This document provides a quiz for ACC 557 Week 11 that includes true-false statements and multiple choice questions related to analyzing financial statements. It tests understanding of key concepts like horizontal analysis, vertical analysis, ratio analysis, liquidity, profitability, and how different stakeholders evaluate financial performance. The quiz provides answers for each question along with learning objectives and difficulty levels.
This document contains a quiz on analyzing financial statements. It includes 31 true-false questions and 15 multiple choice questions testing understanding of key concepts like horizontal analysis, vertical analysis, ratio analysis, and how different stakeholders analyze financial statements differently based on their interests like liquidity, profitability, or solvency. The quiz provides the answers and identifies which concepts and skills each question addresses.
This document contains a quiz for an economics course covering macroeconomic policy in an open economy. The quiz includes 25 multiple choice questions and 20 true/false questions testing understanding of topics like internal balance, external balance, expenditure-changing policies, expenditure-switching policies, the effects of monetary and fiscal policy in open economies, and international policy coordination. It also provides context about the Plaza Accord of 1985 where countries agreed to intervene to depreciate the US dollar.
This document provides a quiz on supply chain management concepts from chapters 16 and 17. It includes multiple choice and true/false questions covering topics like investment recovery, hazardous waste management, inventory storage, transportation coordination, production planning, and supply function evaluation metrics. The questions assess understanding of key responsibilities, strategies, and trends within supply chain and materials management.
Bus 335 staffing organizations week 11 quizsarahlazeto
This document is a quiz for BUS 335 Week 11 that contains 59 multiple choice questions about employee turnover. The questions cover topics such as the types of employee turnover (voluntary, discharge, downsizing), predictors of turnover intentions, costs of turnover, and strategies for improving retention. Correct answers are not provided.
This document contains a quiz for an economics course on international finance. It includes 63 multiple choice and true/false questions testing concepts related to open economy macroeconomics, international trade, exchange rates, current accounts and balance of payments. The questions cover topics such as real GNP, the trade balance, net foreign investment, terms of trade and the effects of tariffs on macroeconomic variables.
This document provides a quiz for an economics course on working capital management and international trade finance. It contains multiple choice and true/false questions covering topics like operating cycles, net working capital, cash management strategies for multinational enterprises, and financial instruments used in international trade like letters of credit. The quiz aims to test understanding of concepts related to managing current assets and liabilities in global business.
This document summarizes a quiz for a business course. It contains 39 multiple choice questions about topics like business processes, business process management, systems development lifecycle, project management, and information systems development. The questions are from chapters 13 and 14 on business process management and systems development in the course textbook.
This document discusses key concepts learned in an MKT 500 marketing course over 10 weeks. It prompts the student to reflect on the two most important concepts learned, and to predict two ways these concepts can be applied to their current job and career. The student is asked to give their opinion on how the course's learning outcomes contribute to an MBA curriculum and provide a rationale.
This document contains a quiz on analyzing financial statements. It includes 31 true-false questions and 15 multiple choice questions testing understanding of key concepts like horizontal analysis, vertical analysis, ratio analysis, and how different stakeholders analyze financial statements differently based on their interests like liquidity, profitability, or solvency. The quiz provides the answers and identifies which concepts and skills each question addresses.
This document contains a quiz for an economics course covering macroeconomic policy in an open economy. The quiz includes 25 multiple choice questions and 20 true/false questions testing understanding of topics like internal balance, external balance, expenditure-changing policies, expenditure-switching policies, the effects of monetary and fiscal policy in open economies, and international policy coordination. It also provides context about the Plaza Accord of 1985 where countries agreed to intervene to depreciate the US dollar.
This document provides a quiz on supply chain management concepts from chapters 16 and 17. It includes multiple choice and true/false questions covering topics like investment recovery, hazardous waste management, inventory storage, transportation coordination, production planning, and supply function evaluation metrics. The questions assess understanding of key responsibilities, strategies, and trends within supply chain and materials management.
Bus 335 staffing organizations week 11 quizsarahlazeto
This document is a quiz for BUS 335 Week 11 that contains 59 multiple choice questions about employee turnover. The questions cover topics such as the types of employee turnover (voluntary, discharge, downsizing), predictors of turnover intentions, costs of turnover, and strategies for improving retention. Correct answers are not provided.
This document contains a quiz for an economics course on international finance. It includes 63 multiple choice and true/false questions testing concepts related to open economy macroeconomics, international trade, exchange rates, current accounts and balance of payments. The questions cover topics such as real GNP, the trade balance, net foreign investment, terms of trade and the effects of tariffs on macroeconomic variables.
