Accounting Multiple Choice Questions Accounting quetions Q1. Given the following list of accounts, calculate Total Assets: Accounts... Description Accounting quetions Q1. Given the following list of a

Accounting Multiple Choice Questions

Accounting quetions Q1. Given the following list of accounts, calculate Total Assets: Accounts...

Description

Accounting quetions

Q1. Given the following list of accounts, calculate Total Assets:Accounts Receivable 5,000Capital Stock 20,000Cash 19,300Equipment 15,400Fees Earned 44,400Miscellaneous Expense 18,200Rent Expense 4,150Retained Earnings 6,550Wages Expense 13,900a. $84,100b. $59,700c. $46,250d. $39,700Q2. A low-cost emphasis strives to providea. no-frills, standardized products and services.b. products and services that provide unique market needs.c. products and services that provide prestige and image for customers.d. products and services that compete on features other than price.Q3. Capital market stakeholders have an interest in the company becausea. they provide incentives for the company to market their products.b. they are part of the Marketing Department that is responsible for promoting the products or services toincrease the business profits.c. they help market their products to customers or find vendors to supply needed inputs.d. they provide major financing for the business.Q4. A note payable requires payment of the amount borrowed plusa. interest.b. cash.c. accounts payable.d. investments.Q5. What is the primary objective of most businesses?a. To maximize profitsb. To pay dividends to stockholdersc. To provide a benefit to societyd. To manufacture a quality productQ6. Which principle determines the amount initially entered into the records for purchases?a. Cost principleb. Going concern conceptc. Business entity conceptd. Objectivity conceptQ7. The ‘rules’ of accounting are calleda. income tax regulations.b. SEC regulations.c. Internet rules.d. Generally Accepted Accounting Principles.Q8. Cash investments made by the stockholders of the business are reported on the statement of cashflows in thea. financing activities section.b. investing activities section.c. operating activities section.d. supplemental statement.Q9. Including all relevant data a reader needs to understand the financial condition and performance ofa business refers to which concept?a. Adequate disclosure conceptb. Going concern conceptc. Objectivity conceptd. Business entity conceptQ10. When a product is sold, this cost is often calleda. cost of goods sold.b. revenue.c. products.d. retained earnings.Q11. Under a premium-price emphasis, a business designs products that possess _____ for whichcustomers are willing to pay a premium price.a. unique attributesb. high costsc. competitive efficienciesd. longer warrantiesQ12. Which of the following is TRUE in regards to a limited liability company?a. It is organized as a corporation.b. It can elect to be taxed as a partnership.c. It provides tax and liability advantages to the owners.d. All are correct.Q13. Assets are acquired through investing activities when resources are purchased.a. trueb. falseQ14. Which of the following is an example of an intangible asset?a. Patentb. Cashc. Landd. EquipmentQ15. Costs incurred in operating a business are also known asa. revenues.b. expenses.c. liabilities.d. dividends.Q16. Accounting is thought to be the ‘language of business’ because business information iscommunicated to stakeholders.a. trueb. falseQ17. Who has first preference to assets in case a business fails?a. Stockholdersb. Long-term creditorsc. Customersd. EmployeesQ18. Merchandising businesses produce products rather than provide services to customers.a. trueb. falseQ19. Companies using a low-cost emphasis provide products and services that compete on featuresother than price.a. trueb. falseQ20. Shares of ownership are evidenced by issuinga. bonds payable.b. commercial paper.c. shares of stock.d. notes payable.Q21. Expressing financial data as if a business will continue operating for an indefinite period timerefers to which concept?a. Business entity conceptb. Going concern conceptc. Objectivity conceptd. Adequate disclosure conceptQ22. A partnership is owned by two or more individuals.a. trueb. falseQ23. Stockholders in a corporation are internal stakeholders.a. trueb. falseQ24. The Balance Sheet represents the accounting equation.a. trueb. falseQ25. Financing activities involve obtaining _____ to operate a business.a. productsb. customersc. business incentivesd. fundsQ26. Expenses can be defined asa. assets consumed.b. services used in the process of generating revenues.c. costs that have been incurred during the normal course of business.d. all of these.Q27. Which of the following transactions changes the mix of assets only?a. Paid for supplies with cashb. Borrowed money from Second National Bankc. Received money for fees earnedd. Received a utility billQ28. A to Z Corporation engaged in the following transaction ‘Purchased a building for $80,000 cash.’On the Statement of Cash Flows, the transaction would be classified asa. Cash Flows from Operating Activities.b. Cash Flows from Investing Activities.c. Cash Flows from Financing Activities.d. Noncash transaction.Q29. For EFG Co., the transaction ‘Purchase of store equipment with a note payable’ woulda. increase total assets.b. decrease total assets.c. have no effect on total assets.d. decrease total liabilities.Q30. A to Z Corporation engaged in the following transaction ‘Paid a $10,000 cash dividend.’ On theStatement of Cash Flows, the transaction would be classified asa. Cash Flows from Operating Activities.b. Cash Flows from Investing Activities.c. Cash Flows from Financing Activities.d. Noncash transaction.Q31. Which of the following group of accounts are all assets?a. Cash, Accounts Payable, Buildingsb. Accounts Receivable, Revenue, Cashc. Prepaid Expenses, Buildings, Patentsd. Unearned Revenues, Prepaid Expenses, CashQ32. For EFG Co., the transaction ‘Receipt of a utility bill’ woulda. increase total assets.b. decrease total assets.c. have no effect on total assets.d. decrease total liabilities.Q33. The effect of every transaction is an increase or a decrease in one or more of the accountingequation elements.a. trueb. falseQ34. Gibbs Company has $16,000 in Retained Earnings, $27,000 in Assets, and $5,000 in Liabilities.How much is in Common Stock?a. $22,000b. $16,000c. $11,000d. $6,000Q35. The payment of utilities expense in cash would affect the operating activities in the statement ofcash flows and the income statement but NOT the balance sheet.a. trueb. falseQ36. The basic financial statements do NOT include thea. income statement.b. tax return.c. balance sheet.d. statement of cash flows.Q37. Dividends are an example of an expense.a. trueb. falseQ38. It is possible for a transaction to change the makeup of assets, but to NOT affect assets in total.a. trueb. falseQ39. Johnson, Inc. issued $15,000 in capital stock in exchange for cash. What is the effect of thistransaction?a. Total assets remain unchanged.b. Cash flow from Financing Activities will increase.c. Net Income will increase.d. Total Retained Earnings will increase.Q40. The statement of cash flows is integrated with the balance sheet becausea. the cash at the beginning of the period plus or minus the cash flows from operating, investing, andfinancing activities equals the end of period cash reported on the balance sheet.b. the cash at the beginning of the period plus or minus the net income equals the end of period cashreported on the balance sheet.c. the cash at the beginning of the period plus or minus assets and liabilities equals the end of period cashreported on the balance sheet.d. the cash at the beginning of the period plus or minus the cash flows from operating activities equals theend of period cash reported on the balance sheet.Q41. A _____ is an economic event that under generally accepted accounting principles affects anelement of the financial statements and must be recorded.a. frameworkb. controlc. set of rulesd. transactionQ42. Philip Corporation purchased equipment on account. What is the effect of this transaction?a. Cash will decrease and equipment will increase.b. Total assets will remain unchanged.c. Cash flow from Investing Activities will decrease.d. Total assets and total liabilities will both increase.Q43. By keeping a running total of the effects of transactions, the accounting equation provides aframework for summarizing the effects of a series of transactions.a. trueb. falseQ44. For EFG Co., the transaction ‘Receipt of interest income’ woulda. increase total assets.b. decrease total assets.c. have no effect on total assets.d. decrease total liabilities.Q45. Johnson, Inc. purchased land for cash. What effect does this transaction have on the followingaccounts:a. Increase in Cash and decrease in Landb. Decrease in Cash and decrease in Landc. Increase in Cash and increase in Landd. Decrease in Cash and increase in LandQ46. A to Z Corporation engaged in the following transaction ‘Issued a $30,000 note payable to borrowcash from the bank.’ On the Statement of Cash Flows, the transaction would be classified asa. Cash Flows from Operating Activities.b. Cash Flows from Investing Activities.c. Cash Flows from Financing Activities.d. Noncash transaction.Q47. The accounting equation can be expressed: Assets – Liabilities = Revenues.a. trueb. falseQ48. The first month of operation showed the net cash from operating activities to be $3,760, the netcash from investing activities to be ($5,415), and the ending cash balance to be $3,425. The net cashfrom financing activities must bea. $1,770.b. $5,080.c. $5,750.d. $12,600.Q49. Hodges, Inc. had the following assets and liabilities as of September 30, 2011:Assets $56,327Liabilities $28,416If assets increased by $3,914 and equity increased by $2,290, what is the increase or decrease inliabilities of Hodges as of October 31, 2011?a. ($1,624)b. $1,624c. $6,204d. ($6,204)Q50. For EFG Co., the transaction ‘Billed a customer for fees earned’ woulda. increase total assets.b. decrease total assets.c. have no effect on total assets.d. increase total liabilities.Q51. On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale ofinvestments would bea. deducted from net income in converting the net income reported on the income statement to cash flowsfrom operating activities.b. added to net income in converting the net income reported on the income statement to cash flows fromoperating activities.c. added to cash received from the sale to determine cash flows from investing activities.d. deducted from cash received from the sale to determine cash flows from investing activities.Q52. It is easy to objectively determine the physical decline in the ability of fixed assets to provideservice.a. trueb. falseQ53. On June 1, Green Pea, Inc. purchased $1,200 worth of supplies on account. Prior to the purchase,the balance in the supplies account was $0. On December 31, the fiscal year-end for Green Pea, it isdetermined that $500 of supplies have been used up. What is the balance in the supplies account afteradjustment?a. $0b. $700c. $500d. $1,200Q54. When an adjusting entry is made to record insurance expense and reduce the prepaid insuranceaccount, which section of the statement of cash flows is affected?a. Cash Flow from Operating Activitiesb. Cash Flow from Investing Activitiesc. Cash Flow from Financing Activitiesd. There is no effect on the statement of cash flows.Q55. Updating accrual accounting records prior to preparing financial statements is calleda. the closing process.b. converting to cash basis accounting.c. the adjustment process.d. going concern adjustments.Q56. Accrued expenses are ordinarily reported on the balance sheet asa. assets.b. liabilities.c. fixed assets.d. prepaid expenses.Q57. Under the cash basis of accounting, a business records only transactions involving increases ordecreases of its cash.a. trueb. falseQ58. Accrued expenses are expenses that have been incurred and paid.a. trueb. falseQ59. Physical assets of a long-term nature are referred to as fixed assets.a. trueb. falseQ60. Which of the following is an example of a deferred expense?a. Prepaid advertisingb. Unearned revenuec. Accounts payabled. Accounts receivableQ61. Under the accrual basis of accounting, the accounting records are normally updated after thepreparation of the financial statements.a. trueb. falseQ62. Fees receivable would appear on the balance sheet as a(n)a. asset.b. liability.c. fixed asset.d. unearned revenue.Q63. If prepaid insurance expires over time, this asset account becomes a(n)a. liability.b. another asset.c. revenue.d. expense.Q64. Cash receipts from interest and dividends are classified asa. investing activities.b. operating activities.c. either financing or investing activities.d. financing activities.Q65. Under the cash basis of accounting, no adjustments are necessary prior to the preparation of thefinancial statements.a. trueb. falseQ66. As time passes, fixed assets, other than land, lose their capacity to provide useful services. Toaccount for this decrease in usefulness, the cost of fixed assets is systematically allocated to expensethrough a process calleda. equipment allocation.b. depreciation.c. accumulation.d. matching.Q67. Current assets are assets that are expected to be converted to cash, sold or used up within 6months.a. trueb. falseQ68. To arrive at cash flows from operations, it is necessary to convert the income statement from anaccrual basis to the cash basis of accounting.a. trueb. falseQ69. The accrual basis recognizes liabilities at the time the business incurs the obligation to pay for theservices or goods purchased.a. trueb. falseQ70. Deferred revenues (unearned revenues) are items initially recorded as liabilities, but expected tobecome _____ over time.a. liabilitiesb. assetsc. revenuesd. expensesQ71. Which transaction would be recorded in a cash basis system of accounting?a. Purchase of equipment on creditb. Purchase of supplies on creditc. Sale of goods on creditd. Sale of goods for cashQ72. The balance in the office supplies account on June 1 was $5,200, supplies purchased during Junewere $2,500, and the supplies on hand at June 30 were $1,500. The amount to be used for theappropriate adjusting entry isa. $6,700.b. $2,500.c. $9,200.d. $6,200.Q73. If land costing $75,000 was sold for $135,000, the amount reported in the investing activitiessection of the statement of cash flows would be $135,000.a. trueb. falseQ74. ‘Brand name’ recognition is an example of goodwill.a. trueb. falseQ75. Flyer Co. billed a client for flying lessons given in January. The payment was received in February.Under the accrual basis of accounting, when should Jedi record the revenue?a. Januaryb. Februaryc. Some in January and some in Februaryd. Jedi should not record any revenueQ76. If merchandise costing $2,500, terms FOB destination, 2/10, n/30, with transportation costs of$100, is paid within 10 days, the amount of the purchases discount is $52.a. trueb. falseQ77. If title to merchandise purchases passes to the buyer when the goods are shipped from the seller,the terms area. n/30.b. FOB shipping point.c. FOB destination.d. consigned.Q78. When merchandise is purchased to resell to customers, it is recorded in the account entitleda. Supplies.b. Cost of Goods Sold.c. Merchandise Inventory.d. Sales.Q79. Merchandise inventory shrinkage will increase Merchandise Inventory.a. trueb. falseQ80. Gross profit is determined by subtracting the cost of merchandise sold from what?a. The cost of merchandise purchasedb. Fees earnedc. Accounts receivabled. Net salesQ81. On the income statement, sales discounts are normally deducted from sales to yield the cost ofmerchandise sold.a. trueb. falseQ82. Which term indicates that merchandise is free of transportation charges to the buyer?a. FOB destinationb. Transportation outc. FOB shipping pointd. Transportation inQ83. Which of the following should be shown on a statement of cash flows under the financing activitysection?a. The purchase of a long-term investment in the common stock of another companyb. The payment of cash to retire a long-term notec. The proceeds from the sale of a buildingd. The issuance of a long-term note to acquire landQ84. Which of the following would NOT affect the