1) Purchase of long-term assets by issuing note payable for entire amount is reported on Statement of Cash Flows in:

a. Operating section.
b. Financing section.
c. Investing section.
d. Schedule of noncash financing and investing activities.
e. Both (b) and (c).

2) How is depreciation expense treated in statement of cash flows and related disclosures (indirect method)?

a. Added to net income.
b. Subtracted from net income.
c. Placed into the investing section.
d. Does not appear because it is not a cash flow.

3) This is the first year of business for a company. At the end of the year, total assets equal $100,000, total liabilities equal $50,000, and common stock has $23,000 balance. Only account missing is retained earnings. If dividends declared and paid were $28,000 for the year, compute net income for the year?

a. $78,000
b. $55,000
c. $25,000
d. $37,000
e. None of the above.

4) Small City, Inc. had merchandise inventory of $20,000 at the end of Year 1 and $28,000 at the end of Year 2. Sales for Years 1 and 2 were $500,000 and $600,000, respectively; cost of goods sold was $300,000 in Year 1 and $360,000 in Year 2. How much is Year 2 inventory turnover, rounded to two decimal places?

a. 25.00
b. 12.85
c. 13.75
d. 15.00
e. None of the above.

5) J Lo, Inc. had accounts receivable of 510,000 at the end of Year 1 and $18,000 at the end of Year 2. Sales for Years 1 and 2 are $182,000 and $210,000, respectively; cost of goods sold is $150,000 in Year 1 and $195,000 in Year 2. How much is Year 2 accounts receivable turnover, rounded to two decimal places?

a. 11.67
b. 14.00
c. 16.25
d. 12.32
e. None of the above.