Sample Quiz 2 - Problem 1(20 points 15 minutes Multiple choices Please put your answer in the bracket[B 1 In 2009 Gene Tech reported a current

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Problem 1 (20 points; 15 minutes) Multiple choices: Please put your answer in the bracket. [ B ] 1. In 2009, Gene Tech reported a current ratio of 2.75 and in 2008 it was 3.10. Which of the following could explain the fall in this ratio? A. A decrease in accounts payable. B. A decrease in inventories. C. An increase in short-term investments. D. All of the above. [ C ] 2. On January 1, 2009, Simko Company acquired a truck that had a purchase price of $20,000. The seller agreed to allow Simko to pay for the truck over a three-year period at 10% interest with equal payments due at the end of 2009, 2010 and 2011. The amount of each annual payment the company must make is (round to the nearest dollar) A. $6,042 B. $7,062 C. $8,042 D. $9,206 [ D ] 3. Which of the following is an advantage of issuing bonds versus issuing stocks to finance expansion? A. Stockholders remain in control as bondholders cannot vote. B. Interest expense is tax deductible but dividends are not. C. Money can usually be borrowed at a lower rate and then invested to earn a higher return on assets. D. All of the above. [ C ] 4. To determine whether a bond will be sold at a premium, discount or at par, one must know which of the following information? A. The par value and the stated rate on the date the bonds were issued B. The par value and the market rate on the date the bonds were issued C. The stated rate and the market rate on the date the bonds were issued D. The stated rate on the date the bonds were issued and the number of interest payments
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[ B ] 5. In 2009, Gene Tech had a debt to equity ratio of 0.21 while its competitor in the same industry, American Bio had a debt to equity ratio of 0.24. Which of the following statements is false ? A. General Tech has a larger portion of its assets financed by equity than American Bio does. B. When compared to General Tech, American Bio's use of more debt financing causes its stockholders to have a lower return on equity when return on capital exceeds the debt's interest rate. C. General Tech's ratio implies that less than 20% of its assets are financed by debt. D. American Bio's ratio implies that less than 25% of its assets are financed by debt. [ D ] 6. If Hayes Corporation issues and sells 100 shares of its $1 par value common stock at $15 per share, the journal entry to record the sale will NOT include which of the following? A.
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This note was uploaded on 12/20/2011 for the course ACCT/MGMT 2010 taught by Professor A during the Spring '11 term at HKUST.

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Sample Quiz 2 - Problem 1(20 points 15 minutes Multiple choices Please put your answer in the bracket[B 1 In 2009 Gene Tech reported a current

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