This document provides a quiz for an economics course on working capital management and international trade finance. It contains multiple choice and true/false questions covering topics like operating cycles, net working capital, cash management strategies for multinational enterprises, and financial instruments used in international trade like letters of credit. The quiz aims to test understanding of concepts related to managing current assets and liabilities in global business.
This document summarizes a quiz for a business course. It contains 39 multiple choice questions about topics like business processes, business process management, systems development lifecycle, project management, and information systems development. The questions are from chapters 13 and 14 on business process management and systems development in the course textbook.
This document discusses key concepts learned in an MKT 500 marketing course over 10 weeks. It prompts the student to reflect on the two most important concepts learned, and to predict two ways these concepts can be applied to their current job and career. The student is asked to give their opinion on how the course's learning outcomes contribute to an MBA curriculum and provide a rationale.
This document contains a quiz on analyzing financial statements. It includes 36 true-false statements and 1 multiple choice question testing concepts such as:
- Horizontal analysis compares financial statement items over time.
- Vertical analysis expresses each item as a percentage of a base amount like net sales.
- Key financial ratios measure liquidity, profitability, and leverage.
This document contains a quiz on analyzing financial statements. It includes 36 true-false statements and 1 multiple choice question testing concepts like horizontal analysis, vertical analysis, ratio analysis, liquidity ratios, profitability ratios, and analyzing trends, financial relationships, and a company's position relative to its industry. The document provides answers and identifies which learning objectives, Bloom's taxonomy level, and accounting standards are assessed by each question.
This document contains a quiz on analyzing financial statements. It includes 36 true-false statements and 1 multiple choice question testing concepts like horizontal analysis, vertical analysis, ratio analysis, liquidity ratios, profitability ratios, and analyzing trends, financial relationships, and a company's position relative to its industry. The document provides answers and identifies which learning objectives, Bloom's taxonomy level, and accounting standards are assessed by each question.
This document contains a quiz on analyzing financial statements. It includes 31 true-false questions and 15 multiple choice questions testing understanding of key concepts like horizontal analysis, vertical analysis, ratio analysis, and how different stakeholders analyze financial statements differently based on their interests like liquidity, profitability, and solvency. The quiz provides the answers and identifies which concepts and skills each question addresses.
This document contains a quiz on analyzing financial statements. It includes 31 true-false questions and 15 multiple choice questions testing understanding of key concepts like horizontal analysis, vertical analysis, ratio analysis, and how different stakeholders analyze financial statements differently based on their interests like liquidity, profitability, or solvency. The quiz provides the answers and identifies which learning objectives, skills, and accounting standards each question relates to.
This document contains a quiz on analyzing financial statements. It includes 31 true-false questions and 15 multiple choice questions testing understanding of key concepts like horizontal analysis, vertical analysis, ratio analysis, and how different stakeholders analyze financial statements differently based on their interests like liquidity, profitability, or solvency. The quiz provides the answers and identifies learning objectives and difficulty for each question.
This document contains a quiz on analyzing financial statements. It includes 31 true-false questions and 15 multiple choice questions testing understanding of key concepts like horizontal analysis, vertical analysis, ratio analysis, and how different stakeholders analyze financial statements differently based on their interests like liquidity, profitability, and solvency. The quiz provides the answers and identifies which concepts and skills each question addresses.
This document provides an overview of Chapter 14 from a financial accounting textbook. It covers the topics of financial statement analysis, including comparative analysis, tools of analysis such as horizontal analysis, vertical analysis, and ratio analysis. It defines key terms and concepts and provides examples of ratios used to analyze a firm's liquidity, profitability, and solvency. It also discusses concepts like earning power, discontinued operations, and quality of earnings. The document appears to be from a test bank or study guide accompanying a financial accounting textbook.
The document contains a quiz on preparing and analyzing statements of cash flows, including 35 true-false questions covering topics such as: the required financial statements, classifying cash flows as operating, investing, or financing activities, and using both the direct and indirect methods. It also provides the learning objectives, difficulty level, and other tags for each question.
The document provides information about a quiz for ACC 557 Week 10, including true-false statements and multiple choice questions related to the statement of cash flows. Specifically, it covers topics like the purpose of the statement of cash flows, how it classifies cash flows as operating, investing and financing activities, and how to prepare it using both the direct and indirect method.
The document provides information about a quiz for ACC 557 Week 10 that includes true-false statements and multiple choice questions related to the statement of cash flows. Specifically, it tests knowledge of the purpose of the statement of cash flows, how it differs from other financial statements, how to classify cash flows as operating, investing or financing activities, and how to prepare the statement of cash flows using both the direct and indirect methods.
The document provides details of a quiz for ACC 557 Week 10, including true-false statements and multiple choice questions related to the statement of cash flows. Specifically, it tests understanding of the purpose of the statement of cash flows, how it is prepared, what activities are classified as operating, investing and financing, and how non-cash items are handled.
