The statement of cash flows is used for _____.
A. showing the relationship of net income to changes in currentassets
B. determining a companyâs acceptable level of debt financing
C. revealing commitments that may restrict future courses ofaction
D. evaluating the creditworthiness of the organization
2) Nonoperating items on the income statement _____.
A. are revenues and expenses arising from adjusting entries
B. include interest income and expense
C. appear only on corporate income statements
D. appear on the income statement immediately after grossprofit
3) The difference between a single-step and multiple-step incomestatement is that a single-step income statement _____.
A. groups all revenues together and all expenses together, whereasa multiple-step income statement separates certain revenues andexpenses from each other and presents subtotals
B. calculates net income using one method, whereas a multiple-stepincome statement calculates net income using two or moremethods
C. calculates gross profit and operating income, whereas amultiple-step income statement does not
D. shows only 1 year’s net income, whereas a multiple-step incomestatement shows multiple years’ net income
4) Which one of the following statements is true?
A. The statement of cash flows reports the cash receipts but notcash payments of an entity over a period of time.
B. Both the statement of cash flows and the income statementdetermine the net income for a company.
C. Transactions affecting the sale and the purchase or productionof goods and services are reported in the financing activitiessection of the statement of cash flows.
D. Investing activities in the statement of cash flows includeacquiring and selling long-term assets.
5) The _____ accounting convention uses the acquisition cost minusdepreciation in valuing an asset on the balance sheet.
A. continuity
B. conservatism
C. cost-benefit
D. materiality
6) A new corporation issuing a common, no-par value stock for cashwould include a journal entry a debit to _____.
A. paid-in capital and a credit to retained earnings.
B. cash and a credit to common stock.
C. retained earnings and a credit to cash.
D. cash and a credit to retained income.
7) Which type of organization would most likely havework-in-process inventory?
A. A retail store
B. A manufacturing company
C. A service organization
D. A real-estate investment trust
8) _____ is a measure of income or profit divided by the investmentrequired to obtain that income or profit.
A. Return on sales
B. Capital turnover
C. Return on investment
D. Residual income
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