Which of the following ratios is used to evaluate a company’s liquidity?
A) Debt-to-assets ratio
B) Fixed asset turnover ratio
C) Return on equity ratio
D) Current ratio
Your company sells $50,000 of bonds for an issue price of $48,000. Which of the
following statements is correct?
A) The bond sold at a price of 96, implying a discount of $4,000.
B) The bond sold at a price of 48, implying a premium of $2,000.
C) The bond sold at a price of 48, implying a premium of $4,000.
D) The bond sold at a price of 96, implying a discount of $2,000.
Ending inventory is incorrectly calculated in the current year. It is accurately calculated
at the end of the next year. The error in the ending inventory in the current year:
A) affects only income statement accounts.
B) affects only balance sheet accounts.
C) can be ignored since it will self-correct.
D) is a self-correcting error.
The following information was summarized from the adjusted trial balance of Reliance
Yacht Repair, Inc. as of September 30, 2015, the end of the company’s fiscal year.
Required:
Part a. Prepare the closing entry for the company for the year ended September 30,
2015.
Part b. Draw a T-account for the Retained Earnings account. Enter the beginning
balance into the T-account, post the closing entry, and then determine the ending
balance.
Part c. Prepare a post-closing trial balance at September 30, 2015.
Flynn Company ‘s monthly bank statement showed the ending balance of cash of
$18,500. The bank reconciliation for the period showed an adjustment for a deposit in
transit of $1,500, outstanding checks of $2,000, a NSF check of $700, bank service
charges of $30 and the EFT from a customer in payment of the customer ‘s account of
$1,500.
Use the information above to answer the following question. What is the up-to-date
ending Cash balance?
A) $18,000
B) $17,230
C) $19,000
D) $19,270
A company’s comparative balance sheet show total assets of $990,000 and $900,000,
for the current and prior years, respectively. The percentage change to be reported in the
horizontal analysis is an increase of:
A) 10%.
B) 9%.
C) 5%.
D) 4%.
The Gulp convenience store chain buys new soda machines for $450,000 and pays
$50,000 for installation costs. One-half of the total cost or $250,000 is paid in cash; a
note in the amount of $250,000 is signed. How should the company record this
transaction?
A) Debit Cash for $250,000, debit Notes Payable for $250,000, and credit Equipment
for $500,000
B) Debit Equipment for $500,000, credit Cash for $250,000, and credit Notes Payable
for $250,000
C) Debit cash for $250,000, debit Notes Payable for $250,000, credit Equipment for
$450,000, and credit Operating Expenses for $50,000
D) Debit Equipment for $450,000, debit Operating Expenses for $50,000, credit cash
for $250,000, and credit Notes Payable for $250,000
The Treadwell Tire Company had net accounts receivable of $67,900 at the beginning
of the year and $72,400 at the end of the year. If the company’s net sales revenue during
the year was $876,875, what is the receivables turnover ratio?
A) 12.5
B) 29.2
C) 0.08
D) 0.034
A company purchased land costing $27,000 by paying cash of $6,750 and signing a
90-day note for the balance. The entry to record this transaction would:
A) increase total assets.
B) decrease total liabilities.
C) decrease Common Stock.
D) increase total assets and decrease total liabilities.
A company has a debt-to-assets ratio of 0.45. If the company then borrows cash from
the bank to finance a building acquisition, which of the following is a correct
statement?
A) The debt-to-assets ratio will be unchanged.
B) The debt-to-assets ratio will increase.
C) The debt-to-assets ratio will decrease.
D) The debt-to-assets ratio will increase as a result of the cash received and then
decrease as a result of the building acquisition.
A company issues $1 million of new stock and pays $200,000 in cash dividends during
the year. In addition, the company took advantage of falling interest rates to borrow
$1.5 million in a new bond issue and paid off existing bonds with a face value of $2
million. The company bought 500 of another company’s $1,000 bonds at a $100,000
premium. The net cash flow provided by financing activities is:
A) An inflow of $500,000.
B) An outflow of $200,000.
