Acc 557 week 11 quiz – strayer new

ACC 557 Week 11 Quiz – Strayer NEW
Click On The Link Below To Purchase A+ Graded Material
Instant Download
http://budapp.net/ACC-557-Week-11-Quiz-Strayer-NEW-ACC557W11Q.htm
Chapter 14
All possible questions with answers
TRUE-FALSE STATEMENTS
Intracompany comparisons of the same financial statement items can often detect
changes in financial relationships and significant trends.
Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Calculating financial ratios is a financial reporting requirement under generally
accepted accounting principles.
Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
Measures of a company's liquidity are concerned with the frequency and amounts of
dividend payments.
Analysis of financial statements is enhanced with the use of comparative data.
Comparisons of company data with industry averages can provide some insight into
the company's relative position in the industry.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Industry/Sector, AICPA FN: Reporting, AICPA PC: None, IMA: Performance
Measurement
Vertical and horizontal analyses are concerned with the format used to prepare
financial statements.
AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Horizontal, vertical, and circular analyses are the most common tools of financial
statement analysis.
AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Horizontal analysis is a technique for evaluating a financial statement item in the
current year with other items in the current year.
Another name for trend analysis is horizontal analysis.
If a company has sales of $110 in 2012 and $154 in 2013, the percentage increase in
sales from 2012 to 2013 is 140%.
Ans: LO: 3, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB:
None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Performance
Measurement

In horizontal analysis, if an item has a negative amount in the base year, and a
positive amount in the following year, no percentage change for that item can be
computed.
Common size analysis expresses each item within a financial statement in terms of a
percent of a base amount.
Vertical analysis is a more sophisticated analytical tool than horizontal analysis.
Vertical analysis is useful in making comparisons of companies of different sizes.
Meaningful analysis of financial statements will include either horizontal or vertical
analysis, but not both.
Using vertical analysis of the income statement, a company's net income as a
percentage of net sales is 10%; therefore, the cost of goods sold as a percentage of
sales must be 90%.

Ans: LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB:
Measurement
In the vertical analysis of the income statement, each item is generally stated as a
percentage of net income.
A ratio can be expressed as a percentage, a rate, or a proportion.
A solvency ratio measures the income or operating success of an enterprise for a
given period of time.
The current ratio is a measure of all the ratios calculated for the current year.
Inventory turnover measures the number of times on the average the inventory was
sold during the period.
Profitability ratios are frequently used as a basis for evaluating management's
operating effectiveness.

The rate of return on total assets will be greater than the rate of return on common
stockholders' equity if the company has been successful in trading on the equity at a
gain.
From a creditor's point of view, the higher the total debt to total assets ratio, the lower
the risk that the company may be unable to pay its obligations.
AICPA FN: Risk Analysis, AICPA PC: None, IMA: Investment Decisions
A current ratio of 1.2 to 1 indicates that a company's current assets exceed its current
liabilities.
Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB:
Measurement
Using borrowed money to increase the rate of return on common stockholders' equity
is called "trading on the equity."
AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
When the disposal of a significant segment occurs, the income statement should
report both income from continuing operations and income (loss) from discontinued
operations.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communcations, AICPA
BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
An event or transaction should be classified as an extraordinary item if it is unusual in
nature or if it occurs infrequently.
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Variations among companies in the application of generally accepted accounting
principles may reduce quality of earnings.
Pro forma income usually excludes items that the company thinks are unusual or
nonrecurring.
Ans: LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communcations, AICPA
BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
The three basic tools of analysis are horizontal analysis, vertical analysis, and ratio
analysis.
Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB:
A percentage change can be computed only if the base amount is zero or positive.
In vertical analysis, the base amount in an income statement is usually net sales.

Profitability ratios measure the ability of the enterprise to survive over a long period
of time.
The days in inventory is computed by multiplying inventory turnover by 365.
Extraordinary items are reported net of applicable taxes in a separate section of the
income statement.
MULTIPLE CHOICE QUESTIONS
Which one of the following is primarily interested in the liquidity of a company?
Federal government
Stockholders
Long-term creditors
Short-term creditors
Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Industry/Sector, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business
Economics

Which one of the following is not a characteristic generally evaluated in analyzing
financial statements?
Liquidity
Profitability
Marketability
Solvency
Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business
Economics
In analyzing the financial statements of a company, a single item on the financial
statements
should be reported in bold-face type.
is more meaningful if compared to other financial information.
is significant only if it is large.
should be accompanied by a footnote.
Ans:LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Economics
Short-term creditors are usually most interested in evaluating
solvency.
liquidity.
marketability.
profitability.
Economics
Long-term creditors are usually most interested in evaluating
liquidity and solvency.
solvency and marketability.
liquidity and profitability.
profitability and solvency.
Economics

