978-0134125053 Chapter 7 Part 4

Unlock access to all the studying documents.

View Full Document

7) The _____ is a more stringent measure of a business’s liquidity.

A) current ratio

B) turnover ratio

C) quick ratio

D) receivables collection ratio

Question Type: Concept

8) Given the following data, which company would be more likely to be concerned about

liquidity?

Quick Ratio

Current Ratio

Blue Co.

2.20

2.41

Yellow Co.

.81

.92

Green Co.

1.53

1.77

Orange Co.

1.43

1.87

A) Blue Co.

B) Yellow Co.

C) Green Co.

D) Orange Co.

Question Type: Critical Thinking

9) Piper Inc. has cash of $62,000; net Accounts Receivable of $74,000; short-term investments

of $15,000 and inventory of $67,000. It also has $51,000 in current liabilities and $73,000 in

long-term liabilities. The quick ratio for Piper Inc. is:

A) 4.27.

B) 1.22.

C) 2.96.

D) 0.84.

Question Type: Application

10) Quicksilver Co. has cash of $41,000; net Accounts Receivable of $51,000; short-term

investments of $15,000 and inventory of $32,000. It also has $28,000 in current liabilities and

$39,000 in long-term liabilities. The quick ratio for Quicksilver is:

A) 4.96.

B) 3.82.

C) 0.80.

D) 1.60.

Question Type: Application

11) Lionworks Company has cash of $148,000; net Accounts Receivable of $92,000; short-term

investments of $44,000 and prepaid expenses of $40,000. It also has $50,000 in current liabilities

and $77,000 in long-term liabilities. The quick ratio for Lionworks Company is:

A) 6.48.

B) 2.24.

C) 5.68.

D) 2.96.

Question Type: Application

12) Piper Inc. has cash of $63,000; net Accounts Receivable of $77,000; short-term investments

of $20,000 and inventory of $68,000. It also has $47,000 in current liabilities and $73,000 in

long-term liabilities. The current ratio for Piper Inc. is:

A) 1.55.

B) 3.40.

C) 1.34.

D) 4.85.

Question Type: Application

13) Quicksilver Co. has cash of $35,000; net Accounts Receivable of $43,000; short-term

investments of $23,000 and inventory of $30,000. It also has $28,000 in current liabilities and

$54,000 in long-term liabilities. The current ratio for Quicksilver is:

A) 4.68.

B) 3.61.

C) 1.93.

D) 1.30.

Question Type: Application

14) Lionworks Company has cash of $145,000; net Accounts Receivable of $92,000; short-term

investments of $35,000 and prepaid expenses of $44,000. It also has $40,000 in current liabilities

and $73,000 in long-term liabilities. The current ratio for Lionworks Company is:

A) 3.63.

B) 7.90.

C) 6.80.

D) 2.80.

Question Type: Application

15) Gallego & Co. reported sales of $515,000 beginning net Accounts Receivable of $219,000

and ending net Accounts Receivable of $221,000. Gallego & Co.‘s Accounts Receivable turnover

is:

A) 2.33.

B) 2.34.

C) 2.35.

D) 1.17.

Question Type: Application

16) Valdez Company reported sales of $345,000; beginning net Accounts Receivable of $87,000

and ending net Accounts Receivable of $108,000. Valdez Company‘s Accounts Receivable

turnover is:

A) 1.77.

B) 3.97.

C) 3.54.

D) 3.19.

Question Type: Application

17) Gallego & Co. reported sales of $525,000; beginning net Accounts Receivable of $207,000

and ending net Accounts Receivable of $224,000. Gallego & Co.‘s receivable collection period

(rounded to the nearest day) is:

A) 300.

B) 156.

C) 590.

D) 150.

Question Type: Application

18) Valdez Company reported sales of $342,000; beginning net Accounts Receivable of $89,000

and ending net Accounts Receivable of $111,000. Valdez Company’s receivable collection

period (rounded to the nearest day) is:

A) 107.

B) 213.

C) 118.

D) 274.

19) A company with an Accounts Receivable turnover of 11.78 would be collecting its

receivables about:

A) once a week.

B) once a month.

C) once a quarter.

D) once a year.

Question Type: Application

20) A company with a quick ratio of 1.90 means that the company:

A) has $1.00 in quick assets for every $1.90 in current liabilities.

B) has $1.90 in quick assets for every $1.00 in current liabilities.