This document provides questions and answers related to accounting for investments. It begins with multiple choice and true-false questions covering various topics in accounting for debt investments, equity investments, and consolidated financial statements. The questions assess understanding of concepts such as accounting for purchases and sales of investments, the equity method, consolidated financial statements, classification of investments, and accounting for subsidiaries. The document aims to help students prepare for an exam through practice questions that test their knowledge of key concepts in accounting for investments.
This document contains a quiz for ACC 560 Week 2 that covers topics in Chapter 1 of Managerial Accounting including:
- The key differences between financial and managerial accounting
- The functions of management: planning, organizing, directing, and controlling
- Classifying costs as product vs. period costs
- Calculating cost of goods manufactured, cost of goods sold, and gross profit
- Inventory valuation methods for raw materials, work-in-process, and finished goods
The quiz contains 37 true/false questions and 10 multiple choice questions testing understanding of these chapter concepts.
The document is a quiz for ACC 560 Week 10 that covers topics related to the statement of cash flows. It includes 36 true/false questions and 10 multiple choice questions testing understanding of key concepts such as the purpose of the statement of cash flows, how it is prepared, and how to classify cash flows as operating, investing or financing activities. The quiz also contains answers to the questions.
The document is a quiz for ACC 560 Week 10 that covers topics related to the statement of cash flows. It includes 36 true/false questions and 10 multiple choice questions testing understanding of key concepts such as the purpose of the statement of cash flows, how it is prepared, and how to classify cash flows as operating, investing or financing activities. The quiz also contains answers to the questions.
This document contains a quiz on preparing and understanding the statement of cash flows. It includes 35 true-false questions covering topics such as the required financial statements, classifying cash flows as operating, investing or financing activities, and using the direct and indirect methods to prepare the statement of cash flows. It also provides the learning objectives, difficulty level and accounting standards addressed for each question.
The document is a quiz for ACC 560 Week 10 that covers topics related to the statement of cash flows. It includes 36 true/false questions and 10 multiple choice questions testing understanding of key concepts such as the purpose of the statement of cash flows, how it is prepared, and how to classify cash flows as operating, investing or financing activities. The quiz also contains answers to the questions.
5 - 12Test Bank for Accounting Principles, Eleventh Edition.docxgilbertkpeters11344
The document is a chapter summary from an accounting textbook. It provides an overview of the learning objectives, types of questions, and organization of the chapter material. The chapter focuses on accounting for merchandising operations and covers topics such as the differences between service and merchandising companies, perpetual and periodic inventory systems, and preparing worksheets. It includes 190 true-false questions, 189 multiple choice questions, and 19 exercises/problems to reinforce the learning objectives.
StuDocu is not sponsored or endorsed by any college or university. This document is a chapter from a test bank for a financial accounting textbook. It covers accounting for merchandising operations, including the differences between service and merchandising companies, recording purchases and sales under perpetual and periodic inventory systems, preparing income statements and worksheets, and the accounting cycle for merchandisers. The chapter contains learning objectives, explanations of key concepts, and true-false questions to test understanding.
Cis 562 week 11 final exam – strayer newsarahlazeto
This document provides an excerpt from a study guide for the CIS 562 Week 11 Final Exam from Strayer University. It includes multiple choice, true/false, and completion questions about computer forensics tools, file systems, analysis and validation. Some key topics covered include forensics tool categories, Macintosh and Linux boot processes, searching and hashing files, and hiding and recovering hidden data.
The document provides sample exam questions for an accounting course covering governmental funds and long-term debt. It includes 30 multiple choice questions and 1 problem covering topics like capital projects funds, debt service funds, bond proceeds, interest payments, and debt refunding. The questions assess understanding of accounting entries and financial reporting for governmental funds.
This document contains a quiz on analyzing financial statements. It includes 36 true-false statements and 1 multiple choice question testing concepts such as:
- Horizontal analysis compares financial statement items over time.
- Vertical analysis expresses each item as a percentage of a base amount like net sales.
- Key financial ratios measure liquidity, profitability, and leverage.
This document contains a quiz on analyzing financial statements. It includes 36 true-false statements and 1 multiple choice question testing concepts like horizontal analysis, vertical analysis, ratio analysis, liquidity ratios, profitability ratios, and analyzing trends, financial relationships, and a company's position relative to its industry. The document provides answers and identifies which learning objectives, Bloom's taxonomy level, and accounting standards are assessed by each question.
This document contains a quiz on analyzing financial statements. It includes 36 true-false statements and 1 multiple choice question testing concepts like horizontal analysis, vertical analysis, ratio analysis, liquidity ratios, profitability ratios, and analyzing trends, financial relationships, and a company's position relative to its industry. The document provides answers and identifies which learning objectives, Bloom's taxonomy level, and accounting standards are assessed by each question.
