In considering equity and debt financing, which of the following statements is true?
a. Compared to equity financing, debt is a more expensive source of funding.
b. Interest and dividends payments are required to be made by the issuing corporation.
c. In general, the higher the proportion of total debt-to-equity ratio, the greater the
likelihood the firm will have difficulty in meeting its obligations in some future period.
d. Most firms prefer to have no debt and rely on equity financing.
Match the following terms with the best definitions for questions 212 through 219. a.
Purchase requisition.
b. Receiving Report.
c. Vendor Invoice.
d. Check.
e. Control procedures.
f. Inventory count.
g. Segregation of duties.
h. Source document control.
Typically sent along with a remittance advice.
Which one of the following statements is true if a company’s collection period for
accounts receivable is unacceptably long?
a. The company may need to borrow to acquire operating cash.
b. The company may offer trade discounts to lengthen the collection period.
c. Cash flows from operations may be higher than expected for the company’s sales.
d. The company should expand operations with its excess cash.
Each account has a normal balance. For the following list of accounts, indicate whether
the normal balance of each is a debit or a credit.
a. Debit
b. Credit
Capital Stock
If an investor can use accounting information for two different companies to evaluate
the types and amounts of expenses, the information is said to have the quality of
a. Comparability
b. Consistency
c. Neutrality
d. Understandability
If a company uses the allowance method to account for bad debts, when will the
company’s owners’ equity decrease?
a. At the date a customer’s account is written off
b. At the end of the accounting period when an adjusting entry for bad debts is recorded
c. At the date a customer’s account is determined to be uncollectible
d. When the accounts receivable amount becomes past due
Assuming the indirect method for preparing the statement of cash flows is used,
indicate whether these items should be added to net income (A), deducted from net
income (D), or not be reported in the operating section of the statement under the
indirect method (NR).
a. Added (A)
b. Deducted (D)
c. Not reported (NR)
Decrease in accounts payable
Accumulated Depreciation
a. increases assets.
b. decreases assets.
c. increases liabilities.
d. decreases liabilities.
Which one of the following items would be subtracted from the balance per bank
statement in a bank reconciliation?
a. Outstanding checks
b. Deposit in transit
c. Service charges
d. Interest on customer note
For each of the following sentences, select the phrase or group of words that best
completes the statement.
a. Earnings per share
b. Dividend yield ratio
c. Dividend payout ratio
d. Leverage
e. Return on assets ratio
f. Return on common stockholders’ equity ratio
g. Debt-to-equity ratio
h. Price/earnings ratio
The percentage of earnings paid out as dividends.
Estimated liability for product warranties to be paid in the future is a current liability.
a. True
b. False
Which of the following would be classified as external users of financial statements?
a. Stockholders and management of the company
b. The controller of the company and a company’s stockholders
c. The company’s marketing managers
d. The creditors and stockholders of the company
For each of the following, calculate the cost of inventory reported on the balance sheet.
(a) The total merchandise inventory counted at the end of the year was $63,000.
Purchases for
$6,000 are in transit under FOB shipping point terms.
(b) The total merchandise inventory counted at the end of the year was $75,000.
Purchases for $5,000 are in transit under FOB destination terms.
Parachute Country Club Use the selected accounts for Parachute Country Club
presented below to answer the following question(s).
Read the information on Parachute Country Club.Which of the following describes the
transaction which occurred on August 7?
a. Sold club memberships on credit.
b. Cash sales of daily fees.
c. Collected an advance deposit in cash.
d. Received cash payments of accounts receivable.