1. Uncertainties Such As Natural Disasters:

1. Uncertainties Such As Natural Disasters:

1. Uncertainties such as natural disasters:

Are not contingent liabilities because they are future events not arising out of past transactions or events

Are contingent liabilities because they are future events arising from past transactions or events

Should be disclosed because of their usefulness to financial statements

Are estimated liabilities because the amounts are uncertain

Arise out of transactions such as debt guarantees

 

2. A promissory note received from a customer in exchange for an account receivable:

Is a cash equivalent for the recipient

Is an account receivable for the recipient

Is a note receivable for the recipient

Is a short-term investment for the recipient

Is a note payable for the recipient

 

3. Amounts received in advance from customers for future products or services:

Are revenues

Increase income

Are liabilities

Are not allowed under GAAP

Require an outlay of cash in the future

 

4. Advance ticket sales totaling $6,000,000 cash would be recognized as follows:

Debit Sales, credit Unearned Revenue

Debit Unearned Revenue, credit Sales

Debit Cash, credit Unearned Revenue

Debit Unearned Revenue, credit Cash

 

5. The matching principle requires:

That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user

The use of the direct write-off method for bad debts

The use of the allowance method of accounting for bad debts

That bad debts be disclosed in the financial statements

That bad debts not be written off

 

6. If a company had net income of $2,379,600, interest expense of 234,000, a tax rate of 40%, and operating income of 4,200,000, what would the times interest earned ratio be for the company?

10.17

17.95

7.78

7.18

4.07

 

7. A company has net sales of $870,000 and average accounts receivable of $174,000. What is its accounts receivable turnover for the period?

0.20

5.00

20.0

73.0

1,825

 

8. A company had average total assets of $897,000. Its gross sales were $1,090,000 and its net sales were $1,000,000. The company’s total asset turnover is equal to:

0.82

0.90

1.09

1.11

1.26

 

9. Sales taxes payable:

Is an estimated liability

Is a contingent liability

Is a current liability for retailers

Is a business expense

Is a long-term liability

 

10. A machine originally had an estimated useful life of 5 years, but after 3 complete years, it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining:

2 years

5 years

7 years

8 years

10 years

 

11. On October 10, 2010, Printfast Company sells a commercial printer for $2,350 with a one year warranty that covers parts. Warranty expense is project to be 4% of sales. On February 28, 2011, the printer requires repairs. The cost of the parts for the repair is $80 and Printfast pays their technician $150 to perform the repair. What is the warranty liability at the end of 2010?

$49.00

$84.80

$94.00

$0, there is no liability at the end of 2010

$230.00

 

12. Most employees and employers are required to pay:

Local payroll taxes

State payroll taxes

Federal payroll taxes

Both B and C only

Local, state and federal payroll taxes

 

13. Liabilities:

Must be certain

Must sometimes be estimated

Must be for a specific amount

Must always have a definite date for payment

Must involve an outflow of cash

 

14. An employee earned $4,300 working for an employer. The current rate for FICA social security is 6.2% and the FICA Medicare rate is 1.45%. The employer’s total FICA payroll tax for this employee is:

$62.35

$266.60

$328.95

$657.90

 

15. A special bank account used solely for the purpose of paying employees, is created by depositing the amount of each employees’ net pay into the account every pay period. This account is referred to as a(n):

Federal depository bank account

Employee’s Individual Earnings account

Employees’ bank account

Payroll register account

Payroll bank account

 

16. A premium on common stock:

Is the amount paid in excess of par by purchasers of newly issued stock

Is the difference between par value and issue price when the amount paid is below par

Represents profit from issuing stock

Represents capital gain on sale of stock

Is prohibited in most states

 

17. The amount of income earned per share of a company’s common stock is known as:

Restricted retained earnings per share

Earnings per share

Continuing operations per share

Dividends per share

Book value per share

 

18. A company has net income of $850,000. It also has 125,000 weighted-average common shares outstanding and a market value per share of $115. The company’s price-earnings ratio is equal to:

16.9

14.7

92.0

13.5

8.0

 

19. A company issues at par 7% bonds with a par value of $500,000 on June 1, which is 5 months after the most recent interest date. How much total cash interest is received on May 1 by the bond issuer?

$0

$2,916.66

$100,000.00

$14,583.33

$35,000.00

 

20. A company’s board of directors’ votes to declare a cash dividend of $0.75 per share. The company has 15,000 shares authorized, 10,000 issued and 9,500 shares outstanding. The total amount of the cash dividend is:

$375

$4,125

$7,125

$7,500

$11,250

 

21. Bonds owned by investors whose names and addresses are recorded by the issuing company and for which interest payments are made with checks to the bondholders, are called:

Callable bonds

Serial bonds

Registered bonds

Coupon bonds

 

22. A company issues 9%, 20-year bonds with a par value of $750,000. The current market rate is 9%. The amount of interest owed to the bondholders for each semiannual interest payment is.