operating activities section of the statement of cashflows, using the indirect method?a. Decrease in merchandise inventoryb. Payment on a note payablec. Decrease in unearned rentd. Depreciation expenseQ85. If the buyer is to pay the delivery expense of delivering merchandise, delivery terms are stated asa. FOB shipping point.b. FOB destination.c. FOB n/30.d. FOB buyer.Q86. A sale of $600 on account subject to a sales tax of 5% would increase account receivable by$570.a. trueb. falseQ87. A sales invoice included the following information: merchandise price, $5,000; terms 1/10,n/eom. Assuming that a credit for merchandise returned of $600 is granted prior to payment, and thatthe invoice is paid within the discount period, what is the amount of cash received by the seller?a. $4,656b. $4,400c. $4,356d. $4,950Q88. Cost of Merchandise Sold is used in accounting for transactions by sellers of merchandise.a. trueb. falseQ89. Investing activities includea. collecting cash on loans made.b. obtaining cash from creditors.c. obtaining capital from owners.d. repaying money previously borrowed.Q90. Multiple-step income statements show:a. gross profit but not income from operations.b. neither gross profit nor income from operations.c. both gross profit and income from operations.d. income from operations but not gross profit.Q91. When purchases of merchandise are made for cash, the transactiona. increases Cash; decreases Merchandise Inventory.b. increases Merchandise Inventory; decreases Cash.c. increases Merchandise Inventory; decreases Cash Discounts.d. increases Merchandise Inventory; decreases Purchases.Q92. What is subtracted from sales to arrive at net sales?a. Sales returns and allowancesb. Sales discountsc. Both sales discounts and sales returns and allowancesd. Neither sales discounts nor sales returns and allowancesQ93. To determine cash payments for operating expenses for the cash flow statement using the directmethod, a decrease in prepaid expenses is added to operating expenses other than depreciation.a. trueb. falseQ94. Using a perpetual inventory system, the purchase of $30,000 of merchandise on account wouldinclude a(n)a. increase in Sales.b. increase in Merchandise Inventory.c. decrease in Merchandise Inventory.d. decrease in Sales.Q95. Using the indirect method for preparing the statement of cash flows, what is the net cash flowfrom operating activities if net income is $39,000; depreciation expense is $9,000; and the decrease inaccounts payable is $5,000.a. $48,000b. $53,000c. $35,000d. $43,000Q96. Gold Co. sold merchandise to Bronze Co. on account, $25,000, terms 2/15, net 45. The cost of themerchandise sold is $18,500. Gold Co. issued a credit memorandum for $2,500 for merchandisereturned that originally cost $1,900. Bronze Co. paid the invoice within the discount period. What isamount of net sales from the transactions?a. $22,500b. $22,000c. $5,450d. $22,050Q97. Discounts taken by the buyer for early payment of an invoice are called purchases discounts bythe buyer.a. trueb. falseQ98. When the seller offers a sales discount, even if borrowing has to be done, it is generallyadvantageous for the buyer to pay within the discount period.a. trueb. falseQ99. Inventory NOT sold at the end of the period is reported asa. cost of goods sold.b. old stock.c. merchandise inventory.d. net purchases.Q100. Based on the following information, what would be recorded as purchases discount if the invoiceis paid within the discount period?1. $5,000 of merchandise inventory was ordered on April 2, 2010.2. $2,000 of this merchandise was received on April 5, 2010.3. On April 6, 2010, an invoice dated April 4, 2010, with terms of 2/10, net 30for $2,150 which included a $150 prepaid freight cost, was received.4. On April 10, 2010, $500 of the merchandise was returned to the seller.a. $100b. $30c. $43d. $33

Q1. The maturity value of a 12%, 60-day note for $1,000 is $1,020.a. trueb. falseQ2. Calculate the cost of ending inventory using FIFO inventory cost method.1/1 Beginning inventory 10 units @ $10 per unit2/28 Purchases 40 units @ $12 per unit5/10 Purchases 50 units @ $14 per unit9/20 Purchases 30 units @ $16 per unit12/31 Ending inventory 50 unitsa. $800b. $760c. $580d. $500Q3. A note receivable due in 90 days is listed on the balance sheet undera. long-term liabilities.b. fixed assets.c. current liabilities.d. current assets.Q4. During inflationary periods, the use of the FIFO method of costing inventory will result in a greateramount of net income than would result from the use of the LIFO cost method.a. trueb. falseQ5. Allowance for Doubtful Accounts is a contra-equity account.a. trueb. falseQ6. During deflationary periods, the use of the LIFO method of costing inventory will result in a greateramount of net income than would result from the use of the FIFO method.a. trueb. falseQ7. Allowance for Doubtful Accounts has an unadjusted balance of $500 at the end of the year, anduncollectible accounts expense is estimated at 1% of net sales. If net sales are $950,000, the amountof the adjustment to record the provision for doubtful accounts isa. $9,500.b. $500.c. $8,500.d. $9,000.Q8. The due date of a 90-day note dated July 5 isa. September 30.b. October 2.c. October 3.d. October 1.Q9. The difference between the total receivables and the balance in Allowance for Doubtful Accounts atthe end of a period is referred to as the net realizable value of the accounts receivable.a. trueb. falseQ10. The due date on a 90-day note dated June 10 is September 8.a. trueb. falseQ11. Cost is a method of inventory valuation.a. trueb. falseQ12. The estimate based on the sales method violates the matching principle.a. trueb. falseQ13. The party promising to pay a note at maturity is the payee.a. trueb. falseQ14. Allowance for Doubtful Accounts has an unadjusted balance of $500 at the end of the year, and ananalysis of accounts in the customers ledger indicates doubtful accounts of $15,000. Which of thefollowing records the proper provision for doubtful accounts?a. Increase Uncollectible Accounts Expense, $14,500; increase Allowance for Doubtful Accounts, $14,500b. Increase Uncollectible Accounts Expense, $15,000; increase Allowance for Doubtful Accounts, $15,000c. Increase Uncollectible Accounts Expense, $14,000; increase Allowance for Doubtful Accounts, $14,000d. Increase Uncollectible Accounts Expense, $15,500; increase Allowance for Doubtful Accounts, $15,500Q15. Allowance for Doubtful Accounts has an unadjusted balance of $800 at the end of the year, and ananalysis of accounts in the customers ledger indicates doubtful accounts of $15,000. Which of thefollowing records the proper provision for doubtful accounts?a. Increase Uncollectible Accounts Expense, $800; increase Allowance for Doubtful Accounts, $800b. Increase Uncollectiable Accounts Expense $15,000; increase Allowance for Doubtful Accounts, $15,000c. Increase Uncollectible Accounts Expense, $14,200; increase Allowance for Doubtful Accounts, $14,200d. Increase Uncollectible Accounts Expense, $15,800; increase Allowance for Doubtful Accounts, $15,800Q16. The inventory method that considers the inventory to be composed of the units of merchandiseacquired earliest is calleda. first-in, first-out.b. retail method.c. average cost.d. last-in, first-out.Q17. Use the following data to calculate cost of merchandise sold under FIFO method.September 1 Beginning Inventory 15 units @ $20September 10 Purchases 20 units @ $25September 20 Purchases 25 units @ $28September 30 Ending Inventory 30 unitsa. $825b. $750c. $675d. $600Q18. Under which method of inventory cost flows is the cost flow assumed to be in the reverse order inwhich the expenditures were made?a. Average costb. Last-in, first-outc. First-in, first-outd. Last-in, last-outQ19. The amount of the promissory note plus the interest earned on the due date is called thea. realizable value.b. maturity value.c. face value.d. net realizable value.Q20. Use the following data to calculate the cost of ending inventory using the LIFO method.September 1 Beginning Inventory 15 units @ $20September 10 Purchases 20 units @ $25September 20 Purchases 25 units @ $28September 30 