Below Is Information for Toronto Imports Corp

question 198

Multiple Choice

Below is information for Toronto Imports Corp. for 2015 and 2016: At the end of 2016, Toronto issued bonds at par value for $800,000 cash. The proceeds from these bonds were used to retire the $500,000 bond issue outstanding at the end of 2015 before their maturity date. All interest expense was paid in cash during 2016.
The following statements describe how Toronto reported the cash flow effects of the items described above on its 2016 statement of cash flows. The indirect method is used to prepare the operating activities section. Which of the following has been reported incorrectly by Toronto?

• A) Proceeds of $800,000 from the issuance of bonds were reported as a cash inflow in the financing activities section.
• B) The loss on bond retirement of $15,000 was added to net income in the operating activities section.
• C) Payments of $560,000 were reported as a cash outflow in the investing activities section.
• D) Interest expense of $45,000 was not reported separately because it is included in net income in the operating activities section.

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Definitions:

World Price

The price at which a good can be bought or sold abroad.

Producer Surplus

A term often used to refer both to individual producer surplus and to total producer surplus.

International Trade

The exchange of goods, services, and capital between countries or territories, influenced by agreements, tariffs, and global economic policies.

Autarky Price

The price of a good or service within a country when it is completely self-sufficient and not engaged in international trade.