2 Week Quiz
Use the following information to answer questions 15: Sams Office Supplies Balance Sheet December 31, 2008 Cash $ 65,000 Prepaid Insurance 30,000 Accounts Receivable 50,000 Inventory 70,000 Land held for investment 75,000 Land 90,000 Building $100,000 Less Accumulated Depreciation (20,000) 80,000 Trademark 70,000 Total Assets $530,000 1. Accounts Payable Salaries Payable Mortgage Payable Total Liabilities Common Stock Retained Earnings Total stockholders equity Total Liabilities and Stockholders Equity $ 70,000 10,000 90,000 $160,000 $120,000 250,000 $370,000 $530,000
The total dollar amount of assets to be classified as current assets is a. $290,000. b. $215,000. c. $180,000. d. $145,000. The total dollar amount of assets to be classified as property, plant, and equipment is a. $320,000. b. $170,000. c. $245,000. d. $190,000. The total dollar amount of assets to be classified as investments is a. $0. b. $150,000. c. $75,000. d. $180,000. The total amount of working capital is a. $135,000. b. $295,000. c. $75,000. d. $60,000. The current ratio is a. 1.94 : 1. b. 1.57 : 1. c. 3.14 : 1. d. 2.69 : 1.
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At December 31, 2008 Lily Company had retained earnings of $1,092,000. During 2008 they issued stock for $49,000, and paid dividends of $17,000. Net income for 2008 was $201,000. The retained earnings balance at the beginning of 2008 was: a. $1,276,000 b. $908,000 c. $957,000 d. $1,227,000 The relationship between current assets and current liabilities is important in evaluating a company's a. profitability. b. liquidity. c. market value. d. solvency. Which of the following is a measure of liquidity? a. Working capital b. Profit margin c. Earnings per share d. Debt to equity ratio Current assets divided by current liabilities is known as the a. working capital. b. current ratio. c. profit margin. d. capital structure. The most important information needed to determine if companies can pay their current obligations is the a. net income for this year. b. projected net income for next year. c. relationship between current assets and current liabilities. d. relationship between short-term and long-term liabilities. A short-term creditor is primarily interested in the __________ of the borrower. a. liquidity b. profitability c. consistency d. solvency The current ratio is a. current assets plus current liabilities. b. current assets minus current liabilities. c. current assets divided by current liabilities. d. current assets times current liabilities. Working capital is calculated by taking a. current assets plus current liabilities. b. current assets minus current liabilities. c. current assets divided by current liabilities. d. current assets times current liabilities.
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Working capital is a measure of a. consistency. b. liquidity. c. profitability. d. solvency. Long-term creditors are usually most interested in evaluating a. liquidity and profitability. b. consistency and profitability. c. liquidity and solvency. d. consistency and solvency. A liquidity ratio measures the a. income or operating success of a company over a period of time. b. ability of a company to survive over a long period of time. c. short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash. d. percentage of total financing provided by creditors. Working capital is a. calculated by dividing current assets by current liabilities. b. used to evaluate a companys liquidity and short-term debt paying ability. c. used to evaluate a companys solvency and long-term debt paying ability. d. calculated by subtracting current assets from current liabilities.
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Use the following balance sheet and income statement information to answer questions 18-21: Current assets $ 7,000 Net income Current liabilities 4,000 Stockholders equity Average assets 40,000 Total liabilities Total assets 30,000 Average common shares outstanding was 10,000 18. What is the total amount of working capital? a. $1,000 b. $7,000 c. $2,000 d. $3,000 What is the current ratio? a. 1.75 : 1 b. 1.6 : 1 c. 0.57 : 1 d. 2 : 1 $ 12,000 27,000 9,000
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What is the earnings per share? a. $3.60 b. $4.00 c. $1.20 d. $0.83 What is the debt to total assets? a. 22.5 percent b. 13 percent c. 75 percent d. 30 percent If a company buys a $700 machine on credit, this transaction will affect the: a. income statement and retained earnings statement only. b. income statement only. c. income statement, retained earnings statement, and balance sheet. d. balance sheet only. A payment of a portion of accounts payable will a. not affect total assets. b. increase liabilities. c. not affect stockholders equity. d. decrease net income. Tritan Corporation received a cash advance of $500 from a customer. As a result of this event, a. assets increased by $500. b. equity increased by $500. c. liabilities decreased by $500. d. Both a and b. Anderson Company purchased equipment for $1,800 cash. As a result of this event, a. equity decreased by $1,800. b. assets increased by $1,800. c. assets remained unchanged. d. Both a and b. Franklin Company provided consulting services and billed the client $2,500. As a result of this event a. assets remained unchanged. b. assets increased by $2,500. c. equity increased by $2,500 d. Both b and c. Felix Corporation paid dividends of $5,000. As a result of this event, a. The dividends account was debited for $5,000. b. The dividends account was credited for $5,000. c. The cash account was debited for $5,000. d. Both b and c. If a company pays dividends of $10,000,
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Equity will be reduced by $10,000. Net income will be reduced by $10,000. Retained earnings will reduced be by $10,000. Both a and c.