This document contains a quiz on analyzing financial statements. It includes 31 true-false questions and 15 multiple choice questions testing understanding of key concepts like horizontal analysis, vertical analysis, ratio analysis, and how different stakeholders analyze financial statements differently based on their interests like liquidity, profitability, and solvency. The quiz provides the answers and identifies which concepts and skills each question addresses.
This document contains a quiz on analyzing financial statements. It includes 31 true-false questions and 15 multiple choice questions testing understanding of key concepts like horizontal analysis, vertical analysis, ratio analysis, and how different stakeholders analyze financial statements differently based on their interests like liquidity, profitability, or solvency. The quiz provides the answers and identifies which learning objectives, skills, and accounting standards each question relates to.
This document contains a quiz on analyzing financial statements. It includes 31 true-false questions and 15 multiple choice questions testing understanding of key concepts like horizontal analysis, vertical analysis, ratio analysis, and how different stakeholders analyze financial statements differently based on their interests like liquidity, profitability, or solvency. The quiz provides the answers and identifies learning objectives and difficulty for each question.
This document contains a quiz on analyzing financial statements. It includes 31 true-false questions and 15 multiple choice questions testing understanding of key concepts like horizontal analysis, vertical analysis, ratio analysis, and how different stakeholders analyze financial statements differently based on their interests like liquidity, profitability, and solvency. The quiz provides the answers and identifies which concepts and skills each question addresses.
This document provides an overview of Chapter 14 from a financial accounting textbook. It covers the topics of financial statement analysis, including comparative analysis, tools of analysis such as horizontal analysis, vertical analysis, and ratio analysis. It defines key terms and concepts and provides examples of ratios used to analyze a firm's liquidity, profitability, and solvency. It also discusses concepts like earning power, discontinued operations, and quality of earnings. The document appears to be from a test bank or study guide accompanying a financial accounting textbook.
The document contains a quiz on preparing and analyzing statements of cash flows, including 35 true-false questions covering topics such as: the required financial statements, classifying cash flows as operating, investing, or financing activities, and using both the direct and indirect methods. It also provides the learning objectives, difficulty level, and other tags for each question.
The document provides information about a quiz for ACC 557 Week 10, including true-false statements and multiple choice questions related to the statement of cash flows. Specifically, it covers topics like the purpose of the statement of cash flows, how it classifies cash flows as operating, investing and financing activities, and how to prepare it using both the direct and indirect method.
The document provides information about a quiz for ACC 557 Week 10 that includes true-false statements and multiple choice questions related to the statement of cash flows. Specifically, it tests knowledge of the purpose of the statement of cash flows, how it differs from other financial statements, how to classify cash flows as operating, investing or financing activities, and how to prepare the statement of cash flows using both the direct and indirect methods.
The document provides details of a quiz for ACC 557 Week 10, including true-false statements and multiple choice questions related to the statement of cash flows. Specifically, it tests understanding of the purpose of the statement of cash flows, how it is prepared, what activities are classified as operating, investing and financing, and how non-cash items are handled.
This document provides questions and answers related to accounting for investments. It begins with multiple choice and true-false questions covering various topics in accounting for debt investments, equity investments, and consolidated financial statements. The questions assess understanding of concepts such as accounting for purchases and sales of investments, the equity method, consolidated financial statements, classification of investments, and accounting for subsidiaries. The document aims to help students prepare for an exam through practice questions that test their knowledge of key concepts in accounting for investments.
This document contains a quiz for ACC 560 Week 2 that covers topics in Chapter 1 of Managerial Accounting including:
- The key differences between financial and managerial accounting
- The functions of management: planning, organizing, directing, and controlling
- Classifying costs as product vs. period costs
- Calculating cost of goods manufactured, cost of goods sold, and gross profit
- Inventory valuation methods for raw materials, work-in-process, and finished goods
The quiz contains 37 true/false questions and 10 multiple choice questions testing understanding of these chapter concepts.
The document is a quiz for ACC 560 Week 10 that covers topics related to the statement of cash flows. It includes 36 true/false questions and 10 multiple choice questions testing understanding of key concepts such as the purpose of the statement of cash flows, how it is prepared, and how to classify cash flows as operating, investing or financing activities. The quiz also contains answers to the questions.
The document is a quiz for ACC 560 Week 10 that covers topics related to the statement of cash flows. It includes 36 true/false questions and 10 multiple choice questions testing understanding of key concepts such as the purpose of the statement of cash flows, how it is prepared, and how to classify cash flows as operating, investing or financing activities. The quiz also contains answers to the questions.