$0

$33,750

$67,500

$750,000

$1,550,000

 

23. A company borrowed $50,000 cash from the bank and signed a 6-year note at 7%. The present value factor for an annuity for 6 years at 7% is 4.7665. The annual annuity payments equal $10,490. The present value of the loan is:

$10,490

$11,004

$50,000

$52,450

 

24. Sinking fund bonds:

Require the issuer to set aside assets in order retire the bonds at maturity

Require equal payments of both principal and interest over the life of the bond issue

Decline in value over time

Are registered bonds

 

25. A dividend preference for preferred stock means that:

Preferred stockholders receive their dividends before common shareholders

Preferred shareholders are guaranteed dividends

Dividends are paid quarterly

Preferred stockholders prefer dividends more than common stockholders

Dividends must be declared on preferred stock

 

26. Bonds that have interest coupons attached to their certificates, which the bondholders detach during each interest period and present to a bank for collection, are called:

Coupon bonds

Callable bonds

Serial bonds

Convertible bonds

 

27. The Discount on Bonds Payable account is:

A liability

A contra liability

An expense

A contra expense

A contra equity

 

28. Shamrock Company had net income of $30,000. On January 1, there were 8,000 shares of common stock outstanding. On April 1, the company issued an additional 2,000 shares of common stock. There were no other stock transactions. The company has an earnings per share of:

$3.75

$3.00

$3.33

$15.00

$3.16

 

29. What is the debt to equity ratio for a company who has $700,000 in total liabilities and $3,500,000 in total equity?

20%

5

$2,100,000

2%

.5

 

30. A bond sells at a discount when the:

Contract rate is above the market rate

Contract rate is equal to the market rate

Contract rate is below the market rate

Bond has a short-term life

Bond pays interest only once a year

 

31. A company had a market price of $83.12 per share, earnings per share of $4.87 and dividends per share of $5.40. Its price-earnings ratio is equal to:

.056

.065

8.09

15.39

17.07

 

32. The measurement of key relations among financial statement items is known as:

Financial reporting

Horizontal analysis

Investment analysis

Ratio analysis

Risk analysis

 

33. One of several ratios that reflects solvency includes the:

Acid-test ratio

Current ratio

Times interest earned ratio

Total asset turnover

Days’ sales in inventory

 

34. Dividing ending inventory by cost of goods sold and multiplying the result by 365 is equal to the:

Inventory turnover ratio

Profit margin

Days’ sales in inventory

Current ratio

Total asset turnover

 

35. A company’s transactions with its creditors to borrow money and/or to repay the principal amounts of loans are reported as cash flows from:

Operating activities

Investing activities

Financing activities

Direct activities

Indirect activities

 

36. A company had net cash flows from operations of $120,000, total cash flows of $500,000 and average total assets of $2,500,000. The cash flow on total assets ratio equals:

4.8%

5.0%

20.0%

20.8%

24.0%

 

37. An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes is a(n):

Short-term marketable equity security

Operating activity

Common stock

Cash equivalent

Financing activity

 

38. The average number of times a company’s inventory is sold during an accounting period, calculated by dividing cost of goods sold by the average inventory balance is equal to the:

Accounts receivable turnover

Inventory turnover

Days’ sales uncollected

Current ratio

 

39. The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts, such as receipts from customers and subtracts the major items of operating cash disbursements, such as cash paid for merchandise is referred to as the:

Direct method of reporting net cash provided or used by operating activities

Cash basis of accounting

Classified statement of cash flows

Indirect method of reporting net cash provided or used by operating activities

Net method of reporting cash flows from operating activities

 

40. External users of financial information:

Are those individuals involved in managing and operating the company

Include internal auditors and consultants

Are not directly involved in operating the company

Make strategic decisions for a company

Make operating decisions for a company

 

41. Comparative financial statements in which each amount is expressed as a percentage of a base amount and in which the base amount is expressed as 100%, are called:

Comparative statements

Common-size comparative statements

General-purpose financial statements

Base line statements

Index statements

 

42. The ability to provide financial rewards sufficient to attract and retain financing is called:

Liquidity and efficiency

Solvency

Profitability

Market prospects

Creditworthiness

 

43. A company has a profit margin of 8%. If net income is equal to $40,000 and average total assets is equal to $332,500, how much are net sales?

$3,200

$500,000

$26,600

$4,156,250

$372,500

 

44. Internal users of financial information:

Are not directly involved in operating a company

Are those individuals involved in managing and operating the company

Include shareholders and lenders

Include directors and customers

Include suppliers, regulators and the press

 

45. A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:

$50,000

$5,000

$45,000

Zero. This is an operating activity

Zero. This is a financing activity

 

46. Accounting standards:

Allow companies to omit the statement of cash flows from a complete set of financial statements if cash is an insignificant asset

Require that companies omit the statement of cash flows from a complete set of financial statements if the company has no investing activities

Require that companies include a statement of cash flows in a complete set of financial statements

Allow companies to include the statement of cash flows in a complete set of financial statements if the cash balance makes up more than 50% of the current assets

Allow companies to omit the statement of cash flows from a complete set of financial statements if the company has no financing activities

 

47. A component of operating efficiency and profitability, calculated by expressing net income as a percent of net sales is equal to the:

Acid-test ratio

Merchandise turnover

Price earnings ratio

Accounts receivable turnover

Profit margin ratio

 

48. The statement of cash flows reports:

Assets, liabilities and equity

Revenues, gains, expenses and losses

Cash inflows and outflows for an accounting period

Equity, net income and dividends

Changes in equity

 

49. A company has a profit margin of 12%. If net income is equal to $450,000 and average total asset is equal to $600,500, how much are sales?

$1,050,500

$126,060

$72,060

$54,000

$3,750,000

 

50. Current assets divided by current liabilities is equal to the

Current ratio

Quick ratio

Debt ratio

Liquidity ratio

Solvency ratio

 

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