Stockholders are most interested in evaluating
liquidity and solvency.
profitability and solvency.
liquidity and profitability.
marketability and solvency.
Economics
A stockholder is interested in the ability of a firm to
pay consistent dividends.
appreciate in share price.
survive over a long period.
all of these.
Economics
Comparisons of financial data made within a company are called
intracompany comparisons.
interior comparisons.
intercompany comparisons.
intramural comparisons.
Industry/Sector, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
A technique for evaluating financial statements that expresses the relationship among
selected items of financial statement data is
common size analysis.
horizontal analysis.
ratio analysis.
vertical analysis.

Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
Which one of the following is not a tool in financial statement analysis?
Horizontal analysis
Circular analysis
Vertical analysis
Ratio analysis
Economics
In analyzing financial statements, horizontal analysis is a
requirement.
tool.
principle.
theory.
Economics
Horizontal analysis is also called
linear analysis.
vertical analysis.
trend analysis.
Economics
Vertical analysis is also known as
perpendicular analysis.
trend analysis.
straight-line analysis.

Economics
In ratio analysis, the ratios are never expressed as a
rate.
negative figure.
percentage.
simple proportion.
Economics
The formula for horizontal analysis of changes since the base period is the current
year amount
divided by the base year amount.
minus the base year amount divided by the base year amount.
minus the base year amount divided by the current year amount.
plus the base year amount divided by the base year amount.
Economics
Horizontal analysis evaluates a series of financial statement data over a period of time
that has been arranged from the highest number to the lowest number.
that has been arranged from the lowest number to the highest number.
to determine which items are in error.
to determine the amount and/or percentage increase or decrease that has taken place.
Economics
Horizontal analysis evaluates financial statement data
within a period of time.
over a period of time.
on a certain date.

as it may appear in the future.
Economics
Assume the following sales data for a company:
2014 $1,050,000
2013 950,000
2012 800,000
2011 550,000
If 2011 is the base year, what is the percentage increase in sales from 2011 to 2013?
100%
90.9%
72.7%
52.4%
Ans:LO: 3, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Business Economics
Comparative balance sheets are usually prepared for
one year.
two years.
three years.
four years.
Horizontal analysis is appropriately performed
only on the income statement.
only on the balance sheet.
only on the statement of retained earnings.
on all three of these statements.

Economics
A horizontal analysis performed on a statement of retained earnings would not show a
percentage change in
dividends paid.
net income.
expenses.
beginning retained earnings.
Economics
Under which of the following cases may a percentage change be computed?
The trend of the balances is decreasing but all balances are positive.
There is no balance in the base year.
There is a positive balance in the base year and a negative balance in the subsequent
year.
There is a negative balance in the base year and a positive balance in the subsequent
year.
Economics
Assume the following sales data for a company:
2014 $945,000
2013 877,500
2012 650,000
If 2012 is the base year, what is the percentage increase in sales from 2012 to 2013?
24%
35%
76%
135%

Business Economics
Assume the following cost of goods sold data for a company:
2014 $1,680,000
2013 1,400,000
2012 1,200,000
If 2012 is the base year, what is the percentage increase in cost of goods sold from
2012 to 2014?
140%
40%
23%
17%
Business Economics
Darius, Inc. has the following income statement (in millions):
DARIUS, INC.
Income Statement
For the Year Ended December 31, 2013
Net Sales $300
Cost of Goods Sold 120
Gross Profit 180
Operating Expenses 44
Net Income $136
Using vertical analysis, what percentage is assigned to Cost of Goods Sold?

30%
40%
100%
None of the above
Business Economics
Darius, Inc. has the following income statement (in millions):
DARIUS, INC.
Income Statement
For the Year Ended December 31, 2012
Net Sales $300
Cost of Goods Sold 120
Gross Profit 180
Operating Expenses 44
Net Income $136
Using vertical analysis, what percentage is assigned to Net Income?
100%
75.6%
45.3%
None of the above
Business Economics
Vertical analysis is also called
horizontal analysis.
ratio analysis.
trend analysis.

