Question 1.1.A current asset is a(n): (Points : 2) asset that will be used in the operating activities of a business. asset generated by the operations of a business within the past year. asset that is expected to be used or converted to cash within one year or the operatingcycle, whichever is longer. miscellaneous asset that is small in dollar amount.Question 2.2.How does the amortization of the principal balance affect the amount of interest expense recorded each succeeding year? (Points : 2) Has no effect on interest expense each succeeding year Increases the amount of interest expense each succeeding year Reduces the amount of interest expense each succeeding year The effect depends on the interest rateQuestion 3.3.Long-term debt would likely be used for which of the following? (Points : 2) Acquisition of inventory Paying premiums for insurance Purchasing a building Paying salariesQuestion 4.4.Which of the following would notbe classified as a current asset? (Points : 2) Marketable Securities Equipment Prepaid Expenses Interest ReceivableQuestion 5.5.Which of the following items would be least likely to appear in the current liabilities section of a classified balance sheet? (Points : 2) Accounts payable Wages payable Bonds payable Interest payableQuestion 6.6.On January 1, 2010, Hays Corporation arranged a $3,000 line of credit with the Barnett Bank. It agreed to accept the bank’s offer of 1% above the prime rate with interest payments on December 31 of each year. All borrowings and payments on principal are to take place on January 1 of each year. Hays began its loan transactions with Barnett Bank by borrowing $1,000 on January 1, 2010. Which of the following answers shows the effect of this event on the financial statements? RowAssets=Liabilities+EquityRevenue-Expenses=Net Inc.CashOne1000=1000+NANA-NA=NA1000 IATwo1000=NA+10001000-NA=10001000 IAThree1000=1000+NANA-NA=NA1000 OAFour1000=1000+NANA-NA=NA1000 FA(Points : 2) Row One Row Two Row Three Row FourQuestion 7.7.Borrowing by issuing a note payable is a(n): (Points : 2) asset source transaction. asset use transaction. asset exchange transaction. claims exchange transaction.Question 8.8.Liquidity refers to a company’s ability to: (Points : 2) sell inventory in a timely manner. generate profits from operations. repay liabilities in the long run. generate cash flows to pay current liabilities.Question 9.9.The Halogen Corporation issued a 5-year note payable on January 1, 2010 for $2,500. The interest rate is 5% and the annual payment of $578, due each December 31, includes both interest and principal. Which of the following correctly shows the effects of the December 31, 2011, payment? RowAssets=Liabilities+EquityRevenue-Expenses=Net Inc.CashOne(578)=(476)+(102)NA-102=(102)(476)FA/(102)OATwo578=578+NANA-NA=NA578FAThree(578)=(578)+NANA-NA=NA(578)FAFour(578)=(476)+(50)NA-50=(50)(476)FA/(50)OA(Points : 2) Row One Row Two Row Three Row FourQuestion 10.10.A contingent liability is: (Points : 2) an unearned revenue. a potential obligation, the existence, or amount of which depends on a future event. an amount owed to a state or local government. an amount related to an impairment loss on an intangible asset.Question 11.11.Reissuance of treasury stock for cash is what kind of transaction? (Points : 2) Asset source Asset use Asset exchange Claims exchangeQuestion 12.12.Mitchell Company was authorized to issue 50,000 shares of common stock. The company issued 27,000 shares of stock and later purchased 5,000 shares of treasury stock. The number of outstanding shares of common stock is: (Points : 2) 45,000 28,000 22,000 17,000Question 13.13.Which of the following terms designates the number of shares of a corporation’s stock currently held by stockholders? (Points : 2) Outstanding shares Authorized shares Treasury stock Issued sharesQuestion 14.14.Which form of business organization is established as a separate legal entity from its owners? (Points : 2) Sole proprietorship Corporation Partnership None of the aboveQuestion 15.15.Which of the following terms designates the maximum number of shares a corporation may issue? (Points : 2) Outstanding shares Authorized shares Treasury stock Issued sharesQuestion 16.16.Purchase of treasury stock would be shown on the statement of cash flows as: (Points : 2) an operating activity. an investing activity. a financing activity. none of the above.Question 17.17.Flynn Company issued 2,000 shares of $10 par value common stock at a market price of $16. As a result of this accounting event, total paid-in capital would: (Points : 2) increase by $12,000. be unaffected by the event. increase by $32,000. increase by $20,000.Question 18.18.The issuance of a stock dividend will: (Points : 2) not affect total equity. increase retained earnings. decrease total paid-in capital. decrease net income.Question 19.19.Grant Corporation declared a 2-for-1 stock split when it had 12,000 shares of $5 par value common stock outstanding. If the market price of the stock had been $20 a share before the split, the par value, number of shares, and approximate market value after the split would be: RowPar ValueNo. of SharesMarket ValueOne$2.5024,000$10.00Two$2.5024,000$ 5.00Three$2.5012,000$10.00Four$5.0024,000$20.00(Points : 2) Row One Row Two Row Three Row FourQuestion 20.20.What kind of transaction is the declaration of a stock dividend? (Points : 2) Asset source transaction Claims exchange transaction Asset use transaction Asset exchange transaction

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