Indicate Whether Each of the Following Statements Is True or False

question 14

Short Answer

Indicate whether each of the following statements is true or false:
1. A cash payment for principal of a note payable is an asset use transaction
2. When a company issues a promissory note, it should recognize a cash flow from financing activities
3. The cash payment for interest on a note payable is reported on the statement of cash flows as a cash outflow from operating activities
4. A cash payment for principal of a note payable is reported on the statement of cash flows as a cash outflow from investing activities
5. The year-end adjusting entry to accrue interest on a note payable is an asset use transaction

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Definitions:

Specialization of Labor

An economic strategy where individuals or groups focus on producing a limited range of goods or services to increase efficiency and output.

Marginal Cost

The expense involved in creating one more unit of a product or service.

Constant Returns to Scale

A situation in which output increases by the same proportion as inputs when the scale of production is changed.

Long-run Average Total Cost

The average total cost when all factors of production are variable and economies of scale are fully exploited, indicating the lowest possible cost per unit.