Economics
Vertical analysis is a technique which expresses each item within a financial
statement
in dollars and cents.
in terms of a percentage of the item in the previous year.
in terms of a percent of a base amount.
starting with the highest value down to the lowest value.
Economics
In common size analysis,
a base amount is required.
a base amount is optional.
the same base is used across all financial statements analyzed.
the results of the horizontal analysis are necessary inputs for performing the analysis.
Economics
In performing a vertical analysis, the base for prepaid expenses is
total current assets.
total assets.
total liabilities and stockholders' equity.
prepaid expenses.
Economics
In performing a vertical analysis, the base for sales revenues on the income statement
is

net sales.
sales.
net income.
cost of goods available for sale.
Economics
In performing a vertical analysis, the base for sales returns and allowances is
sales.
sales discounts.
net sales.
total revenues.
Economics
In performing a vertical analysis, the base for cost of goods sold is
total selling expenses.
net sales.
total revenues.
total expenses.
Economics
Each of the following is a liquidity ratio except the
acid-test ratio.
current ratio.
debt to total assets ratio.
inventory turnover.
Economics

A ratio calculated in the analysis of financial statements
expresses a mathematical relationship between two numbers.
shows the percentage increase from one year to another.
restates all items on a financial statement in terms of dollars of the same purchasing
power.
is meaningful only if the numerator is greater than the denominator.
Economics
A liquidity ratio measures the
income or operating success of an enterprise over a period of time.
ability of the enterprise to survive over a long period of time.
short-term ability of the enterprise to pay its maturing obligations and to meet
unexpected needs for cash.
number of times interest is earned.
Economics
The current ratio is
calculated by dividing current liabilities by current assets.
used to evaluate a company's liquidity and short-term debt paying ability.
used to evaluate a company's solvency and long-term debt paying ability.
calculated by subtracting current liabilities from current assets.
Economics
The acid-test (quick) ratio
is used to quickly determine a company's solvency and long-term debt paying ability.
relates cash, short-term investments, and net receivables to current liabilities.
is calculated by taking one item from the income statement and one item from the
balance sheet.
is the same as the current ratio except it is rounded to the nearest whole percent.

Economics
Harvey Clothing Store had a balance in the Accounts Receivable account of $390,000
at the beginning of the year and a balance of $410,000 at the end of the year. Net
credit sales during the year amounted to $3,000,000. The average collection period of
the receivables in terms of days was
30 days.
365 days.
274 days.
48.7 days.
Business Economics
Parker Hardware Store had net credit sales of $8,000,000 and cost of goods sold of
$5,000,000 for the year. The Accounts Receivable balances at the beginning and end
of the year were $600,000 and $700,000, respectively. The receivables turnover was
7.7 times.
4.6 times.
11.4 times.
12.3 times.
Business Economics
Wagon Department Store had net credit sales of $16,000,000 and cost of goods sold
of $15,000,000 for the year. The average inventory for the year amounted to
$2,000,000. Inventory turnover for the year is
8 times.
15 times.
7.5 times.
5 times.
Business Economics

Wagon Department Store had net credit sales of $16,000,000 and cost of goods sold
of $15,000,000 for the year. The average inventory for the year amounted to
$2,000,000. The average number of days in inventory during the year was
365 days.
48.7 days.
46 days.
30 days.
Business Economics
Each of the following is included in computing the acid-test ratio except
cash.
inventory.
receivables.
short-term investments.
Economics
Which one of the following would not be considered a liquidity ratio?
Current ratio
Inventory turnover
Acid-test ratio
Return on assets
Economics
Asset turnover measures
how often a company replaces its assets.
how efficiently a company uses its assets to generate sales.
the portion of the assets that have been financed by creditors.
the overall rate of return on assets.

Economics
Profit margin is calculated by dividing
sales by cost of goods sold.
gross profit by net sales.
net income by stockholders' equity.
net income by net sales.
Economics
Stout Corporation had net income of $200,000 and paid dividends to common
stockholders of $40,000 in 2012. The weighted average number of shares outstanding
in 2012 was 50,000 shares. Stout Corporation's common stock is selling for $75 per
share on the New York Stock Exchange. Stout Corporation's price-earnings ratio is
3.8 times.
15 times.
18.8 times.
12 times.
Business Economics
Stout Corporation had net income of $200,000 and paid dividends to common
in 2012 was 50,000 shares. Stout Corporation's common stock is selling for $60 per
share on the New York Stock Exchange. Stout Corporation's payout ratio for 2012 is
$4 per share.
b 25%.
20%.
12.5%.
Business Economics