This document contains a quiz on preparing and understanding the statement of cash flows. It includes 35 true-false questions covering topics such as the required financial statements, classifying cash flows as operating, investing or financing activities, and using the direct and indirect methods to prepare the statement of cash flows. It also provides the learning objectives, difficulty level and accounting standards addressed for each question.
The document is a quiz for ACC 560 Week 10 that covers topics related to the statement of cash flows. It includes 36 true/false questions and 10 multiple choice questions testing understanding of key concepts such as the purpose of the statement of cash flows, how it is prepared, and how to classify cash flows as operating, investing or financing activities. The quiz also contains answers to the questions.
5 - 12Test Bank for Accounting Principles, Eleventh Edition.docxgilbertkpeters11344
The document is a chapter summary from an accounting textbook. It provides an overview of the learning objectives, types of questions, and organization of the chapter material. The chapter focuses on accounting for merchandising operations and covers topics such as the differences between service and merchandising companies, perpetual and periodic inventory systems, and preparing worksheets. It includes 190 true-false questions, 189 multiple choice questions, and 19 exercises/problems to reinforce the learning objectives.
StuDocu is not sponsored or endorsed by any college or university. This document is a chapter from a test bank for a financial accounting textbook. It covers accounting for merchandising operations, including the differences between service and merchandising companies, recording purchases and sales under perpetual and periodic inventory systems, preparing income statements and worksheets, and the accounting cycle for merchandisers. The chapter contains learning objectives, explanations of key concepts, and true-false questions to test understanding.
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The Origins of the Dwayne Johnson Kidnapping Saga
Dwayne Johnson: A Brief Background
Before discussing the specifics of the kidnapping. it is crucial to understand who Dwayne Johnson is and why his kidnapping would be so significant. Born May 2, 1972, Dwayne Douglas Johnson is an American actor, producer, businessman. and former professional wrestler. Known by his ring name, "The Rock," he gained fame in the World Wrestling Federation (WWF, now WWE) before transitioning to a successful career in Hollywood.
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Setting the Scene: The Day of the Kidnapping
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But, beneath the veneer of normalcy, a sinister plot was unfolding. Unbeknownst to Johnson and his team, a group of criminals had planned his abduction. hoping to leverage his celebrity status for a hefty ransom. The stage was set for an event that would soon dominate worldwide headlines and social media feeds.
The Abduction: Unfolding the Dwayne Johnson Kidnapping
The Moment of Capture
On the day of the kidnapping, everything seemed to be proceeding as usual on set. Johnson and his co-stars and crew were engrossed in shooting a particularly demanding scene. As the day wore on, the production team took a short break. providing the kidnappers with the perfect opportunity to strike.
The abduction was executed with military precision. A group of masked men, armed and organized, infiltrated the set. They created chaos, taking advantage of the confusion to isolate Johnson. Johnson was outnumbered and caught off guard despite his formidable strength and fighting skills. The kidnappers overpowered him, bundled him into a waiting vehicle. and sped away, leaving everyone on set in a state of shock and disbelief.
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Acc 557 week 11 quiz – strayer new
1. ACC 557 Week 11 Quiz – Strayer NEW
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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,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Measures of a company's liquidity are concerned with the frequency and amounts of
dividend payments.
Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Analysis of financial statements is enhanced with the use of comparative data.
Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Comparisons of company data with industry averages can provide some insight into
the company's relative position in the industry.
2. 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.
Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Horizontal, vertical, and circular analyses are the most common tools of financial
statement analysis.
Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
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.
Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Another name for trend analysis is horizontal analysis.
Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
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
3. 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.
Ans: LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Common size analysis expresses each item within a financial statement in terms of a
percent of a base amount.
Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Vertical analysis is a more sophisticated analytical tool than horizontal analysis.
Ans: LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Vertical analysis is useful in making comparisons of companies of different sizes.
Ans: LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Meaningful analysis of financial statements will include either horizontal or vertical
analysis, but not both.
Ans: LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
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%.
4. Ans: LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB:
None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Performance
Measurement
In the vertical analysis of the income statement, each item is generally stated as a
percentage of net income.
Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
A ratio can be expressed as a percentage, a rate, or a proportion.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
A solvency ratio measures the income or operating success of an enterprise for a
given period of time.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
The current ratio is a measure of all the ratios calculated for the current year.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Inventory turnover measures the number of times on the average the inventory was
sold during the period.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Profitability ratios are frequently used as a basis for evaluating management's
operating effectiveness.
5. Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
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.
Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
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.
Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
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:
None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Performance
Measurement
Using borrowed money to increase the rate of return on common stockholders' equity
is called "trading on the equity."
Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None,
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.
6. 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.
Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
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.
Ans: LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
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:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
A percentage change can be computed only if the base amount is zero or positive.
Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
In vertical analysis, the base amount in an income statement is usually net sales.
7. Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Profitability ratios measure the ability of the enterprise to survive over a long period
of time.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
The days in inventory is computed by multiplying inventory turnover by 365.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Extraordinary items are reported net of applicable taxes in a separate section of the
income statement.
Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
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
8. Which one of the following is not a characteristic generally evaluated in analyzing
financial statements?
Liquidity
Profitability
Marketability
Solvency
Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
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:
Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business
Economics
Short-term creditors are usually most interested in evaluating
solvency.
liquidity.
marketability.
profitability.
Ans:LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business
Economics
Long-term creditors are usually most interested in evaluating
liquidity and solvency.
solvency and marketability.
liquidity and profitability.
profitability and solvency.
Ans:LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business
Economics
9. Stockholders are most interested in evaluating
liquidity and solvency.
profitability and solvency.
liquidity and profitability.
marketability and solvency.
Ans:LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business
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.
Ans:LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business
Economics
Comparisons of financial data made within a company are called
intracompany comparisons.
interior comparisons.
intercompany comparisons.
intramural comparisons.
Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
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.
10. Ans:LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
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
Ans:LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
In analyzing financial statements, horizontal analysis is a
requirement.
tool.
principle.
theory.
Ans:LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
Horizontal analysis is also called
linear analysis.
vertical analysis.
trend analysis.
common size analysis.
Ans:LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
Vertical analysis is also known as
perpendicular analysis.
common size analysis.
trend analysis.
straight-line analysis.
11. Ans:LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
In ratio analysis, the ratios are never expressed as a
rate.
negative figure.
percentage.
simple proportion.
Ans:LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
Horizontal analysis evaluates financial statement data
within a period of time.
over a period of time.
on a certain date.
12. as it may appear in the future.
Ans:LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
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.
13. Ans:LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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%
14. 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
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%
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
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?
15. 30%
40%
100%
None of the above
Ans:LO: 4, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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
Ans:LO: 4, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Business Economics
Vertical analysis is also called
common size analysis.
horizontal analysis.
ratio analysis.
trend analysis.
16. Ans:LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
In performing a vertical analysis, the base for prepaid expenses is
total current assets.
total assets.
total liabilities and stockholders' equity.
prepaid expenses.
Ans:LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
In performing a vertical analysis, the base for sales revenues on the income statement
is
17. net sales.
sales.
net income.
cost of goods available for sale.
Ans:LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
In performing a vertical analysis, the base for sales returns and allowances is
sales.
sales discounts.
net sales.
total revenues.
Ans:LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
In performing a vertical analysis, the base for cost of goods sold is
total selling expenses.
net sales.
total revenues.
total expenses.
Ans:LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
Each of the following is a liquidity ratio except the
acid-test ratio.
current ratio.
debt to total assets ratio.
inventory turnover.
Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
18. 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.
Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
19. Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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.
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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.
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Business Economics
20. 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.
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Business Economics
Each of the following is included in computing the acid-test ratio except
cash.
inventory.
receivables.
short-term investments.
Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
Which one of the following would not be considered a liquidity ratio?
Current ratio
Inventory turnover
Acid-test ratio
Return on assets
Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
21. Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Business 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 $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%.
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Business Economics
22. 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.
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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.
Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
23. 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.
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Business Economics
The current ratio may also be referred to as the
short run ratio.
acid-test ratio.
working capital ratio.
contemporary ratio.
Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
A supplier to a company would be most interested in the company’s
asset turnover.
profit margin.
current ratio.
earnings per share.
Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
24. 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
Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
25. Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: 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 the amount of West Company's working
capital?
No effect
$75,000 increase
$150,000 increase
$75,000 decrease
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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.
Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
26. 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.
Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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
27. Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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.
Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Business Economics
A successful grocery store would probably have
a low inventory turnover.
28. a high inventory turnover.
zero profit margin.
low volume.
Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
An aircraft company would most likely have
a high inventory turnover.
low profit margin.
high volume.
a low inventory turnover.
Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Business Economics
Earnings per share is calculated
only for common stock.
only for preferred stock.
for common and preferred stock.
only for treasury stock.
Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
Which of the following is not a profitability ratio?
29. Payout ratio
Profit margin
Times interest earned
Return on common stockholders' equity
Ans:LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
Times interest earned is also called the
money multiplier.
interest coverage ratio.
coupon coverage ratio.
premium ratio.
Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
The ratio that uses weighted average common shares outstanding in the denominator
is the
price-earnings ratio.
return on common stockholders' equity.
earnings per share.
payout ratio.
Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
Net income does not appear in the numerator of the
profit margin.
return on assets.
return on common stockholders' equity.
payout ratio.
Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
30. 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.
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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.
