HA_223_F06_Prelim_2_Exam - Exam # _ HA-223 Financial...

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Exam # _________ HA-223 Financial Accounting Principles Prof. A. Neal Geller PRELIMINARY EXAMINATION 2 Question Sheet October 31, 2006 In Class STUDENT NAME: _____________________________________ CUID NUMBER: __________________________ Page 1
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True/False Section : Each question = 1 point 1. Sales returns and allowances should be included as a selling expense. 2. A company is thinking of borrowing money at an 18% annual interest rate in order to pay a $30,000 invoice within the discount period. The invoice terms are 2/10, n/30. They should borrow the money because they will still have a net savings of 19.2%. 3. The gross profit percentage is computed by taking operating income divided by net sales. 4. An entry to bad debts expense and allowance for doubtful accounts is made to write off a customer's account during the year when it is determined to be uncollectable. 5. The actual physical flow of goods in a company usually determines a company's choice of inventory costing method. 6. Under LIFO costing, the oldest costs are assigned to the units sold. 7. Patents and trademarks are examples of tangible assets. 8. Natural resources are intangible assets. 9. In 2002, Landry's Restaurants had a fixed asset turnover ratio of 1.27 and in 2003 the ratio was 1.23. This demonstrates an improvement in their ability to generate sales from their investment in long-lived assets. 10. When a company acquires land by issuing 10,000 shares of its $1 par value common stock currently trading for $20 per share, the company must get an appraisal of the building and recognize a gain if the appraised value is more than the $200,000 value of the stock issued. 11. Repair costs are classified as capital expenditures when they increase the useful life or efficiency of an asset. 12. Working capital is the total amount of assets needed to operate the business during the next year or operating cycle, whichever is shorter. 13. Liquidity is the ability of the company to cover its current liabilities. 14. Any withholdings from the employees' pay made by the employer are accounted for in current liability accounts until the company pays the government agency or other organization. 15. The portion of a long-term debt that will mature within the next year (from the current balance sheet date) or operating cycle, whichever is longer, should be reported on the balance sheet as a current liability. Page 2
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Multiple Choice Questions : Each question = 2 points 16. When a credit sale is made with terms of 2/10, net 30 on May 10 and the customer's check is received on May 19, which of the following is true about the May 19 journal entry? A. The debit to cash will equal the credit to accounts receivable because the discount was recorded on May 10. B.
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This test prep was uploaded on 02/19/2009 for the course HA 230 taught by Professor Davidlee during the Fall '06 term at Cornell University (Engineering School).

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HA_223_F06_Prelim_2_Exam - Exam # _ HA-223 Financial...

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