Flake Company reported the following on its income statement:
Income before income taxes $600,000
Income tax expense 150,000
Net income $450,000
An analysis of the income statement revealed that interest expense was $50,000.
Flake Company's times interest earned was
13 times.
12 times.
6 times.
7 times.
Business Economics
The debt to total assets ratio measures
the company's profitability.
whether interest can be paid on debt in the current year.
the proportion of interest paid relative to dividends paid.
the percentage of the total assets provided by creditors.
Economics
Trading on the equity (leverage) refers to the
amount of working capital.
amount of capital provided by owners.
use of borrowed money to increase the return to owners.
number of times interest is earned.
Economics

The current assets of Margo Company are $300,000. The current liabilities are
$100,000. The current ratio expressed as a proportion is
300%.
3.0 : 1
.33 : 1
$300,000 ÷ $100,000.
Business Economics
The current ratio may also be referred to as the
short run ratio.
acid-test ratio.
working capital ratio.
contemporary ratio.
Economics
A weakness of the current ratio is
the difficulty of the calculation.
that it doesn't take into account the composition of the current assets.
that it is rarely used by sophisticated analysts.
that it can be expressed as a percentage, as a rate, or as a proportion.
Economics
A supplier to a company would be most interested in the company’s
asset turnover.
profit margin.
current ratio.
earnings per share.
Economics

Which one of the following ratios would not likely be used by a short-term creditor in
evaluating whether to sell on credit to a company?
Current ratio
Acid-test ratio
Asset turnover
Receivables turnover
Economics
Ratios are used as tools in financial analysis
instead of horizontal and vertical analyses.
because they may provide information that is not apparent from inspection of the
individual components of the ratio.
because even single ratios by themselves are quite meaningful.
because they are prescribed by GAAP.
Economics
The ratios that are used to determine a company's short-term debt paying ability are
asset turnover, times interest earned, current ratio, and receivables turnover.
times interest earned, inventory turnover, current ratio, and receivables turnover.
times interest earned, acid-test ratio, current ratio, and inventory turnover.
current ratio, acid-test ratio, receivables turnover, and inventory turnover.
Economics
A measure of the percentage of each dollar of sales that results in net income is
profit margin.
return on assets.
return on common stockholders' equity.
earnings per share.

Economics
West Company had $375,000 of current assets and $150,000 of current liabilities
before borrowing $75,000 from the bank with a 3-month note payable. What effect
did the borrowing transaction have on the amount of West Company's working
capital?
No effect
$75,000 increase
$150,000 increase
$75,000 decrease
Business Economics
West Company had $375,000 of current assets and $150,000 of current liabilities
before borrowing $75,000 from the bank with a 3-month note payable. What effect
did the borrowing transaction have on West Company's current ratio?
The ratio remained unchanged.
The change in the current ratio cannot be determined.
The ratio decreased.
The ratio increased.
Ans:LO: 5, Bloom: C, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Business Economics
If equal amounts are added to the numerator and the denominator of the current ratio,
the ratio will always
increase.
decrease.
stay the same.
equal zero.
Economics

The acid-test ratio
is a quick calculation of an approximation of the current ratio.
does not include all current liabilities in the calculation.
does not include inventory as part of the numerator.
does include prepaid expenses as part of the numerator.
Economics
If a company has an acid-test ratio of 1.2:1, what respective effects will the borrowing
of cash by short-term debt and collection of accounts receivable have on the ratio?
Short-term Borrowing Collection of Receivable
Increase No effect
Increase Increase
Decrease No effect
Decrease Decrease
Ans:LO: 5, Bloom: C, Difficulty: Medium, Min: 2, AACSB: None, AICPA BB:
Economics
A company has a receivables turnover of 10 times. The average receivables during the
period are $500,000. What is the amount of net credit sales for the period?
$50,000
$5,000,000
$500,000
Cannot be determined from the information given
Business Economics
If the average collection period is 60 days, what is the receivables turnover?
6.0 times
6.1 times
12.2 times
None of these

Business Economics
A general rule to use in assessing the average collection period is that
it should not exceed 30 days.
it can be any length as long as the customer continues to buy merchandise.
it should not greatly exceed the discount period.
it should not greatly exceed the credit term period.
Economics
Inventory turnover is calculated by dividing
cost of goods sold by the ending inventory.
cost of goods sold by the beginning inventory.
cost of goods sold by the average inventory.
average inventory by cost of goods sold.
Economics
A company has an average inventory on hand of $40,000 and the days in inventory is
73 days. What is the cost of goods sold?
$200,000
$2,920,000
$400,000
$1,460,000
Business Economics
A successful grocery store would probably have
a low inventory turnover.

a high inventory turnover.
zero profit margin.
low volume.
Economics
An aircraft company would most likely have
a high inventory turnover.
low profit margin.
high volume.
a low inventory turnover.
Economics
Net sales are $6,000,000, beginning total assets are $2,800,000, and the asset turnover
is 3.0 times. What is the ending total asset balance?
$2,000,000
$1,200,000
$2,800,000
$2,200,000
Business Economics
Earnings per share is calculated
only for common stock.
only for preferred stock.
for common and preferred stock.
only for treasury stock.
Economics
Which of the following is not a profitability ratio?

