{"type":"doc","content":[{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q1. What are the two main categories of stockholders' equity?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Stockholders' Equity"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of the basic structure of stockholders' equity on the balance sheet."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Paid-in Capital: Amount invested by stockholders."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Retained Earnings: Profits kept in the business."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall that stockholders' equity is divided into two main sections on the balance sheet."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"One section represents the money invested by owners (stockholders)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"The other section represents profits that have been retained in the company rather than distributed as dividends."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q2. Which of the following is NOT an advantage of a corporation?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Corporate Structure"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your knowledge of the benefits and drawbacks of the corporate form of business."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Double Taxation: Corporations pay taxes on income, and shareholders pay taxes on dividends."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Limited Liability: Shareholders are not personally liable for corporate debts."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"List the typical advantages of corporations: continuous life, ability to raise capital, limited liability."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which option is actually a disadvantage, not an advantage."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall that double taxation means profits are taxed twice—once at the corporate level and again at the shareholder level."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q3. Who do stockholders directly elect in a corporation?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Corporate Governance"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of the roles and responsibilities within a corporation."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Board of Directors: Elected by stockholders to oversee management."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Corporate Officers: Appointed by the board, not directly elected by stockholders."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall the hierarchy: stockholders elect the board, the board appoints officers."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which position is directly elected by stockholders."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Consider the difference between governance (board) and management (officers)."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q4. Which is a characteristic of a corporation?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Corporate Characteristics"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your knowledge of what makes corporations unique compared to other business forms."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Limited Liability: Shareholders' risk is limited to their investment."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Mutual Agency: Not present in corporations."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review the characteristics of corporations: limited liability, separate legal entity, etc."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which options are not characteristics (e.g., mutual agency, no income tax)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Focus on the feature that distinguishes corporations from partnerships and sole proprietorships."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q5. What is the basic form of capital stock?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Capital Stock"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of the types of stock issued by corporations."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Common Stock: Basic ownership in a corporation."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Preferred Stock: Has special rights, but is not the basic form."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall the two main types of stock: common and preferred."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which type is considered the basic form and why."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Consider the rights associated with each type of stock."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q6. Which characteristic is least likely for preferred stock?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Preferred Stock Features"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your knowledge of the typical features of preferred stock."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Preference as to dividends and assets: Common for preferred stock."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Voting Rights: Usually not given to preferred stockholders."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"List the common features of preferred stock: dividend preference, asset preference, convertibility."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which feature is least likely (e.g., voting rights)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall that preferred stockholders typically do not have voting rights."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q7. If a corporation issues 1,200 shares of $1.20 par value common stock for $7,200, what is the journal entry credit to Common Stock?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Stock Issuance Journal Entries"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to record the issuance of stock at par value and above par value."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Formula:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Common Stock Credit = Number of Shares × Par Value"}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify the number of shares issued and the par value per share."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Calculate the total par value credited to the Common Stock account: "},{"type":"inlineMath","attrs":{"latex":"1,200 \\times 1.20"}},{"type":"text","text":"."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recognize that any amount received above par is credited to Paid-in Capital in Excess of Par."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q8. What is the par value of a share of common stock?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Par Value"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of what par value represents and where it is stated."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Par Value: The nominal value assigned to shares in the corporate charter."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Corporate Charter: Legal document stating par value."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall that par value is a legal concept, not a market value."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify where par value is stated (corporate charter)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand that par value does not change with market transactions."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q9. How is the issuance of no-par common stock recorded?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: No-Par Stock Issuance"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of journal entries for issuing no-par stock."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"No-Par Stock: Stock without a stated par value."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Common Stock Account: Receives the full amount of cash received for no-par stock."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify the number of shares issued and the price per share."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Calculate the total cash received: "},{"type":"inlineMath","attrs":{"latex":"310,000 \\times 7"}},{"type":"text","text":"."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recognize that for no-par stock, the entire amount is credited to the Common Stock account."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q10. Which classification represents the most shares of common stock?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Stock Classifications"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of the different categories of shares: authorized, issued, outstanding, treasury, unissued."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Authorized Shares: Total shares a corporation can issue, as stated in the charter."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Issued Shares: Shares that have been sold to shareholders."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Outstanding Shares: Issued shares minus treasury shares."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall the definitions of each classification."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which classification includes the largest number of shares."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand that authorized shares are the maximum possible, not necessarily issued or outstanding."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q11. Why might a company purchase treasury stock?