liability on the income statement.

Question 9
1. While bonds and notes are both formal written promises to pay an amount of money at a specified date, notes generally tend to be for much larger amount and for a longer period of time.
True
False

Question 10
1. If the stated interest rate on bonds is less than the current market rate, the bonds will sell at a discount.
True
False

Question 11
1. Bonds payable less the discount on bonds payable is called the carrying value of the bonds.
True
False

Question 12
1. To determine whether a bond will sell at price equal to, greater than, or less than face value, compare the stated and market interest rates.
True
False

Question 13
1. An example of a cash outflow from financing activities is
cash dividends paid
interest paid on notes payale
payment for additional inventory
buying debt and equity securities.

Question 14
1. Under the direct and indirect methods of reporting the statement of cash flows, only
the operating activities section is different.
the financing activities section is different.
the investing activities section is different.
the operating and financing activities sections are different.

Question 15
1. Those transactions dealing primarily with selling a product or providing a service related to the revenues and expenses reported on the income statement are called
investing activities
operating activities
financing activities
planning activities

Question 16
1. A statement of cash flows is prepared from the
balance sheet from the beginning and end of the period.
general journal.
accounts receivable ledger
accounts payable ledger.

Question 17
1. Which of the following adjustments would NOT be made to net income when computing cash from operating activities?
add an increase in Accrued Interest Payable
deduct the purchase of store equipment
add the decrease in Merchandise Inventory
add the reduction in Accounts Receivable

Question 18
1. Achieving profitability will automatically assure sufficient amounts of cash
True
False

Question 19
1. The current ratio and the quick or acid-test ratio may be too high for the overall good of the business.
True
False

Question 20
1. From the standpoint of the individual stockholder, one of the most important measures of profitability of the firm is the earnings per share.
True
False

Question 21
1. Asset turnover ratio measures how effectively a companay uses assets to generate sales.
True
False

Question 22
1. An expression of the amount of each item in a statement as a percentage of some designated total for a comparative purposes is called
vertical analysis
return on total assets
earnings per share
horizontal analysis

Question 23
1. Dividing total current assets by total current liabilities is the calculation for the
current ratio
return on investment
quick or acid-test ratio
ratio of liabilities to owner's equity.

Question 24
1. The net income of a company is $175,000. The average book value of the company's assets is $1,300,000. the return on total assets would be
20%
7.43%
600%
13.46%

Question 25
1. The net inome for a company was $315,000 last year and is $270,000 this year. The percent of increase or decrease was
16.7%
14.3%
26.4%
86.0%