Payout ratio
Profit margin
Times interest earned
Return on common stockholders' equity
Economics
Times interest earned is also called the
money multiplier.
interest coverage ratio.
coupon coverage ratio.
premium ratio.
Economics
The ratio that uses weighted average common shares outstanding in the denominator
is the
price-earnings ratio.
earnings per share.
payout ratio.
Economics
Net income does not appear in the numerator of the
profit margin.
return on assets.
payout ratio.
Economics

Bria Clothing Store had a balance in the Accounts Receivable account of $920,000 at
the beginning of the year and a balance of $980,000 at the end of the year. Net credit
sales during the year amounted to $7,600,000. The receivables turnover ratio was
8.0 times.
8.4 times.
7.8 times.
8.3 times.
Business Economics
Bria Clothing Store had a balance in the Accounts Receivable account of $810,000 at
the beginning of the year and a balance of $850,000 at the end of the year. Net credit
sales during the year amounted to $6,640,000. The average collection period of the
receivables in terms of days was
91.3 days.
45.6 days.
30 days.
46.7 days.
Business Economics
Donner Corporation had net income of $200,000 and paid dividends to common
in 2013 was 50,000 shares. Donner Corporation's common stock is selling for $35 per
share on the New York Stock Exchange. Donner Corporation's price-earnings ratio is
5 times.
8.75 times.
4 times.
10.9 times.
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 5, AACSB: Analytic, AICPA BB:
Business Economics

Donner Corporation had net income of $400,000 and paid dividends to common
in 2012 was 50,000 shares. Donner Corporation's common stock is selling for $50 per
share on the New York Stock Exchange. Donner Corporation's payout ratio for 2012
is
$8 per share.
10%.
12.5%.
20%.
Business Economics
Town Company reported the following on its income statement:
Income before income taxes $750,000
Income tax expense 150,000
Net income $600,000
An analysis of the income statement revealed that interest expense was $100,000.
Town Company's times interest earned was
5 times.
8.5 times.
6 times.
7.5 times.
Business Economics
The following information pertains to Sampson Company. Assume that all balance
sheet amounts represent both average and ending balance figures. Assume that all
sales were on credit.
Assets
Cash and short-term investments $ 45,000
Accounts receivable (net) 25,000
Inventory 20,000
Property, plant and equipment 210,000

Total Assets $300,000
Liabilities and Stockholders’ Equity
Current liabilities $ 50,000
Long-term liabilities 90,000
Stockholders’ equity—common 160,000
Total Liabilities and Stockholders’ Equity $300,000
MC 122. (Cont.)
Income Statement
Sales $ 120,000
Cost of goods sold 66,000
Gross profit 54,000
Operating expenses 30,000
Net income $ 24,000
Number of shares of common stock 6,000
Market price of common stock $20
Dividends per share .50
What is the current ratio for Sampson?
1.80:1
1.30:1
1.40:1
0.64

Business Economics
Assets
Inventory 20,000
Income Statement
Sales $ 105,000
Gross profit 39,000
Net income $ 9,000

What is the receivables turnover for Sampson?
1.5 times
1.1 times
3.0 times
12.9 times
Business Economics
Assets
Inventory 11,000
Income Statement

Sales $ 120,000
Gross profit 65,000
Net income $ 35,000
What is the inventory turnover for Sampson?
3,2 times
5 times
10.9 times
0.20 times
Business Economics
Assets
Inventory 20,000

MC 125. (Cont.)
Income Statement
Sales $ 120,000
Gross profit 54,000
Net income $ 24,000
What is the return on assets for Sampson?
8.0%
7.0%
18.0%
16.0%

Business Economics
Assets
Inventory 20,000
Income Statement
Sales $ 300,000
Gross profit 234,000
Net income $ 204,000

MC 126. (Cont.)
What is the profit margin for Sampson?
115%
28.2%
68%
51%
Business Economics
Assets
Inventory 20,000

Income Statement
Sales $ 150,000
Gross profit 84,000
Net income $ 54,000
What is the return on common stockholders’ equity for Sampson?
30%
46.7%
36%
16.9%
Business Economics
Assets

