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 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?
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?
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:
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:
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?
$0, there is no liability at the end of 2010
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
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:
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:
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?
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:
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:
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.
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:
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:
27. The Discount on Bonds Payable account is:
A contra liability
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:
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?
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:
32. The measurement of key relations among financial statement items is known as:
33. One of several ratios that reflects solvency includes the:
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
Days’ sales in inventory
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:
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:
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
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
Days’ sales uncollected
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:
Common-size comparative statements
General-purpose financial statements
Base line statements
42. The ability to provide financial rewards sufficient to attract and retain financing is called:
Liquidity and efficiency
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?
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:
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:
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?
50. Current assets divided by current liabilities is equal to the
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