978-0134125053 Chapter 4 Part 4

Unlock access to all the studying documents.

View Full Document

23) Kramer and Associates has the following account balances listed in alphabetical order:

Accumulated Depreciation, $23,000; Accounts Payable, $8,500, Accounts Receivable, $10,000;

Cash, $3,000; Equipment, $41,000, Land, $22,000, Mortgage Payable, $42,000; Prepaid

Insurance, $9,500; Supplies, $1,000; Unearned Revenue, $4,000; Wages payable, $2,000.

Kramer and Associates’ current assets are:

A) $13,000.

B) $23,500.

C) $14,000.

D) $63,500.

Question Type: Application

24) Kramer and Associates has the following account balances listed in alphabetical order:

Accumulated Depreciation, $18,000; Accounts Payable, $7,500, Accounts Receivable, $13,000;

Cash, $2,000; Equipment, $46,000, Land, $21,000, Mortgage Payable, $42,000; Prepaid

Insurance, $5,500; Supplies, $1,000; Unearned Revenue, $4,000; Wages payable, $6,000.

Kramer and Associates’ long-term assets are:

A) $15,000.

B) $21,500.

C) $49,000.

D) $66,500.

Question Type: Application

25) Kramer and Associates has the following account balances listed in alphabetical order:

Accumulated Depreciation, $24,000; Accounts Payable, $9,500, Accounts Receivable, $11,000;

Cash, $4,000; Equipment, $47,000, Land, $23,000, Mortgage Payable, $46,000; Prepaid

Insurance, $7,500; Supplies, $1,000; Unearned Revenue, $5,000; Wages payable, $2,000.

Kramer and Associates’ current liabilities are:

A) $16,500.

B) $57,500.

C) $11,500.

D) $62,500.

Question Type: Application

26) What is liquidity?

A) Liquidity is gross profit minus operating expenses.

B) Liquidity is a shipping term that applies to freight sent by boat.

C) Liquidity is the ability to convert an asset to cash quickly.

D) Liquidity is a measure of the fragility of certain types of inventory.

Question Type: Concept

27) The Cost of Goods Sold account appears on the:

A) Balance Sheet.

B) Statement of Retained Earnings.

C) Income Statement.

D) post-closing trial balance.

Question Type: Concept

28) The Inventory account appears on the:

A) Balance Sheet.

B) Statement of Retained Earnings.

C) Income Statement.

D) list of liabilities.

Question Type: Concept

29) The major difference in the Statement of Retained Earnings between a service business and a

merchandising business is:

A) that the Retained Earnings statement of a service business includes Dividends.

B) that the Retained Earnings statement of a merchandising business includes Dividends.

C) that the Retained Earnings statement of a merchandising business shows the Cost of Goods

Sold.

D) nothing. There are no differences between the two.

Question Type: Concept

30) The major difference in the Balance Sheet between a service business and a merchandising

business is:

A) that the Balance Sheet of a merchandising business includes Equipment as a current asset.

B) that the Balance Sheet of a merchandising business includes Prepaid Expenses as a long-term

asset.

C) that the Balance Sheet of a merchandising business includes Inventory as a current asset.

D) nothing. There are no differences between the two.

Question Type: Concept

4.7 Compute earnings per share, the gross profit percentage, and the net income percentage

1) Gross profit percentage is computed by dividing net sales by cost of goods sold.

Question Type: Concept

2) The net income percentage is computed by dividing net income by gross profit.

Question Type: Concept

3) If a company has $115,000 net sales, $65,000 in gross profit, and $12,000 in net income, the

net income percentage would be approximately 57%.

Question Type: Application

4) If a company had net sales of $56,000, gross profit of $33,000, and net income of $8,000, the

gross profit percentage would be approximately 59%.

Question Type: Application

5) If a company has net sales of $134,000, gross profit of $48,000, and $14,000 net income. The

net income percentage would be approximately 36%.

Question Type: Application

6) If a company has net sales of $134,000, gross profit of $48,000, and $14,000 net income. The

gross profit percentage would be approximately 36%.

Question Type: Application

7) A company has a net income percentage of 27.3%. This means that the company makes a little

over $0.27 on every dollar of sales.

Question Type: Application

8) A gross profit percentage of 43% means that for every $1 of gross profit, the company has

$0.43 of net income.

Question Type: Application

9) A company has net sales of $124,000, cost of goods sold of $76,000, operating expenses of

$38,000, and other expenses of $5,000. The company’s gross profit percentage is approximately:

A) 8.1%.

B) 4%.

C) 26.6%.

D) 38.7%.

Question Type: Application

10) A company has net sales of $124,000, cost of goods sold of $76,000, and operating expenses

of $45,000. The company’s net income percentage is approximately:

A) 25%.

B) 38.7%.

C) 2.4%.

D) 5.6%.

Question Type: Application

11) A company has net sales of $56,500 and a cost of goods sold of $26,200. The company’s

gross profit percentage is approximately:

A) 53.6%.

B) 46.4%.

C) 215.6%.

D) 115.6%.

Question Type: Application

12) Which of the following would most likely cause the net income percentage to increase?

A) Cost of Goods Sold as a percentage of net sales increases.

B) Operating expenses as a percentage of net sales increases.

C) Gross profit as a percentage of net sales decreases.

D) Operating expenses as a percentage of net sales decreases.

Question Type: Concept

13) A high gross profit percentage means:

A) the cost of goods sold was relatively low.

B) the cost of goods sold was relatively high.

C) selling expenses are very low.

D) general and administrative expenses are very high.

Question Type: Concept

14) A low gross profit percentage means that:

A) the cost of goods sold was relatively low.

B) the cost of goods sold was relatively high.

C) selling expenses are very low.

D) general and administrative expenses are very high.

Question Type: Concept

15) If net sales decreases and cost of goods sold increases, the gross profit percentage:

A) remains the same.

B) decreases.

C) increases.

D) will change based upon the change in total assets.

Question Type: Concept

16) If net sales increases and cost of goods sold decreases, the gross profit ratio:

A) remains the same.

B) decreases.

C) increases.

D) cannot be determined from the information given.

Question Type: Concept

17) A company’s gross profit percentage increased from 37% to 41%. What does this mean?

A) This means that cost of goods sold as a percentage of net sales increased.

B) This means that cost of goods sold as a percentage of net sales decreased.

C) This means that operating expenses as a percentage of net sales decreased.

D) There is not enough information to explain the increase.

Question Type: Concept

18) A company’s gross profit percentage decreases from 58% to 51%. What does this mean?

A) This means that net income will be higher.

B) This means that net income will be lower.

C) This means that there will be a net loss.

D) We cannot determine anything definite from the information given.

Question Type: Concept

19) Renoir, Inc. has gross profit of $93,400, operating expenses of $34,000, interest expense of

$900 and 2,000 average shares of stock outstanding. What is Renoir‘s Earnings per Share?

A) $29.70

B) $29.25

C) $3.37

D) $3.42

Question Type: Application

20) Because the ________ of a company tends to vary little from year to year, a significant

change would prompt further investigation.

A) gross profit percentage

B) operating income

C) earnings per share

D) net income percentage

Question Type: Concept