Inventory 20,000
Income Statement
Sales $ 120,000
Gross profit 54,000
Net income $ 36,000
What is the price-earnings ratio for Sampson?
5.5 times
1.1 times
6 times

6.6 times
Business Economics
The following information pertains to Eura Company. Assume that all balance sheet
amounts represent both average and ending balance figures. Assume that all sales
were on credit.
Assets
Inventory 25,000
MC 129. (Cont.)
Income Statement
Sales $ 90,000
Gross profit 45,000

Net income $ 20,000
Dividends per share 1
What is the return on assets for Eura?
4.8%
9.7%
6.5%
12.9%
Business Economics
were on credit.
Assets
Inventory 25,000
Income Statement

Sales $ 135,000
Gross profit 90,000
Net income $ 65,000
What is the profit margin for Eura?
27.8%
51.9%
72.2%
48.1%
Business Economics
were on credit.
Assets
Inventory 45,000

Income Statement
Sales $ 90,000
Gross profit 45,000
Net income $ 15,000
What is the return on common stockholders’ equity for Eura?
4.8%
7.7%
23.1%
46.2%
Business Economics
were on credit.
Assets
Inventory 25,000

MC 132. (Cont.)
Income Statement
Sales $ 90,000
Gross profit 45,000
Net income $ 20,000
Dividends per share 1.00
What is the price-earnings ratio for Eura?
5 times
4.0 times
7.3 times
5.5 times
Business Economics

The following information is available for Compton Company:
2012 2011
Accounts receivable $ 460,000 $ 500,000
Inventory 280,000 320,000
Net credit sales 2,470,000 1,400,000
Cost of goods sold 1,860,000 1,060,000
Net income 300,000 170,000
The receivables turnover ratio for 2012 is
1.6 times.
5.4 times.
5.1 times.
3.9 times.
Business Economics
The following information is available for Compton Company:
2012 2011
Accounts receivable $ 360,000 $ 400,000
Inventory 340,000 420,000
Net credit sales 2,470,000 1,400,000
Cost of goods sold 1,860,000 1,060,000
Net income 300,000 170,000

The inventory turnover ratio for 2012 is
6.2 times.
4.9 times.
5.5 times.
4.4 times.
Business Economics
The following amounts were taken from the financial statements of Plant Company:
2013 2012
Total assets $800,000 $1,000,000
Net sales 720,000 650,000
Gross profit 352,000 320,000
Net income 126,000 117,000
Weighted average number of common shares outstanding 90,000 90,000
Market price of common stock $35 $39
The return on assets ratio for 2013 is
16%.
14%.
32%.
28%.
Business Economics
2013 2012

Total assets $800,000 $1,000,000
Net sales 840,000 650,000
Gross profit 352,000 320,000
Net income 155,400 117,000
Market price of common stock $35 $39
The profit margin ratio for 2013 is
19.4%.
44.1%.
18.5%.
10.7%.
Business Economics
2013 2012
Total assets $800,000 $1,000,000
Net sales 720,000 650,000
Gross profit 352,000 320,000
Net income 150,000 117,000
Market price of common stock $67.50 $39
The price-earnings ratio for 2013 is
27 times.
45 times.

11 times.
2.5 times.
Business Economics
Star Corporation had net income of $300,000 and paid dividends to common
in 2012 was 50,000 shares. Star Corporation's common stock is selling for $36 per
share on the New York Stock Exchange.
Star Corporation's price-earnings ratio is
5.2 times.
6 times.
18 times.
6.9 times.
Business Economics
Star Corporation had net income of $320,000 and paid dividends to common
in 2012 was 50,000 shares. Star Corporation's common stock is selling for $30 per
share on the New York Stock Exchange.
Star Corporation's payout ratio for 2012 is
16%.
25%.
9%.
$4 per share.
Business Economics

The following financial statement information is available for Houser Corporation:
2012 2011
Inventory $ 44,000 $ 43,000
Current assets 81,000 106,000
Total assets 432,000 358,000
Current liabilities 30,000 36,000
Total liabilities 102,000 88,000
The current ratio for 2012 is
.37:1.
2.7:1.
.79:1.
4.24:1.
Business Economics
The following financial statement information is available for Jones Corporation:
2012 2011
Net sales $784,000 $697,000
Cost of goods sold 406,000 377,000
Net income 112,000 80,000
Tax expense 48,000 29,000
Interest expense 14,000 14,000
The profit margin ratio for 2012 is
14.3%.
16.1%.
48.2%.
11.7%.