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Treasury Stock"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of the reasons for repurchasing shares and the effect on earnings per share (EPS)."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Treasury Stock: Shares repurchased by the company."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Earnings Per Share (EPS): Net income divided by outstanding shares."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"List common reasons for repurchasing stock: employee plans, avoiding takeovers, etc."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Consider the effect on EPS when shares are repurchased."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which reason is not valid (e.g., decreasing EPS)."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q12. What is the effect on stockholders' equity when treasury stock is purchased?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Treasury Stock Transactions"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of how treasury stock purchases affect the equity section of the balance sheet."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Formula:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Decrease in Equity = Amount Paid to Reacquire Shares"}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify the number of shares repurchased and the price paid per share."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Calculate the total cost: "},{"type":"inlineMath","attrs":{"latex":"3,200 \\times 1.50"}},{"type":"text","text":" (par value is not relevant for treasury stock)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recognize that the decrease in equity is equal to the total amount paid to reacquire the shares."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q13. When treasury stock is sold for less than its cost, which account is debited?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Treasury Stock Sales"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of how losses on treasury stock sales are recorded."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Retained Earnings: Used to absorb losses when Paid-in Capital is insufficient."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Paid-in Capital in Excess of Par: Used for gains, not losses."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall the order of accounts used to absorb losses: first Paid-in Capital, then Retained Earnings."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which account is debited when the sale price is below cost and Paid-in Capital is insufficient."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand that losses reduce Retained Earnings."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q14. What is the journal entry for purchasing treasury stock?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Treasury Stock Journal Entries"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to record the purchase of treasury stock and its effect on equity."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Treasury Stock: Contra equity account with a debit balance."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Cash: Credited for the amount paid."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify the number of shares purchased and the price paid per share."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Calculate the total cost: "},{"type":"inlineMath","attrs":{"latex":"700 \\times 20"}},{"type":"text","text":"."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Record the debit to Treasury Stock and credit to Cash for the total amount paid."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q15. How does the declaration of a cash dividend affect assets, liabilities, and equity?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Dividend Declaration"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of the accounting effects of declaring a dividend."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Dividends Payable: Liability created when a dividend is declared."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Retained Earnings: Decreased when a dividend is declared."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall that declaring a dividend creates a liability (Dividends Payable)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand that Retained Earnings decrease by the amount of the dividend."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Assets are not affected until the dividend is paid."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q16. What is the journal entry on the date of record for cash dividends?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Dividend Dates"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of the three key dates for dividends: declaration, record, payment."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Date of Record: No journal entry required."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Date of Declaration: Journal entry to record liability."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Date of Payment: Journal entry to pay dividend."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall the three dates: declaration, record, payment."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which date requires a journal entry and which does not."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand that the date of record is informational only."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q17. What is the effect of a stock split on total stockholders' equity?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Stock Splits"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of how stock splits affect the number of shares, par value, and equity."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Stock Split: Increases number of shares, decreases par value proportionally."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Stockholders' Equity: Total value remains unchanged."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall that a stock split increases the number of shares and decreases par value."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand that the total equity does not change."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recognize that assets and equity are unaffected by a stock split."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q18. When are stockholders eligible for a dividend?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Dividend Eligibility"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of the key dates for dividend eligibility."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Date of Record: Determines eligibility for dividend."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Date of Declaration: Announces dividend."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Date of Payment: Pays dividend."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall the three key dates for dividends."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which date determines who receives the dividend."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand that only stockholders on the date of record are eligible."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q19. What is the amount of income attributable to each share of common stock called?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Earnings Per Share (EPS)"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of EPS and its calculation."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Formula:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"inlineMath","attrs":{"latex":"\\text{Earnings Per Share (EPS)} = \\frac{\\text{Net Income} - \\text{Preferred Dividends}}{\\text{Weighted Average Common Shares Outstanding}}"}}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall the definition of EPS."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand how EPS is calculated."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify the term that describes income per share."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q20. What is NOT a purpose of the statement of cash flows?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Statement of Cash Flows"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of the objectives of the statement of cash flows."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Statement of Cash Flows: Reports cash receipts and payments."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Income Statement: Reports revenues and expenses."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"List the purposes of the statement of cash flows: cash receipts/payments, predicting future cash flows, ability to pay dividends/interest."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which purpose is not related to cash flows (e.g., listing revenues and expenses)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall that revenues and expenses are reported on the income statement, not the cash flow statement."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q21. What does the statement of cash flows NOT report?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Statement of Cash Flows Content"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of what is included and excluded in the statement of cash flows."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Cash Receipts/Payments: Included."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Revenues/Expenses: Not included."