If a company issues common stock for $25,000 and uses $20,000 of the cash to purchase a truck, a. Assets will be increased by $5,000. b. Equity will be reduced by $25,000. c. Assets will be increased by $25,000. d. Assets will be unchanged. Are advanced receipts from customers treated as revenue at the time of receipt? Why or why not? a. Yes, they are treated as revenue at the time of receipt because the company has access to the cash b. No, the amount of revenue cannot be adequately determined until the company completes the work. c. Yes, The intent of the company is to perform the work and the customer is confident that the services will be completed. d. No, revenue cannot be recognized until the work is performed. At September 1, 2009, Dolce Enterprises reported a cash balance of $45,000. During the month, Dolce collected cash of $15,000 and made disbursements of $25,000. At September 31, 2009, the cash balance is a. $25,000 credit b. $35,000 credit c. $60,000 debit d. $35,000 debit During 2008, its first year of operations, Dawson's Bakery had revenues of $40,000 and expenses of $22,000. The business paid cash dividends of $12,000. What is the balance in Retained Earnings at December 31, 2008? a. $0. b. $12,000 debit. c. $6,000 credit. d. $18,000 credit. At January 31, 2009, the balance in Peanut Inc,'s supplies account was $250. During February. Peanut purchased supplies of $300 and used supplies of $400. At the end of February, the balance in the supplies account should be a. $250 debit. b. $350 credit. c. $950 debit. d. $150 debit At December 1, 2008, Ruby Company's accounts receivable balance was $1,200. During December, Ruby had credit sales of $5,000 and collected accounts receivable of $4,000. At December 31, 2008, the accounts receivable balance is a. $1,200 debit b. $2,200 debit
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c. $6,200 debit d. $2,200 credit 35. At October 1, 2008, Mojo Industries had an accounts payable balance of $30,000. During the month, the company made purchases on account of $25,000 and made payments on account of $40,000. At October 31, 2008, the accounts payable balance is a. $30,000 debit b. $10,000 credit c. $15,000 credit d. $40,000 credit A common application of the conservatism constraint is the use of the 1. straight-line depreciation method for plant assets. 2. lower of cost or market method for inventories. 3. FIFO method for inventory valuation. a. b. c. d. 37. 1 2 3 1 and 2
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The time period assumption states that the economic life of a business can be divided into a. equal time periods. b. cyclical time periods. c. artificial time periods. d. perpetual time periods. The going concern assumption underlies the a. cost principle. b. monetary unit assumption. c. time period assumption. d. full disclosure principle. The going concern assumption is inappropriate when a. the business is just starting up. b. liquidation appears likely. c. market values are higher than costs. d. the business is organized as a proprietorship. Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments? a. Monetary unit assumption b. Economic entity assumption c. Time period assumption d. Going concern assumption It is assumed that the activities of Ford Motor Corporation can be distinguished from those of General Motors because of the a. going concern assumption. b. economic entity assumption.
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c. monetary unit assumption. d. time period assumption. 42. The going concern assumption assumes that the business a. will be liquidated in the near future. b. will be purchased by another business. c. is in a growth industry. d. will remain in operation for the foreseeable future. The economic entity assumption states that economic events a. of different entities can be combined if all the entities are corporations. b. must be reported to the Securities and Exchange Commission. c. of a sole proprietorship cannot be distinguished from the personal economic events of its owners. d. of every entity can be separately identified and accounted for. The concept that a business has a reasonable expectation of remaining in business for the foreseeable future is called the a. economic entity assumption. b. monetary unit assumption. c. time period assumption. d. going concern assumption. Which of the following is not an accounting assumption? a. Integrity b. Going concern c. Time period d. Economic entity The time period assumption states a. the business will remain in operation for the foreseeable future. b. the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared. c. every economic entity can be separately identified and accounted for. d. only those things that can be expressed in money are included in the accounting records. The ACE Company has five plants nationwide that cost $300 million. The current market value of the plants is $500 million. The plants will be reported as assets at a. $200 million. b. $800 million. c. $300 million. d. $500 million. The Tac Company has four plants nationwide that cost $400 million. The current market value of the plants is $300 million. The plants will be reported as assets at a. $400 million. b. $800 million. c. $300 million. d. $500 million.
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The cost principle requires that when assets are acquired, they be recorded at a. market value. b. the amount paid for them. c. selling price. d. list price. Valuing assets at their market value rather than at their cost is inconsistent with the: a. economic entity assumption. b. cost principle. c. time period assumption. d. full disclosure principle.
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