Business Economics
The following financial statement information is available for Henn Corporation:
2013 2012
Stockholders' equity - common $330,000 $270,000
Net sales 784,000 697,000
Cost of goods sold 406,000 377,000
Net income 112,000 80,000
Inc tax expense 48,000 29,000
Dividends paid to preferred
stockholders 22,000 20,000
Dividends paid to common
The return on common stockholders’ equity for 2013 is
25.0%.
37.3%.
27.3%.
30.0%.
Business Economics
The following financial statement information is available for Bongo Corporation:
2013 2012
Net income $115,000 $ 80,000
Income tax expense 50,000 29,000

The times interest earned for 2013 is
8.8 times.
7.7 times.
12 times.
11 times.
Business Economics
Dean Corporation reported net income $48,000, net sales $400,000, and average
assets $800,000 for 2013. The 2013 profit margin was:
6%.
12%.
50%.
200%.
Business Economics
Goin Company reports the following amounts for 2012:
Net income $ 150,000
Average stockholders’ equity 2,000,000
Preferred dividends 48,000
Par value preferred stock 200,000

The 2012 rate of return on common stockholders’ equity is:
5.1%.
5.7%.
7.5%.
8.3%.
Business Economics
Gamble Corporation had beginning inventory $100,000, cost of goods purchased
$700,000, and ending inventory $140,000. What was Gamble's inventory turnover?
5 times.
5.5 times.
5.83 times.
6.6 times.
Business Economics
In 2012 Shum Corporation reported income from operations $180,000, interest
expense $50,000, and income tax expense $40,000. Shum’s times interest earned ratio
was:
5.4 times.
4.6 times.
4.4 times.
3.6 times.
Business Economics
Reynolds Company has income before taxes of $360,000 and an extraordinary loss of
$80,000. If the income tax rate is 30% on all items, the income statement should show
income before irregular items and an extraordinary loss, respectively, of:
$360,000 and ($80,000)

$252,000 and ($24,000)
$252,000 and ($56,000)
$108,000 and ($24,000)
Ans:LO: 6, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Business Economics
All of the following statements regarding changes in accounting principles are true
except:
Most changes in accounting principles are only reported in current periods when the
principle change takes place.
Changes in accounting principles are allowed when new principles are preferable to
old ones.
Most changes in accounting principles are retroactively reported.
Consistency is one of the biggest concerns when a change in accounting principle is
undertaken.
Economics
Alpha’s Bunny Barn has experienced a $60,000 loss due to tornado damage to its
inventory. Tornados have never before occurred in this area. Assuming that the
company’s tax rate is 30%, what amount will be reported for this loss on the income
statement?
$60,000
$42,000
$18,000
$54,000
Business Economics
Wing Company reported income before taxes of $900,000 and an extraordinary loss
of $250,000. Assume that the company’s tax rate is 30%. What amounts will be
reported on the income statement for income before irregular items and extraordinary
items, respectively?

$630,000 and $250,000
$630,000 and $175,000
$650,000 and $250,000
$650,000 and $175,000
Business Economics
Krug Corporation has income before taxes of $900,000 and an extraordinary gain of
$300,000. If the income tax rate is 25% on all items, the income statement should
show income before irregular items and extraordinary items, respectively, of
$600,000 and $300,000.
$600,000 and $225,000.
$675,000 and $300,000.
$675,000 and $225,000.
Business Economics
Hook Inc. has an investment in non-trading securities of $80,000. This investment
experienced an unrealized loss of $5,000 during the current year. Assuming a 35% tax
rate, the effect of this loss on comprehensive income will be
no effect.
$80,000 increase.
$28,000 decrease.
$5,000 decrease.
Ans:LO: 6, Bloom: K, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Business Economics
The disposal of a significant component of a business is called
a change in accounting principle.
an extraordinary item.
an other expense.
discontinued operations.

Ans:LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB:
Economics
ACME Company reports income before income taxes of $2,400,000 and had an extra-
ordinary loss of $800,000. If the tax rate is 30%,
the income before the extraordinary item is $1,920,000.
the extraordinary loss would be reported on the income statement at $800,000.
the income before the extraordinary item is $1,680,000.
the extraordinary loss will be reported at $240,000.
Business Economics
Eaton, Inc. disposes of an unprofitable segment of its business. The operation of the
segment suffered a $360,000 loss in the year of disposal. The loss on disposal of the
segment was $180,000. If the tax rate is 30%, and income before income taxes was
$2,250,000,
the income tax expense on the income before discontinued operations is $513,000.
the income from continuing operations is $1,575,000.
net income is $1,710,000.
the losses from discontinued operations are reported net of income taxes at $270,000.
Business Economics
Each of the following is an extraordinary item except the
effects of major casualties, if rare in the area.
effects of a newly enacted law or regulation.
expropriation of property by a foreign government.
losses attributable to labor strikes.