Ending Inventory 30 unitsa. $825b. $750c. $675d. $600Q21. At the end of a period before the accounts are adjusted, Allowance for Doubtful Accounts has abalance of $250, and net sales on account for the period total $500,000. If uncollectible accountsexpense is estimated at 1% of net sales on account, the current provision to be made for uncollectibleaccounts expense is $4,997.50.a. trueb. falseQ22. The balance of the allowance for doubtful accounts is deducted from accounts receivable on thebalance sheet.a. trueb. falseQ23. The lower of cost or market is a method of inventory valuation.a. trueb. falseQ24. Inventories of merchandising and manufacturing businesses are reported as current assets on thebalance sheet.a. trueb. falseQ25. Of the three widely used inventory costing methods (FIFO, LIFO, and average), the FIFO methodof costing inventory is based on the assumption that costs are charged against revenues in the order inwhich they were incurred.a. trueb. falseQ26. A company acquired some land for $80,000 to construct a new office complex. Legal fees paidwere $2,300, delinquent taxes assumed were $3,400, and $5,850 was paid to remove an old buildingfrom which salvaged materials sold for $1,950. What is the cost basis for the land?a. $93,500b. $91,550c. $85,700d. $89,600Q27. A fully depreciated asset must bea. removed from the books.b. kept on the books until sold or discarded.c. disclosed only in the notes to the financial statements.d. recognized on the income statement as a loss.Q28. A machine was purchased for $60,000. It has a useful life of 5 years and a residual value of$6,000. Under the straight-line method, what is annual depreciation expense?a. $13,200b. $12,000c. $11,000d. $10,800Q29. If a fixed asset with an original cost of $18,000 and accumulated depreciation of $2,000 is soldfor $15,000, the company musta. recognize a loss on the income statement under other expenses.b. recognize a loss on the income statement under operating expenses.c. recognize a gain on the income statement under other revenues.d. Gains and losses are not to be recognized upon the sell of fixed assets.Q30. The acquisition costs of property, plant, and equipment should include all normal, reasonable, andnecessary costs to get the asset in place and ready for use.a. trueb. falseQ31. Amortization refers to the systematic transfer of fixed assets to expense accounts.a. trueb. falseQ32. The Drilling Company purchased a mining site for $500,000 on July 1, 2010. The company expectsto mine ore for the next 10 years and anticipates that a total of 100,000 tons will be recovered. Theestimated residual value of the property is $80,000. During 2010 the company extracted 6,500 tons ofore. The depletion expense for 2010 isa. $37,700.b. $42,000.c. $32,500.d. $27,300.Q33. Fixed assets are ordinarily presented in the balance sheeta. at current market values.b. at replacement costs.c. at cost less accumulated depreciation.d. in a separate section along with intangible assets.Q34. Goodwill isa. amortized similar to other intangibles.b. only written down if an impairment in value occurs.c. charged to expense immediately.d. amortized over 40 years or its economic life, whichever is shorter.Q35. The Accumulated Depreciation account is deducted from the cost of fixed assets on the balancesheet.a. trueb. falseQ36. Depreciable cost equalsa. cost less accumulated depreciation.b. book value less residual value.c. cost less residual value.d. market value less residual value.Q37. A machine with a useful life of 10 years and a residual value of $4,000 was purchased for$30,000. What is annual depreciation under the straight-line method?a. $3,000b. $3,400c. $2,600d. $5,200Q38. The removal of an old building to make the land ready for its intended use is charged toa. land.b. land improvements.c. buildings.d. operating expenses.Q39. A patent was purchased for $670,000 with a legal life of 20 years. Management estimates that thepatent has an 12-year economic life. The entry to record amortization would includea. an increase in amortization expense for $33,500.b. an increase in research and development expense for $670,000.c. a decrease in patent for $55,833.d. an increase in accumulated amortization for $670,000.Q40. Physical depreciation occurs when a fixed asset is no longer able to provide services at the levelfor which it was intended.a. trueb. falseQ41. If an asset is discarded, a loss is recognized equal to the salvage value.a. trueb. falseQ42. What type of depreciation occurs when an asset can no longer provide services at the leveloriginally intended?a. Physical depreciationb. Market depreciationc. Cost depreciationd. Functional depreciationQ43. The cost of a patent should be amortizeda. over 20 years.b. over its economic life.c. over 20 years or its economic life, whichever is shorter.d. only if an impairment occurs.Q44. Which of the following expenditures would NOT be included in the cost of an asset?a. Freight costsb. Vandalismc. Sales taxd. Surveying feesQ45. Accelerated depreciation is primarily used fora. the financial statements of large companies.b. the financial statements of small companies.c. income tax purposes.d. both financial reporting and income taxes by most companies.Q46. The exclusive right to use a certain name or symbol is called aa. franchise.b. patent.c. trademark.d. copyright.Q47. The double-declining-balance method of depreciation is referred to as an accelerated method.a. trueb. falseQ48. When selling a piece of equipment for cash, a loss will result when the proceeds of the sale aregreater than the book value of the asset.a. trueb. falseQ49. Intangible assets are used in operations buta. cannot be specifically identified.b. cannot be sold.c. lack physical substance.d. cannot be long-lived.Q50. All amounts paid to get an asset in place and ready for use are referred to asa. capital expenditures.b. revenue expenditures.c. residual value.d. cost of an asset.Q51. The par value per share of common stock representsa. the minimum selling price of the stock established by the articles of incorporation.b. the minimum amount the stockholder will receive when the corporation is liquidated.c. the monetary amount assigned to each share of stock in the articles of incorporation.d. the amount of dividends per share to be received each year.Q52. Cash dividends are not paid on shares of treasury stock.a. trueb. falseQ53. A corporation has 10,000 shares of $100 par value stock outstanding that has a current marketvalue of $160. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall toapproximately $32.a. trueb. falseQ54. If 20,000 shares are authorized, 15,000 shares are issued, and 500 shares are reacquired, thenumber of outstanding shares is 19,500.a. trueb. falseQ55. A 10% stock dividend will increase the number of shares outstanding and the book value pershare.a. trueb. falseQ56. When the contract rate of interest on bonds is higher than the market rate of interest, the bondssell ata. a premium.b. their face value.c. their maturity value.d. a discount.Q57. Current liabilities area. due and receivable within one year.b. due and to be paid out of current assets within one year.c. due but not payable for more than one year.d. payable if a possible subsequent event occurs.Q58. The charter of a corporation provides for the issuance of 100,000 shares of common stock.Assume that 40,000 shares were originally issued and 5,000 were subsequently reacquired. What isthe number of shares outstanding?a. 5,000b. 35,000c. 45,000d. 55,000Q59. For accounting purposes, stated value is treated the same way as par value.a. trueb. falseQ60. Which of the following accounts is reported in the noncurrent liabilities section of the corporatebalance sheet?a. Bonds Payableb. Common Stockc. Dividends Payabled. CashQ61. If $4,000,000 of 12% bonds are issued at 103 1/4, the amount of cash received from the sale isa. $4,040,000.b. $4,000,000.c. $4,130,000.d. $3,520,000.Q62. The charter of a corporation provides for the issuance of 100,000 shares of common stock.Assume that 75,000 shares were originally issued and 5,000 were subsequently reacquired. What isthe number of shares outstanding?a. 