Question

1. On an indirect method statement of cash flows, the purchase of machinery in exchange for common shares is:

Select one:

a. ignored

b. reflected in the investing activities section

c. shown in the schedule of noncash investing and financing activities which accompanies the statement of cash flows

d. reflected in the operating activities section

Question 2. The statement of cash flows is designed to fulfill all of the following purposes except:

Select one:

a. to determine the company's ability to pay dividends to shareholders

b. to assess the collectibility of accounts receivable

c. to predict future cash flows

d. to show the relationship of net income to changes in the company's cash

Question 3. A cash dividend becomes a legal liability of the corporation on the

Select one:

a. date of payment

b. date of declaration

c. date of distribution

d. date of record

Question 4. All of the following are basic rights of a shareholder except

Select one:

a. the right to vote

b. the right to sell the shares

c. the right to collect dividends

d. the right to declare dividends

Question 5. Which of the following statements regarding stock splits is incorrect?

Select one:

a. A stock split involves a reduction in the share's issue value.

b. A stock split decreases the market price of the shares.

c. A stock split increases total owners' equity.

d. A stock split is an increase in the number of authorized, issued, and outstanding shares

6. Which of the following represents the correct order on the statement of cash flows?

Select one:

a. Investing, operating and then financing activities

b. Operating, investment then financing activities

c. Investing, financing then operating activities

d. Operating, financing then investing activities

Question 7. The issuance of common shares requires a

Select one:

a. debit to Common Shares

b. debit to Retained Earnings

c. credit to Common Shares

d. credit to Retained Earnings

Question 8.

Following is the shareholders' equity section of the balance sheet of the Everslim Company:

The preferred shares are currently selling for $102.25 per share and the common shares are currently selling for $11.50 per share. The entry to record the distribution of a $66,000 dividend includes a

Select one:

a. credit to Dividends Payable, Preferred for $66,000

b. credit to Dividends Payable, Preferred for $6,000

c. debit to Common Shares for $66,000

d. debit to Common Shares for $6,000

Question 9.

Under ASPE on an indirect method statement of cash flows, dividends paid during the year are:

Select one:

a. reflected in the financing activities section

b. reflected in the investing activities section

c. deducted from net income

d. added to net income

Question 10.

When a cash dividend is declared

Select one:

a. the Cash account is debited

b. the Retained Earnings account is credited

c. the Retained Earnings account is debited

d. the Cash account is credited

Answer 1

Ans(1) Option (a) Ignored.

Ans(2) Option (c) To predict future cashflows

Ans (3) Option (b) Date of Declarartion

Ans(4) Option(d) Right to declare dividends

Ans(5) Option (a). A stock split involves a reduction in the share's issue value

Ans (6) Option ( b) Operating, investment then financing activities

Ans (7) Option (c) credit to Common Shares

Ans(8) Option (a)credit to Dividends Payable, Preferred for $66,000

Ans(9) Option (a). reflected in the financing activities section

Ans (10) Option (d). the Cash account is credited