The discontinued operations section of the income statement refers to
discontinuance of a product line.
the income or loss on products that have been completed and sold.
obsolete equipment and discontinued inventory items.
the disposal of a significant segment of a business.
Which one of the following would be classified as an extraordinary item?
Expropriation of property by a foreign government
Losses attributed to a labor strike
Write-down of inventories
Gains or losses from sales of equipment
A loss on the write down of obsolete inventory should be reported as
"other expenses and losses."
part of discontinued operations.
an operating expense.
an extraordinary item.
Legal/Regulatory, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
If an item meets one (but not both) of the criteria for an extraordinary item, it
only needs to be disclosed in the footnotes of the financial statements.
may be treated as sales revenue (if it is a gain) and as an operating expense (if it is a
loss).
is reported as an "other revenue or gain" or "other expense and loss," net of tax.
is reported at its gross amount as an "other revenue or gain" or "other expense or
loss."
Legal/Regulatory, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

The order of presentation of nontypical items that may appear on the income
statement is
Extraordinary items, Discontinued operations, Other revenues and expenses.
Discontinued operations, Extraordinary items, Other revenues and expenses.
Other revenues and expenses, Discontinued operations, Extraordinary items.
Other revenues and expenses, Extraordinary items, Discontinued operations.
Each of the following is a factor affecting quality of earnings except
alternative accounting methods.
improper recognition.
pro forma income.
extraordinary items.
Comparisons can be made on each of the following bases except
industry averages.
intercompany basis.
intracompany basis.
Each of these is a basis for comparison.
Economics
165.... Comparisons of data within a company are an example of the following
comparative basis:
Industry averages
Intercompany
Intracompany
Interregional

Industry/Sector, AICPA FN: Measurement, AICPA PC: None, IMA: Business
Economics
166.... Center Corporation reported net sales of $200,000, $350,000, and $550,000 in
the years 2012, 2013, and 2014 respectively. If 2012 is the base year, what is the trend
percentage for 2014?
100%
75%
175%
275%
Ans:LO: 3, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Business Economics
In vertical analysis, the base amount for each income statement item is
gross profit.
net income.
net sales.
sales.
Economics
When performing vertical analysis, the base amount for administrative expense is
generally
administrative expense in a previous year.
net sales.
gross profit.
fixed assets.
Economics

Ratios that measure the short-term ability of the company to pay its maturing
obligations are
liquidity ratios.
profitability ratios.
solvency ratios.
trend ratios.
Economics
What type of ratios best measure the short-term ability of the enterprise to pay its
maturing obligations and to meet unexpected needs for cash?
Leverage
Solvency
Profitability
Liquidity
Economics
The acid-test ratio is also known as the
current ratio.
quick ratio.
fast ratio.
times interest earned ratio.
Economics
The debt to total assets ratio
is a solvency ratio.
is computed by dividing total assets by total debt.
measures the total assets provided by stockholders.
is a profitability ratio.

Economics
An extraordinary item is one that
occurs infrequently and is uncontrollable in nature.
occurs infrequently and is unusual in nature.
is material and is unusual in nature.
is material and is uncontrollable in nature.
Parrish, Inc. decided on January 1 to discontinue its telescope manufacturing division.
On July 1, the division’s assets with a book value of $1,250,000 are sold for
$850,000. Operating income from January 1 to June 30 for the division amounted to
$125,000. Ignoring income taxes, what total amount should be reported on Parrish’s
income statement for the current year under the caption, Discontinued Operations?
$125,000
$275,000 loss
$400,000 loss
$525,000
Reporting
When there has been a change in accounting principle,
the old principle should be used in reporting the results of operations for the current
year.
the cumulative effect of the change should be reported in the current year’s retained
earnings statement.
the change should be reported retroactively.
the new principle should be used in reporting the results of operations of the current
year, but there is no change to prior years.

Acc 557 week 11 quiz – strayer new

Recommended

Recommended

More Related Content

Viewers also liked

Viewers also liked (9)

Similar to Acc 557 week 11 quiz – strayer new

Similar to Acc 557 week 11 quiz – strayer new (20)

Recently uploaded

Recently uploaded (20)

Acc 557 week 11 quiz – strayer new