10,000b. 70,000c. 50,000d. 60,000Q63. The excess of issue price over par of common stock is termed a(n)a. discount.b. income.c. deficit.d. premium.Q64. The interest rate specified in the bond indenture is called thea. discount rate.b. contract rate.c. market rate.d. effective rate.Q65. A current liability is a debt that can reasonably be expected to be paida. between 6 months and 18 months.b. out of currently recognized revenues.c. within one year.d. out of cash currently on hand.Q66. Obligations that depend on past events and that are based on future transactions are contingentliabilities.a. trueb. falseQ67. FICA tax is a payroll tax that is paid only by employers.a. trueb. falseQ68. When a corporation issues bonds, it executes a contract with the bondholders known as a bondindenture.a. trueb. falseQ69. A corporation has 10,000 shares of $100 par value stock outstanding. If the corporation issues a4-for-1 stock split, the number of shares outstanding after the split will be 40,000.a. trueb. falseQ70. When the market rate of interest is less than the contract rate for a bond, the bond will sell for adiscount.a. trueb. falseQ71. If 50,000 shares are authorized, 37,000 shares are issued, and 2,000 shares are reacquired, thenumber of outstanding shares is 35,000.a. trueb. falseQ72. Bonds are sold at face value when the contract rate is equal to the market rate of interest.a. trueb. falseQ73. The total earnings of an employee for a payroll period is referred to as the net pay.a. trueb. falseQ74. If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interestsemiannually would sell at an amounta. less than face value.b. equal to the face value.c. greater than face value.d. that cannot be determined.Q75. Federal unemployment compensation tax is a tax that is paid only by employers.a. trueb. falseQ76. The Sarbanes-Oxley Act of 2002 requires companies to maintain strong and effective internalcontrols over recording transactions and preparing financial statements.a. trueb. falseQ77. A credit memorandum received with a bank statement means the bank account has beenincreased.a. trueb. falseQ78. For efficiency of operations and better control over cash, a company should maintain only onebank account.a. trueb. falseQ79. Employee fraud is the intentional act of deceiving an employer for personal gain.a. trueb. falseQ80. Money market accounts, commercial paper, and U.S. Treasury Bills are examples of cashequivalents.a. trueb. falseQ81. Outstanding checks are checks that have been issued but have NOT cleared the bank.a. trueb. falseQ82. In a voucher system, paid vouchers are transferred to a paid voucher file.a. trueb. falseQ83. A voucher is the notification accompanying the check issued to a creditor that indicates thespecific invoice being paid.a. trueb. falseQ84. A voucher is a written authorization to make a cash payment.a. trueb. falseQ85. Which of the following elements of internal control focuses upon locating weaknesses andimproving control effectiveness?a. The control environmentb. Risk assessmentc. Control proceduresd. MonitoringQ86. Money orders are considered cash.a. trueb. falseQ87. A special cash fund used to make small payments that occur frequently is called a(n)a. operating expenses fund.b. change fund.c. market fund.d. petty cash fund.Q88. Internal control does NOT consist of policies and procedures thata. guarantee the company will not go bankrupt.b. ensure that laws and regulations are being followed.c. protect assets from misuse.d. ensure that business information is accurate.Q89. The internal control environment is enhanced by the hiring and retention of competent, honestemployees.a. trueb. falseQ90. In preparing a bank reconciliation, the amount of deposits in transit is deducted from the balanceper bank statement.a. trueb. falseQ91. Depositing all cash, checks, etc. in a bank and paying with checks is an internal control procedureover cash.a. trueb. falseQ92. The objectives of internal control are toa. control the internal organization of the accounting department personnel and equipment.b. provide reasonable assurance that assets are safeguarded, information is processed accurately, and lawsand regulations are complied with.c. prevent fraud and promote the social interest of the company.d. provide control over ‘internal-use only’ reports and employee internal conduct.Q93. When a firm uses internal auditors, it is adhering to which of the following internal controlelements?a. Risk assessmentb. Proofs and security measuresc. Monitoringd. Separating responsibilities for related operationsQ94. The bank often informs the depositor of bank service charges by including a debit memorandumwith the monthly bank statement.a. trueb. falseQ95. The bank reconciliationa. should be prepared by an employee who records cash transactions.b. is part of the internal control system.c. is for information purposes only.d. is sent to the bank for verification.Q96. Internal controls are important because theya. prevent fraud and misleading financial statements.b. eliminate fraud.c. deter fraud and prevent theft and other abuses.d. guarantee accurate financial statements.Q97. There are two internal control objectives: to ensure accurate financial reports, and to ensurecompliance with applicable laws.a. trueb. falseQ98. A check for $456 was erroneously charged by the bank as $654. In order for the bankreconciliation to balance, you must deduct $198 from the bank statement balance.a. trueb. falseQ99. A voucher is a form where pertinent data about a liability and the particulars of its payment arerecorded.a. trueb. falseQ100. Internal control is enhanced by combining the control of a transaction with the record-keepingfunction.a. trueb. false

Q1. The relevant range is useful for analyzing cost behavior for management decision-makingpurposes.a. trueb. falseQ2. Which of the following conditions would cause the break-even point to increase?a. Total fixed costs decreaseb. Unit selling price increasesc. Unit variable cost decreasesd. Unit variable cost increasesQ3. Break-even analysis is one type of cost-volume-profit analysis.a. trueb. falseQ4. If employees accept a wage contract that decreases the unit contribution margin, the break-evenpoint will decrease.a. trueb. falseQ5. Fixed costs are costs that vary in total dollar amount as the level of activity changes.a. trueb. falseQ6. Only a single line, which represents the difference between total sales revenues and total costs, isplotted on the cost-volume-profit chart.a. trueb. falseQ7. Even if a business sells six products, it is possible to estimate the break-even point.a. trueb. falseQ8. Variable costs are costs that remain constant in total with changes in the activity level.a. trueb. falseQ9. Direct materials and direct labor costs are examples of variable costs of production.a. trueb. falseQ10. The dollars available from each unit of sales to cover fixed cost and profit is the contributionmargin per unit.a. trueb. falseQ11. For purposes of analysis, mixed costs can generally be separated into their variable and fixedcomponents.a. trueb. falseQ12. Only a single line, which represents the difference between total sales revenues and total costs, isplotted on the profit-volume chart.a. trueb. falseQ13. Because variable costs are assumed to change in constant proportion with changes in the activitylevel, the graph of the variable costs when plotted against the activity level appears as a circle.a. trueb. falseQ14. If fixed costs are $810,000, the unit selling price is $60, and the unit variable costs are $48, whatis the break-even sales (in units) if fixed costs are reduced by $50,000?a. 15,834 unitsb. 67,500 unitsc. 62,500 unitsd. 