Question

1. Which of the following transactions is included in the operating activities section of a cash flow

statement prepared using the indirect method?

A.

Gain on sale of plant asset

B.

Payment of cash dividend to the shareholders

C.

Issuance of common stock to the shareholders

D.

Sale of property, plant and equipment

12. What is

not

a variable that is considered in interest computations?

A. Interest rate

B. Time

C. Principal

D. Assets

13. A series of equal receipts at equal intervals of time when each receipt is received at the

beginning of each time period is called an

A. unearned receipt

B. ordinary annuity

C. annuity in arrears

D. annuity due

14. An amount is deposited for eleven years at 16%. If compounding occurs quarterly, then the time

value of money variables would be

A.

16% for 44 periods

B.

4% for eleven periods

C.

4% for 44 periods

D.

16% for eleven periods

15. Assume Waterway Industries deposits $82,000 with First National Bank in an account earning

interest at 6% per annum, compounded semi-annually. How much will Waterway have in the

account after six years if interest is reinvested?

A. $116,912

B. $111,520

C. $116,320

D. $82,000

16. Sheridan Company is purchasing new equipment with a cash cost of $294,000 for an assembly

line. The manufacturer has offered to accept $67,300 payment at the end of each of the next six

years. How much interest will Sheridan Company pay over the term of the loan?

A. $294,000

B. $403,800

C. $67,300

D. $109,800

17. Swifty Corporation will receive $405,000 in 7 years. If the appropriate interest rate is 12%, the

present value of the $405,000 receipt is

A. $183,201

B. $587,250

C. $895,325

D. $182,250

18. Concord Corporation will receive $640,000 in a future year. If the future receipt is discounted at

an interest rate of 12%, its present value is $206,061. In how many years is the $640,000

received?

A. 10 years

B. 8 years

C. 9 years

D. 11 years

19. What interest rate (the nearest percent) must Charlie earn on a $553,958 investment today so

that he will have $1,166,000 after 11 years?

A. 5%

B. 6%

C. 7%

D. 8%

20. Lucy and Fred want to begin saving for their baby's college education. They estimate that they

will need $180,000 in eighteen years. If they are able to earn 9% per annum, how much must be

deposited at the beginning of each of the next eighteen years to fund the education?

A. $3,998

B. $3,879

C. $4,238

D. $7,276

Answer 1

Answer 1 is A.

Gain on sale of plant assets = Operating activities
Payment of cash dividend to the shareholders = financing activities
Issuance of common stock to the shareholders = financing activities
Sale of property, plant and equipment = investing activities

Answer 12 is D.

At the time of computing interest, interest rate, time period and principal amount are considered while assets are not considered

Answer 13 is D.

A series of equal receipts at equal intervals of time when each receipt is received at the beginning of each time period is called an annuity due.

Answer 14 is C.

Annual Interest Rate = 16%
Quarterly Interest Rate = 4%

Period = 11 years or 44 quarters

So, time value of money variables would be 4% for 44 period .

Answer 15 is A.

Amount deposited = $82,000
Annual Interest Rate = 6%
Semiannual Interest Rate = 3%
Period = 6 years or 12 semiannual period

Accumulated Sum = $82,000 * 1.03^12
Accumulated Sum = $116,912