If $200,000 of New Bonds Are Issued During the Year

question 75

Multiple Choice

If $200,000 of new bonds are issued during the year and $120,000 of old bonds are retired during the year, the financing activities section of the statement of cash flows will show

• A)a net increase in cash of $80,000.
• B)a net decrease in cash of $80,000.
• C)an increase in cash of $200,000 and a decrease in cash of $120,000.
• D)a net gain on retirement of bonds of $80,000.

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Definitions:

Shutdown Point

The level of operations at which a business does not generate enough revenue to cover its variable costs, leading to a temporary or permanent cessation of production.

Average Variable Cost

The total variable costs of production divided by the quantity of output produced, representing the cost of producing one more unit of output.

Short Run

A period in economics where at least one input is fixed and cannot be changed, limiting the response of a firm to changes in demand or production.

Shutdown Point

The level of production and corresponding price at which a business's total revenue exactly equals its total variable costs, beyond which the business would start to incur losses.