63,333 unitsQ15. Winston Co. manufactures office furniture. During the most productive month of the year, 3,500desks were manufactured at a total cost of $84,400. In its slowest month, the company made 1,100desks at a cost of $46,000. Using the high-low method of cost estimation, total fixed costs area. $56,000.b. $28,400.c. $17,600.d. $29,900.Q16. Tucker Co. manufactures office furniture. During the most productive month of the year, 3,600desks were manufactured at a total cost of $192,000. In its slowest month, the company made 1,200desks at a cost of $72,000. Using the high-low method of cost estimation, total fixed costs per montharea. $120,000.b. $12,000.c. $72,000.d. $11,600.Q17. Cost-volume-profit analysis can be presented in both equation form and graphic form.a. trueb. falseQ18. Cost behavior refers to the manner in whicha. a cost changes as the related activity changes.b. a cost is allocated to products.c. a cost is used in setting selling prices.d. a cost is estimated.Q19. If sales total $2,000,000, fixed costs total $800,000, and variable costs are 60% of sales, thecontribution margin ratio is 40%.a. trueb. falseQ20. If sales are $300,000, variable costs are 60% of sales, and operating income is $40,000, what isthe operating leverage?a. 3.000b. 7.500c. 1.875d. 4.500Q21. A rental cost of $40,000 plus $0.50 per machine hour of use is an example of a mixed cost.a. trueb. falseQ22. Cost-volume-profit analysis CANNOT be used if which of the following occurs?a. Costs cannot be properly classified into fixed and variable costsb. The total fixed costs changec. The per-unit variable costs changed. Per-unit sales prices changeQ23. Which of the following conditions would cause the break-even point to increase?a. Total fixed costs increaseb. Unit selling price increasesc. Unit variable cost decreasesd. Total fixed costs decreaseQ24. If a business had sales of $4,000,000, fixed costs of $1,200,000, a margin of safety of 25%, and acontribution margin ratio of 40%, what was the break-even point?a. $3,000,000b. $2,800,000c. $4,800,000d. $2,000,000Q25. A mixed cost has characteristics of both a variable cost and a fixed cost.a. trueb. falseQ26. The ratio that indicates the percentage of each sales dollar available to cover the fixed costs andto provide operating income is termed the contribution margin ratio.a. trueb. falseQ27. If a business sells four products, it is NOT possible to estimate the break-even point.a. trueb. falseQ28. As production increases, what would you expect to happen to fixed costs per unit?a. Increaseb. Decreasec. Remain the samed. Either increase or decrease, depending on the variable costsQ29. Which of the following conditions would cause the break-even point to decrease?a. Total fixed costs increaseb. Unit selling price decreasesc. Unit variable cost decreasesd. Unit variable cost increasesQ30. The point where the sales line and the total costs line intersect on the cost-volume-profit chartrepresentsa. the maximum possible operating loss.b. the maximum possible operating income.c. the total fixed costs.d. the break-even point.Q31. If fixed costs are $350,000, the unit selling price is $75, and the unit variable costs are $30, whatis the break-even sales (in units)?a. 3,500 unitsb. 7,778 unitsc. 11,667 unitsd. 4,667 unitsQ32. If the volume of sales is $4,000,000 and sales at the break-even point amount to $3,200,000, themargin of safety is 20%.a. trueb. falseQ33. If the unit selling price is $40, the volume of sales is $3,000,000, sales at the break-even pointamount to $2,500,000, and the maximum possible sales are $3,300,000, the margin of safety is 7,500units.a. trueb. falseQ34. Using the following partial table of present value of $1 at compound interest, determine thepresent value of $20,000 to be received three years hence, withearnings at the rate of 10% a year.Year 6% 10% 12%1 .943 .909 .8932 .890 .826 .7973 .840 .751 .7124 .792 .683 .636a. $14,240b. $16,800c. $15,020d. $15,840Q35. Which method of evaluating capital investment proposals uses the concept of present value tocompute a rate of return?a. Average rate of returnb. Internal rate of returnc. Cash payback periodd. Accounting rate of returnQ36. Crane Company is considering the acquisition of a machine that costs $60,000. The machine isexpected to have a useful life of 5 years, a negligible residual value, an annual cash flow of $15,000,and annual operating income of $15,000. What is the estimated cash payback period for the machine?a. 1.7 yearsb. 3 yearsc. 4 yearsd. 5 yearsQ37. Which of the following is a present value method of analyzing capital investment proposals?a. Average rate of returnb. Cash payback methodc. Accounting rate of returnd. Net present valueQ38. The computations involved in the net present value method of analyzing capital investmentproposals are less involved than those for the average rate of return method.a. trueb. falseQ39. The expected average rate of return for a proposed investment of $540,000 in a fixed asset, witha useful life of four years, straight-line depreciation, no residual value, and an expected total netincome of $216,000 for the 4 years, isa. 18%.b. 15%.c. 27%.d. 20%.Q40. The amount of the average investment for a proposed investment of $70,000 in a fixed asset,with a useful life of four years, straight-line depreciation, no residual value, and an expected total netincome of $21,600 for the 4 years, isa. $10,800.b. $21,600.c. $35,000.d. $30,000.Q41. When evaluating two competing proposals with unequal lives, management should give greaterconsideration to the investment with the longer life because the asset will be useful to the company fora longer period of time.a. trueb. falseQ42. In capital rationing, alternative proposals that survive initial and secondary screening arenormally evaluated in terms ofa. net income.b. nonfinancial factors.c. maximum cost.d. net cash flow.Q43. The process by which management plans, evaluates, and controls long- term investment decisionsinvolving fixed assets is called cost-volume-profit analysis.a. trueb. falseQ44. Capital rationing is the process by which management allocates funds among competing capitalinvestment proposals.a. trueb. falseQ45. A present value index can be used to rank competing capital investment proposals when the netpresent value method is used.a. trueb. falseQ46. The methods of evaluating capital investment proposals can be grouped into two generalcategories that can be referred to as (1) methods that ignore present value and (2) present valuesmethods.a. trueb. falseQ47. When evaluating a proposal by use of the cash payback method, if net cash flows exceed thecapital investment within the time deemed acceptable by management, the proposal should beaccepted.a. trueb. falseQ48. Decisions to install new equipment, replace old equipment, and purchase or construct a newbuilding are examples ofa. sales mix analysis.b. variable cost analysis.c. variable cost analysis.d. capital investment analysis.Q49. Care must be taken involving capital investment decisions since normally a long-termcommitment of funds is involved and operations could be affected for many years.a. trueb. falseQ50. Periods in time that experience increasing price levels are known as periods ofa. inflation.b. recession.c. depression.d. deflation.Q51. The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and noresidual value, is expected to yield total net income of $300,000 for the 5 years. The expected averagerate of return is 30%.a. trueb. falseQ52. The rate of earnings is 10% and the cash to be received in two years is $10,000. Determine thepresent value amount, using the following partial table of present value of $1 at compound interest.Year 6% 10% 12%1 .943 .909 .8932 .890 .826 .7973 .840 .751 .7124 .792 .683 .636a. $8,900b. $8,260c. $7,970d. $9,090Q53. The primary advantages of the average rate of return method are its ease of computation and thefact thata. it emphasizes the amount of income earned over the life of the proposal.b. there is less possibility of loss from changes in economic conditions and obsolescence when thecommitment is short-term.c. it is especially useful to managers whose primary concern is liquidity.d. rankings of proposals are necessary.Q54. Which of the following provisions of the Internal Revenue Code can be used to reduce the amountof the income tax expense arising from capital investment projects?a. Interest deductionb. Depreciation deductionc. Minimum tax provisiond. Charitable contributionsQ55. The process by which management allocates available investment funds among competing capitalinvestment proposals is termed capital