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Business Economics
Donner Corporation had net income of $200,000 and paid dividends to common
stockholders of $40,000 in 2013. The weighted average number of shares outstanding
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:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Business Economics
31. Donner Corporation had net income of $400,000 and paid dividends to common
stockholders of $40,000 in 2012. The weighted average number of shares outstanding
in 2012 was 50,000 shares. 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%.
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 5, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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.
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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
32. 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
33. Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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) 35,000
Inventory 20,000
Property, plant and equipment 210,000
Total Assets $310,000
Liabilities and Stockholders’ Equity
Current liabilities $ 60,000
Long-term liabilities 90,000
Stockholders’ equity—common 160,000
Total Liabilities and Stockholders’ Equity $310,000
Income Statement
Sales $ 105,000
Cost of goods sold 66,000
Gross profit 39,000
Operating expenses 30,000
Net income $ 9,000
34. Number of shares of common stock 6,000
Market price of common stock $20
Dividends per share .50
What is the receivables turnover for Sampson?
1.5 times
1.1 times
3.0 times
12.9 times
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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 11,000
Property, plant and equipment 210,000
Total Assets $291,000
Liabilities and Stockholders’ Equity
Current liabilities $ 50,000
Long-term liabilities 90,000
Stockholders’ equity—common 151,000
Total Liabilities and Stockholders’ Equity $291,000
Income Statement
35. Sales $ 120,000
Cost of goods sold 55,000
Gross profit 65,000
Operating expenses 30,000
Net income $ 35,000
Number of shares of common stock 6,000
Market price of common stock $20
Dividends per share .50
What is the inventory turnover for Sampson?
3,2 times
5 times
10.9 times
0.20 times
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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
36. 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 125. (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 return on assets for Sampson?
8.0%
7.0%
18.0%
16.0%
37. Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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 310,000
Total Assets $400,000
Liabilities and Stockholders’ Equity
Current liabilities $ 50,000
Long-term liabilities 90,000
Stockholders’ equity—common 260,000
Total Liabilities and Stockholders’ Equity $400,000
Income Statement
Sales $ 300,000
Cost of goods sold 66,000
Gross profit 234,000
Operating expenses 30,000
Net income $ 204,000
Number of shares of common stock 6,000
38. Market price of common stock $20
Dividends per share .50
MC 126. (Cont.)
What is the profit margin for Sampson?
115%
28.2%
68%
51%
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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 230,000
Total Assets $320,000
Liabilities and Stockholders’ Equity
Current liabilities $ 50,000
Long-term liabilities 90,000
39. Stockholders’ equity—common 180,000
Total Liabilities and Stockholders’ Equity $320,000
Income Statement
Sales $ 150,000
Cost of goods sold 66,000
Gross profit 84,000
Operating expenses 30,000
Net income $ 54,000
Number of shares of common stock 6,000
Market price of common stock $20
Dividends per share .50
What is the return on common stockholders’ equity for Sampson?
30%
46.7%
36%
16.9%
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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
40. 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
Income Statement
Sales $ 120,000
Cost of goods sold 66,000
Gross profit 54,000
Operating expenses 18,000
Net income $ 36,000
Number of shares of common stock 6,000
Market price of common stock $33
Dividends per share .50
What is the price-earnings ratio for Sampson?
5.5 times
1.1 times
6 times
41. 6.6 times
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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
Cash and short-term investments $ 40,000
Accounts receivable (net) 30,000
Inventory 25,000
Property, plant and equipment 215,000
Total Assets $310,000
Liabilities and Stockholders’ Equity
Current liabilities $ 60,000
Long-term liabilities 75,000
Stockholders’ equity—common 175,000
Total Liabilities and Stockholders’ Equity $310,000
MC 129. (Cont.)
Income Statement
Sales $ 90,000
Cost of goods sold 45,000
Gross profit 45,000
Operating expenses 25,000
42. Net income $ 20,000
Number of shares of common stock 5,000
Market price of common stock $22
Dividends per share 1
What is the return on assets for Eura?
4.8%
9.7%
6.5%
12.9%
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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
Cash and short-term investments $ 40,000
Accounts receivable (net) 30,000
Inventory 25,000
Property, plant and equipment 215,000
Total Assets $310,000
Liabilities and Stockholders’ Equity
Current liabilities $ 60,000
Long-term liabilities 75,000
Stockholders’ equity—common 175,000
Total Liabilities and Stockholders’ Equity $310,000
Income Statement
43. Sales $ 135,000
Cost of goods sold 45,000
Gross profit 90,000
Operating expenses 25,000
Net income $ 65,000
Number of shares of common stock 5,000
Market price of common stock $22
Dividends per share 1
What is the profit margin for Eura?