C) could not pay off all of its current liabilities using quick assets.

D) would have to use inventory to help pay off its current liabilities.

Question Type: Concept

21) If a company has n/90-credit terms, you would expect its Accounts Receivable turnover to

be:

A) 12.

B) 4.

C) 2.

D) 1.

Question Type: Application

22) If a company has n/120-credit terms, you would expect its Accounts Receivable turnover to

be:

A) 3

B) 6

C) 10

D) 12

Question Type: Application

23) A company with a current ratio of 1.90 means that the company:

A) has $1.90 of quick assets to pay each $1 of current liabilities.

B) has $1.90 of current assets to pay each $1 of current liabilities.

C) has $1.00 of quick assets for every $1.90 of current liabilities.

D) has $1.00 of current assets for every $1.90 of current liabilities.

Question Type: Concept

24) A company with 5.6 Accounts Receivable turnover means that the company:

A) has a good Accounts Receivable turnover.

B) has a bad Accounts Receivable turnover.

C) needs to tighten its credit terms.

D) cannot be determined from the information provided.

7.8 (Appendix 7A) Account for the petty cash fund

1) A petty cash fund may be established for minor expenditures, such as postage.

Question Type: Concept

2) A petty cash fund is established by making a check payable to Petty Cash, cashing the check,

and placing the funds in the cash register.

Question Type: Concept

3) The journal entry to record the set-up of a petty cash fund is to debit Petty Cash and to credit

Cash.

Question Type: Application

4) The total of cash in the petty cash box plus the amount of the petty cash ticket receipts should

total the beginning amount of the petty cash fund.

Question Type: Concept

5) Because petty cash funds are for small dollar amounts, internal control policies to govern the

fund are not necessary.

Question Type: Concept

6) Island Equipment has a petty cash fund of $360. At the end of the month, $7 remains in the

fund along with $330 in various receipts. The journal entry to replenish the fund would show a

debit(s) to:

A) various expenses for $330 and Cash short of $23.

B) various expenses for $330 and Cash over of $23.

C) Cash for $353.

D) Cash for $330.

Question Type: Application

7) DogCo has a petty cash fund of $265. At the end of the month, $10 remains in the fund along

with $258 in various receipts. The journal entry to replenish the fund would be to:

A) debit various expenses, $258; debit Cash Short for $3 and credit Cash for $261.

B) debit various expenses, $258; credit Cash Over for $3 and credit Cash for $255.

C) debit Petty Cash for $255 and credit Cash for $255.

D) debit various expenses, $258 and credit Cash for $258.

Question Type: Application

8) Aspen Inc. has a petty cash fund of $265. At the end of the month, $10 remains in the fund

along with $248 in various receipts. The journal entry to replenish the fund would show a

debit(s) to:

A) various expenses for $248 and Cash Short of $7.

B) various expenses for $248 and Cash Over of $7.

C) Cash for $248.

D) Cash for $255.

Question Type: Application

9) Leo Company has a petty cash fund of $300. At the end of the month, $42 remains in the fund

along with $260. in various receipts. The journal entry to replenish the fund would be:

A) debit Petty Cash for $258 and credit Cash for $258.

B) debit various expenses, $256;

debit Cash Short for $2 and credit Cash for $258.

C) debit various expenses, $260; credit Cash Over for $2 and credit Cash for $258.

D) debit various expenses, $260 and credit Cash for $260.

Question Type: Application

10) Island Equipment wants to increase the size of its petty cash fund from $350 to $440. Island

Equipment will:

A) not be allowed to do this, $440 is too large for a petty cash fund.

B) debit Cash, $440; credit Petty Cash $440.

C) debit Petty Cash $440, credit Cash $440.

D) debit Petty Cash $90, credit Cash $90.

Question Type: Application

11) Stella Company wants to increase the size of its petty cash fund from $100 to $260, the

journal entry will be:

A) debit Petty Cash $260; credit Cash $260.

B) debit Cash $260; credit Petty Cash $260.

C) debit Petty Cash $160; credit Cash $160.

D) debit Cash $160; credit Petty Cash $160.

Question Type: Application

12) Which of the following is NOT a recommended control for the petty cash fund?

A) Designate a custodian for the petty cash fund.

B) Document all payments with a written record.

C) Keep the fund in a safe, locked location.

D) Ensure all employees have access to the fund.

Question Type: Concept