rationing.a. trueb. falseQ56. If the average rate of return on an asset exceeds the minimum acceptable rate of return forinvestments, the asset should be purchased.a. trueb. falseQ57. When evaluating a proposal by use of the net present value method, if there is a deficiency of thepresent value of future cash inflows over the amount to be invested, the proposal should be accepted.a. trueb. falseQ58. The payback period is determined using which of the following formulas?a. Amount to be invested/Annual average net incomeb. Annual net cash flow/Amount to be investedc. Annual average net income/Amount to be investedd. Amount to be invested/Equal annual net cash flowsQ59. The amount of the estimated average income for a proposed investment of $60,000 in a fixedasset, giving effect to depreciation (straight-line method), with a useful life of four years, no residualvalue, and an expected total income yield of $22,300, isa. $10,800.b. $5,575.c. $5,400.d. $15,000.Q60. If a proposed expenditure of $400,000 for a fixed asset with a 4-year life has an annual expectednet cash flow and net income of $160,000 and $60,000, respectively, the cash payback period is 2.5years.a. trueb. falseQ61. Qualitative considerations are best evaluated using present value methods such as internal rateof return.a. trueb. falseQ62. A qualitative characteristic that may impact upon capital investment analysis is the impact ofinvestment proposals on product quality.a. trueb. falseQ63. The expected period of time that will elapse between the date of a capital investment and thecomplete recovery in cash of the amount invested is called the discount period.a. trueb. falseQ64. The expected average rate of return for a proposed investment of $3,000,000 in a fixed assetgiving effect to depreciation (straight-line method) with a useful life of 20 years, no residual value, andan expected total income of $6,000,000 isa. 25%.b. 18%.c. 40%.d. 20%.Q65. Assume in analyzing alternative proposals that Proposal F has a useful life of six years andProposal J has a useful life of nine years. What is one widely used method that makes the proposalscomparable?a. Ignore the fact that Proposal F has a useful life of six years and treat it as if it has a useful life of nineyears.b. Adjust the life of Proposal J to a time period that is equal to that of Proposal F by estimating a residualvalue at the end of year six.c. Ignore the useful lives of six and nine years and find an average (7 1/2 years).d. Ignore the useful lives of six and nine years and compute the average rate of return.Q66. In net present value analysis for a proposed capital investment, the expected future net cashflows are reduced to their present values.a. trueb. falseQ67. A series of unequal cash flows at fixed intervals is termed an annuity.a. trueb. falseQ68. The percentage analysis of increases and decreases in corresponding items in comparativefinancial statements is referred to as vertical analysis.a. trueb. falseQ69. The rate earned on total assets is one of the measures of profitability.a. trueb. falseQ70. The ability of a business to earn a reasonable amount of income is referred to as the factor ofa. leverage.b. profitability.c. wealth.d. solvency.Q71. Based on the following data for the current year, what is the accounts receivable turnover?Net sales on account during year $ 525,500Cost of merchandise sold during year 375,000Accounts receivable, beginning of year 50,000Accounts receivable, end of year 40,000Inventory, beginning of year 110,000Inventory, end of year 140,000a. 13.14b. 11.7c. 10.35d. 8.3Q72. The ratio of the sum of cash, receivables, and marketable securities to current liabilities is calledthea. price-earnings ratio.b. earnings ratio.c. quick ratio.d. current ratio.Q73. The following information is available for Morgan Corp.:2010Market price per share of common stock $25.00Earnings per share on common stock 1.25Which of the following statements is correct?a. The price-earnings ratio is 20 and a share of common stock was selling for 20 times the amount ofearnings per share at the end of 2010.b. The price-earnings ratio is 5.0% and a share of common stock was selling for 5.0% more than the amountof earnings per share at the end of 2010.c. The price-earnings ratio is 10 and a share of common stock was selling for 125 times the amount ofearnings per share at the end of 2010.d. The market price per share and the earnings per share are not statistically related to each other.Q74. Based on the following data, what is the amount of quick assets?Accounts payable $ 32,000Accounts receivable 56,000Accrued liabilities 7,000Cash 20,000Intangible assets 40,000Inventory 72,000Long-term investments 100,000Long-term liabilities 75,000Marketable securities 40,000Notes payable (short-term) 20,000Property, plant, and equipment 625,000Supplies 2,000a. $228,000b. $188,000c. $116,000d. $114,000Q75. The effects of differences in accounting methods are of little importance when analyzingcomparable data from competing businesses.a. trueb. falseQ76. The percentage analysis of increases and decreases in individual items in comparative financialstatements is calleda. vertical analysis.b. solvency analysis.c. profitability analysis.d. horizontal analysis.Q77. Based on the following data for the current year, what is the inventory turnover?Net sales on account during year $ 500,000Cost of merchandise sold during year 300,000Accounts receivable, beginning of year 45,000Accounts receivable, end of year 35,000Inventory, beginning of year 90,000Inventory, end of year 110,000a. 3.0b. 2.7c. 4.0d. 3.3Q78. If the current credit terms are 2/10, n/30 for Jones Inc., an accounts receivable turnover of 3 forthe current year would be considered normal.a. trueb. falseQ79. The terms acid-test ratio and quick ratio refer to the same ratio–the instant debt-paying ability ofa company.a. trueb. falseQ80. The relationship of each asset item as a percent of total assets is an example of horizontalanalysis.a. trueb. falseQ81. A balance sheet shows cash, $75,000; marketable securities, $110,000; receivables, $90,000; and$225,000 of inventories. Current liabilities are $200,000. The current ratio is 1.375 to 1.a. trueb. falseQ82. Based on the following data for the current year, what is the accounts receivable turnover?Net sales on account during year $ 500,000Cost of merchandise sold during year 300,000Accounts receivable, beginning of year 45,000Accounts receivable, end of year 35,000Inventory, beginning of year 90,000Inventory, end of year 110,000a. 12.5b. 14.3c. 11.1d. 7.5Q83. Assuming that the quantities of inventory on hand during the current year were sufficient to meetall demands for sales, a decrease in the inventory turnover for the current year when compared withthe turnover for the preceding year indicates an improvement in the management of inventory.a. trueb. falseQ84. Interpreting financial analysis should be considered in light of conditions peculiar to the industryand the general economic conditions.a. trueb. falseQ85. Based on the following data, what is the quick ratio, rounded to one decimal place?Accounts payable $ 32,000Accounts receivable 64,000Accrued liabilities 7,000Cash 20,000Intangible assets 40,000Inventory 72,000Long-term investments 100,000Long-term liabilities 75,000Marketable securities 35,000Notes payable (short-term) 25,000Property, plant, and equipment 625,000Prepaid expenses 2,000a. 3.2b. 2.1c. 1.9d. 1.4Q86. If a company has issued only one class of stock, the earnings per share is determined by dividingnet income by the number of shares outstanding.a. trueb. falseQ87. Ratios and various other analytical measures are NOT a substitute for sound judgment, nor dothey provide definitive guides for action.a. trueb. falseQ88. In computing the rate earned on total assets, interest expense is added to net income beforedividing by average total assets.a. trueb. falseQ89. The percent of fixed assets to total assets is an example ofa. vertical analysis.b. solvency analysis.c. profitability analysis.d. horizontal analysis.Q90. An acceleration in the collection of receivables will tend to cause the accounts receivable