27.8%
51.9%
72.2%
48.1%
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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
Cash and short-term investments $ 40,000
Accounts receivable (net) 30,000
Inventory 45,000
Property, plant and equipment 215,000
Total Assets $330,000
Liabilities and Stockholders’ Equity
Current liabilities $ 60,000
44. Long-term liabilities 75,000
Stockholders’ equity—common 195,000
Total Liabilities and Stockholders’ Equity $330,000
Income Statement
Sales $ 90,000
Cost of goods sold 45,000
Gross profit 45,000
Operating expenses 30,000
Net income $ 15,000
Number of shares of common stock 5,000
Market price of common stock $22
Dividends per share 1
What is the return on common stockholders’ equity for Eura?
4.8%
7.7%
23.1%
46.2%
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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
Cash and short-term investments $ 40,000
Accounts receivable (net) 30,000
Inventory 25,000
45. Property, plant and equipment 215,000
Total Assets $310,000
Liabilities and Stockholders’ Equity
Current liabilities $ 60,000
Long-term liabilities 75,000
Stockholders’ equity—common 175,000
Total Liabilities and Stockholders’ Equity $310,000
MC 132. (Cont.)
Income Statement
Sales $ 90,000
Cost of goods sold 45,000
Gross profit 45,000
Operating expenses 25,000
Net income $ 20,000
Number of shares of common stock 5,000
Market price of common stock $22
Dividends per share 1.00
What is the price-earnings ratio for Eura?
5 times
4.0 times
7.3 times
5.5 times
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Business Economics
46. 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.
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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
47. The inventory turnover ratio for 2012 is
6.2 times.
4.9 times.
5.5 times.
4.4 times.
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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%.
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Business Economics
The following amounts were taken from the financial statements of Plant Company:
2013 2012
48. 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
Weighted average number of common shares outstanding 90,000 90,000
Market price of common stock $35 $39
The profit margin ratio for 2013 is
19.4%.
44.1%.
18.5%.
10.7%.
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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 150,000 117,000
Weighted average number of common shares outstanding 60,000 90,000
Market price of common stock $67.50 $39
The price-earnings ratio for 2013 is
27 times.
45 times.
49. 11 times.
2.5 times.
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Business Economics
Star Corporation had net income of $300,000 and paid dividends to common
stockholders of $40,000 in 2012. The weighted average number of shares outstanding
in 2012 was 50,000 shares. 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.
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Business Economics
Star Corporation had net income of $320,000 and paid dividends to common
stockholders of $80,000 in 2012. The weighted average number of shares outstanding
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.
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Business Economics
50. 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.
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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%.
51. Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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
Interest expense 14,000 14,000
Dividends paid to preferred
stockholders 22,000 20,000
Dividends paid to common
stockholders 15,000 10,000
The return on common stockholders’ equity for 2013 is
25.0%.
37.3%.
27.3%.
30.0%.
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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
52. Interest expense 15,000 14,000
Dividends paid to preferred
stockholders 22,000 20,000
Dividends paid to preferred
stockholders 15,000 10,000
The times interest earned for 2013 is
8.8 times.
7.7 times.
12 times.
11 times.
Ans:LO: 5, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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%.
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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
53. The 2012 rate of return on common stockholders’ equity is:
5.1%.
5.7%.
7.5%.
8.3%.
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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.
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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.
Ans:LO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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)
54. $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:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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.
Ans:LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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
Ans:LO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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?
55. $630,000 and $250,000
$630,000 and $175,000
$650,000 and $250,000
$650,000 and $175,000
Ans:LO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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.
Ans:LO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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.
56. Ans:LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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.
Ans:LO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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.
Ans:LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
57. 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.
Ans:LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
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
Ans:LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
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.
Ans:LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
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."
Ans:LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
58. 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.
Ans:LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Each of the following is a factor affecting quality of earnings except
alternative accounting methods.
improper recognition.
pro forma income.
extraordinary items.
Ans:LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
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.
Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
165.... Comparisons of data within a company are an example of the following
comparative basis:
Industry averages
Intercompany
Intracompany
Interregional
59. Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
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:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
Business Economics
In vertical analysis, the base amount for each income statement item is
gross profit.
net income.
net sales.
sales.
Ans:LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
60. Ratios that measure the short-term ability of the company to pay its maturing
obligations are
liquidity ratios.
profitability ratios.
solvency ratios.
trend ratios.
Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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
Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
Economics
The acid-test ratio is also known as the
current ratio.
quick ratio.
fast ratio.
times interest earned ratio.
Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
61. Ans:LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business
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.
Ans:LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
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
Ans:LO: 6, Bloom: AP, Difficulty: Hard, Min: 5, AACSB: Analytic, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA:
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.
Ans:LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting