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:

T-statistic

A type of statistic used in hypothesis testing, calculated to determine the significance of certain variables or differences between means.

Level of Significance

A threshold of probability set before a study to determine when an observed effect is considered statistically significant, typically denoted by alpha.

Alpha

In statistics, the significance level defined as the probability of rejecting the null hypothesis when it is true.

Critical Value

A point on the scale of a test statistic beyond which we reject the null hypothesis, often associated with the desired significance level of a test.