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall what is reported: cash transactions, noncash investing/financing activities."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify what is not reported (e.g., revenues and expenses)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand the difference between cash flows and accrual accounting."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q22. How are increases and decreases in long-term assets from cash transactions reported on the statement of cash flows?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Cash Flow Classification"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of the classification of cash flows: operating, investing, financing."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Investing Activities: Involve long-term assets."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Operating Activities: Involve day-to-day operations."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall the three sections of the statement of cash flows."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which section deals with long-term assets."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand that buying/selling long-term assets is an investing activity."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q23. How is cash received from the issuance of common stock reported on the statement of cash flows?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Cash Flow Classification"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of how equity transactions are classified on the statement of cash flows."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Financing Activities: Include issuance of stock and borrowing."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Investing Activities: Include buying/selling assets."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall that financing activities involve changes in long-term liabilities and equity."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which section includes issuance of common stock."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand that cash received from stock issuance is a financing activity."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q24. Which item is classified as a financing activity on the statement of cash flows?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Cash Flow Classification"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to distinguish between operating, investing, and financing activities."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Financing Activities: Borrowing, repaying debt, issuing stock."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Investing Activities: Buying/selling assets."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"List examples of financing activities: issuing stock, borrowing cash, repaying loans."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which option involves a long-term liability or equity transaction."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand the distinction between investing and financing activities."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q25. Which item is classified as an investing activity on the statement of cash flows?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Cash Flow Classification"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of investing activities involving long-term assets."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Investing Activities: Buying/selling long-term assets."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Financing Activities: Borrowing, repaying, issuing stock."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"List examples of investing activities: purchasing equipment, selling land, collecting cash on long-term loans."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which option involves a long-term asset."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand the distinction between investing and financing activities."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q26. How is paying off bonds payable reported on the statement of cash flows?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Cash Flow Classification"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of how paying off long-term liabilities is classified."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Bonds Payable: Long-term liability."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Financing Activities: Include paying off bonds."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall that financing activities include changes in long-term liabilities."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which section includes paying off bonds."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand that paying off bonds is a financing activity."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q27. How is the issuance of stock for cash reported on the statement of cash flows?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Cash Flow Classification"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of how equity transactions are classified."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Issuance of Stock: Equity transaction."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Financing Activities: Include issuance of stock."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall that financing activities include changes in stockholders' equity."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which section includes issuance of stock."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand that cash received from stock issuance is a financing activity."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q28. How is selling equipment for cash reported on the statement of cash flows?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Cash Flow Classification"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of how asset sales are classified."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Selling Equipment: Long-term asset transaction."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Investing Activities: Include buying/selling assets."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recall that investing activities include buying/selling long-term assets."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which section includes selling equipment."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand that selling equipment is an investing activity."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q29. Which transaction does NOT affect cash during a period?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Cash Flow Transactions"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of which transactions impact cash flow."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Write-off of Uncollectible Account: Non-cash transaction."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Issuing Stock, Paying Payables, Purchasing Assets: Cash transactions."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"List which transactions involve cash movement."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which transaction is purely an accounting adjustment (no cash involved)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand that writing off an account does not affect cash."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q30. How do you calculate net cash provided by financing activities?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Cash Flow Calculation"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to calculate net cash from financing activities using given transactions."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Formula:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Net Cash from Financing = Cash Inflows from Financing - Cash Outflows from Financing"}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify all financing activities: repurchase of stock, issuance of bonds."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Calculate cash outflows (e.g., repurchase of stock)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Calculate cash inflows (e.g., issuance of bonds)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Combine inflows and outflows to find net cash provided by financing activities."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q31. How much cash should be reported as proceeds from sale of plant assets?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Cash Flow from Asset Sales"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to calculate cash proceeds from the sale of assets, considering book value and gain."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Formula:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Book Value = Cost - Accumulated Depreciation"}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Cash Proceeds = Book Value + Gain on Sale"}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Calculate the book value: "},{"type":"inlineMath","attrs":{"latex":"21,000 - 9,000"}},{"type":"text","text":"."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Add the gain on sale to the book value."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Sum to find the total cash received from the sale."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q32. How do you calculate net cash provided by investing activities?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Cash Flow Calculat