C) An outflow of $100,000.
D) An inflow of $300,000.
Company A uses the FIFO inventory method and Company B uses the LIFO method. If
prices are rising and there are no other significant differences between the companies,
which of the following is correct?
A) Company A will report a higher current ratio and lower earnings per share than
Company B.
B) Company A will report a higher current ratio and higher earnings per share than
Company B.
C) Company A will report a lower current ratio and higher earnings per share than
Company B.
D) Company A will report a lower current ratio and lower earnings per shares than
Company B.
What journal entry must be prepared when the company is notified by the bank that a
customer’s check that had been deposited in the amount of $776 was returned NSF?
A) Debit Accounts Receivable and credit Cash in the amount of $776
B) Debit Cash and credit Accounts Receivable in the amount of $776
C) Debit NSF Check Expense and credit Accounts Receivable in the amount of $776
D) No journal entry is necessary.
Chino Company reported net income of $20,000 for the current year. During the year,
Inventory decreased by $7,000, Accounts Payable decreased by $8,000, Depreciation
Expense was $10,000, and Accounts Receivable increased by $6,500. If the indirect
method is used, what is the net cash provided by operating activities?
A) $10,500
B) $22,500
C) $38,500
D) $51,500
Which of the following would not be recorded as an accounting transaction?
A) Putting a deposit down on a new vehicle
B) Hiring a new employee
C) Receiving cash upon signing a note
D) Receiving a deposit from a customer
Choose the appropriate letter to match the term and the definition. There are more
definitions than terms.
Term
1> ____ FOB Destination
2> ____ FOB Shipping Point
3> ____ Merchandising Company
4> ____ Periodic Inventory System
5> ____ Perpetual Inventory System
6> ____ Service Company
Definition
A. Sells services rather than physical goods.
B. Assets acquired for resale to customers.
C. Inventory records are updated every time inventory is bought, sold, or returned.
D. A term of sale indicating that goods are owned by the seller until they are delivered
to the buyer.
E. Sells goods that have been obtained from a supplier.
F. The sum of beginning inventory and purchases for the period.
G. Inventory records are updated at the end of the accounting period. To determine how
much merchandise has been sold, periodic systems require that inventory be physically
counted at the end of the period.
H. A term of sale indicating that goods are owned by the buyer the moment they leave
the seller’s premises.
I. A sales price reduction given to customers for prompt payment of their account
balance.
J. Presents important subtotals, such as gross profit, to help distinguish core operating
results from other, less significant items that affect net income.
If a company’s earnings per share and return on equity both increase:
A) it could mean that net income is rising or it could mean that the number of
outstanding shares is falling. The first is sustainable; the second cannot be continued
indefinitely.
B) it means that the company is becoming more profitable and stockholders will see
greater returns.
C) it means that the company’s tax liability will rise in the future and cause a decline in
profitability.
D) it could mean that net income is rising or it could mean that the number of
outstanding shares is falling. In either case, stockholders can expect greater future
returns indefinitely.
On the maturity date of a $5,000, 3-month, 10% note, the borrower sends a check that
includes the principal and all of the interest due on the note. What is the amount of the
borrower’s check?
A) $5,125
B) $5,500
C) $6,500
D) $5,000
A company has a debt-to-assets ratio of 0.45 and a return on equity ratio of 10%. If the
company then issues additional shares of common stock for cash, which of the
following is a correct statement?
A) The debt-to-assets ratio will decrease and the return on equity ratio will decrease.
B) The debt-to-assets ratio will increase and the return on equity ratio will increase.
C) The debt-to-assets ratio will not change and the return on equity ratio will not
change.
D) The debt-to-assets ratio will decrease and the return on equity ratio will increase.
A company purchased equipment for use in the business at a cost of $12,000,
one-fourth was paid in cash, and the company signed a note for the balance. The journal
entry to record this transaction will include a:
A) debit to Notes Payable of $9,000.
B) debit to Cash of $12,000.
C) credit to Notes Payable of $9,000.
D) debit to Equipment of $3,000.