turnovertoa. decrease.b. remain the same.c. either increase or decrease.d. increase.Q91. “Working capital” is another term for the current ratio.a. trueb. falseQ92. A company with working capital of $500,000 and a current ratio of 2.25 pays a $100,000 shorttermliability. The amount of working capital immediately after payment isa. $600,000.b. $400,000.c. $500,000.d. $100,000.Q93. Which of the following is a measure of the liquid position of a corporation?a. Earnings per shareb. Inventory turnoverc. Current ratiod. Number of times interest charges earnedQ94. The relationship of 120 to 100 can be expressed as 1.2, 1.2:1, or 120%.a. trueb. falseQ95. The number of times interest charges are earned is computed asa. net income plus interest charges, divided by interest charges.b. income before income tax plus interest charges, divided by interest charges.c. net income divided by interest charges.d. income before income tax divided by interest charges.Q96. A company with $60,000 in current assets and $40,000 in current liabilities pays a $1,000 currentliability. As a result of this transaction, the current ratio and working capital willa. both decrease.b. both increase.c. increase and remain the same, respectively.d. remain the same and decrease, respectively.Q97. The comparison of the financial data of a single company for two or more years is calledhorizontal analysis.a. trueb. falseQ98. The ability of a business to pay its debts as they come due and to earn a reasonable amount ofincome is referred to asa. solvency and leverage.b. solvency and profitability.c. solvency and liquidity.d. solvency and equity.Q99. The relationship of $225,000 to $100,000, expressed as a ratio, isa. 2.0 to 1.b. 1.8 to 1.c. 1.5 to 1.d. 2.25 to 1.Q100. The ratio of current assets to current liabilities is referred to as the acid-test ratio.a. trueb. false

Q1. Many preferred stocks have a feature that requires a firm to periodically set aside an amount ofmoney for the retirement of its preferred stock. What is the name of this feature?a. convertibleb. callablec. cumulatived. sinking fundQ2. TC Corp paid a dividend today of $5 per share. The dividend is expected to grow at a constant rateof 6.5% per year. If TC Corp stock is selling for $50.00 per share, the stockholders’ expected rate ofreturn isa. 11.50%.b. 13.56%.c. 15.49%.d. 16.50%.Q3. Backford Company just paid a dividend yesterday of $2.25 per share. The company’s stock iscurrently selling for $60 per share, and the required rate of return on Backford Company stock is 16%.What is the growth rate expected for Backford Company dividends assuming constant growth?a. 9.47%b. 9.89%c. 10.87%d. 11.81%Q4. Southland Tours has net income of $2 million this year. The book value of Southland Tours commonequity is $8 million dollars. The company’s dividend payout ratio is 60% and is expected to remain thisway. What is Southland Tours’ internal growth rate?a. 6%b. 9%c. 10%d. 15%Q5. The amount of the preferred stock dividend is generally fixed either as a dollar amount or as apercentage of the par value.a. Trueb. FalseQ6. What provision entitles the common shareholder to maintain a proportionate share of ownership ina firm?a. the cumulative featureb. the convertible featurec. the proportionality claused. the preemptive rightQ7. If a common stockholder cannot personally attend the meeting of shareholders then their votes arelost.a. Trueb. FalseQ8. Although under normal operating conditions preferred shareholders do not have voting rights,protective provision generally allow for voting rights in the event of nonpayment of preferreddividends.a. Trueb. FalseQ9. Preferred stock is riskier than long-term debt because its claim on assets and income come afterthose of bonds.a. Trueb. FalseQ10. Common stock does not mature.a. Trueb. FalseQ11. If a shareholder cannot attend the corporation’s annual meeting, the shares may still be votedusinga. the preemptive right.b. a proxy.c. majority voting rules.d. the cumulative voting right.Q12. Shareholders, as owners of the corporation, face unlimited liability for the corporation’s debts,while bondholders, as creditors, may only lose the value of their investment if the company goesbankrupt.a. Trueb. FalseQ13. The most relevant form of growth for valuing a firm’s common stock is internal growth.a. Trueb. FalseQ14. A firm can increase the growth rate of common stockholders’ investment in the firm by retainingmore earnings or increasing return on equity.a. Trueb. FalseQ15. Assume that an investment is forecasted to produce the following returns: a 30% probability of a12% return; a 50% probability of a 16% return; and a 20% probability of a 19% return. What is theexpected percentage return this investment will produce?a. 33.3%b. 16.1%c. 9.5%d. 15.4%Q16. Diversifying among different kinds of assets is called asset allocation.a. Trueb. FalseQ17. Variation in the rate of return of an investment is a measure of the riskiness of that investment.a. Trueb. FalseQ18. A well-diversified portfolio includes investments in 50 securities. The portfolio’s systematic risk islikely to be abouta. 50% of the total risk.b. 40% of the total risk.c. 25% of the total risk.d. zero because risk is eliminated with a portfolio of 50 securities or more.Q19. Of the following, which differs in meaning from the other three?a. systematic riskb. market riskc. undiversifiable riskd. asset-unique riskQ20. The relevant variable a financial manager uses to measure returns isa. net income determined using generally accepted accounting principles.b. earnings per share minus dividends per share.c. cash flows.d. dividends.Q21. Decker Corp. common stock has a required return of 17.5% and a beta of 1.75. If the expectedrisk free return is 3%, what is the expected return for the market based on the CAPM?a. 11.29%b. 14.29%c. 13.35%d. 15.27%Q22. You are considering an investment in Citizens Bank Corp. The firm has a beta of 1.6. Currently,U.S. Treasury bills are yielding 2.75% and the expected return for the S & P 500 is 14%. What rate ofreturn should you expect for your investment in Citizens Bank?a. 11.15%b. 15.39%c. 16.75%d. 20.75%Q23. Marble Corp. has a beta of 2.5 and a standard deviation of returns of 20%. The return on themarket portfolio is 15% and the risk free rate is 4%. According to CAPM, what is the required rate ofreturn on Collectible’s stock?a. 37.5%b. 31.5%c. 26.5%d. 23.5%Q24. Which of the following is/are true?a. Most of the unsystematic risk is removed by the time a portfolio contains 30 stocks.b. Two points on the Characteristic Line are the T-bill and the market portfolio.c. The greater the total risk of an asset, the greater the expected return.d. All securities have a beta between 0 and 1.Q25. Changes in the general economy, like changes in interest rates or tax laws represent what type ofrisk?a. company-unique riskb. market riskc. unsystematic riskd. diversifiable riskQ26. Other things being equal, investors will value which of the following bonds the highest?a. callable bondsb. convertible bondsc. bonds that are both callable and convertibled. unsecured, callable bondsQ27. A mortgage bond is secured by a lien on real property.a. Trueb. FalseQ28. The yield to maturity on long-term bondsa. is equal to the current yield if the bond is selling for face value.b. is equal to the coupon rate on the bond.c. is equal to the net present value of the bond’s future cash flows.d. is set by the indenture agreement and will not change over the life of the bond.Q29. Callable bonds are most likely to be called ifa. interest rates decrease.b. interest rates increase.c. Shafer Corporation needs additional financing.d. Shafer Corporation’s stock price increases dramatically.Q30. Junk bonds are also called high-yield bonds.a. Trueb. FalseQ31. Which of the following is true of a zero coupon bond?a. The bond makes no coupon payments.b. The bond sells at a premium prior to maturity.c. The bond has a zero par value.d. The bond has no value until the year it matures because there are no positive cash flows until then.Q32. Bryant Inc. just issued $1,000 par 30-year bonds. The bonds sold for $1,107.20 and pay interestsemiannually. Investors require a ra