84) The Apple Pie Company had net income of $47,500 and earnings per share of $3.17. Apple
Pie declared dividends of $2 per share of common stock during 2019. On December 31, 2019,
the stock had a market price of $18.50 per share. Apple Pie’s price/earnings ratio is closest to:
A) 9.25
B) 8.11
C) 5.84
D) 0.17
85) Main Street Company paid out $2.30 in dividends per share of common stock and had
earnings per share of $5.00 during 2019. The market price of the stock on December 31, 2019
was $21.00 per share. There were 15,000 shares of stock outstanding for the entire year. The
dividend yield as of December 31, 2019 is closest to:
A) 16.43%
B) 10.95%
C) 9.13%
D) 46.00%
86) MusicPod’s earnings per share ratios were $2.47 and $2.07 respectively for 2019 and 2018.
MusicPod’s stock was trading at $53.00 and $41.50 per share at the end of 2019 and 2018
respectively. The company paid cash dividends per share of $0.85 in 2019 and $0.63 in 2018.
Total stockholders’ equity was $13,572 million and $11,896 million in 2019 and 2018
respectively. The common shares outstanding were approximately 1,782,000 in both 2019 and
2018.
MusicPod’s price/earnings ratio for 2019 is closest to:
A) 21.5
B) 62.4
C) 20.0
D) 2.9
87) MusicPod’s earnings per share ratios were $2.47 and $2.07 respectively for 2019 and 2018.
MusicPod’s stock was trading at $53.00 and $41.50 per share at the end of 2019 and 2018
respectively. The company paid cash dividends per share of $0.85 in 2019 and $0.63 in 2018.
Total stockholders’ equity was $13,572 million and $11,896 million in 2019 and 2018
respectively. The common shares outstanding were approximately 1,782,000 in both 2019 and
2018.
MusicPod’s dividend yield ratio for 2019 is closest to:
A) 34.4%
B) 1.4%
C) 30.4%
D) 1.6%
88) Lee Company has provided the following information:
• Cash flow from operating activities, $240,000
• Net income, $204,000
• Interest expense, $20,000
• Interest cash payments, $10,000
• Income tax payments, $140,000
• Income tax expense, $136,000
Using the modified method discussed in the text, what was Lee’s cash coverage ratio?
A) 39.0
B) 20.0
C) 19.8
D) 39.6
89) Lee Company has provided the following information:
• Cash flow from operating activities, $240,000
• Net income, $204,000
• Interest expense, $20,000
• Interest cash payments, $10,000
• Income tax payments, $140,000
• Income tax expense, $136,000
What was Lee’s times interest earned ratio?
A) 39.0
B) 18.0
C) 35.4
D) 17.7
90) Lee Company has provided the following information:
• Cash flow from operating activities, $240,000
• Net income, $204,000
• Interest expense, $20,000
• Interest cash payments, $10,000
• Income tax payments, $140,000
• Income tax expense, $136,000
Lee’s quality of income ratio is closest to:
A) 1.18
B) 0.85
C) 1.76
D) 0.74
91) Lucas Company has provided the following information:
• Cash flow from operating activities, $360,000
• Net income, $306,000
• Interest expense, $30,000
• Interest cash payments, $20,000
• Income tax payments, $240,000
• Income tax expense, $246,000
Using the modified method discussed in the text, what was Lucas’ cash coverage ratio?
A) 21.0
B) 31.8
C) 21.2
D) 31.0
92) Lucas Company has provided the following information:
• Cash flow from operating activities, $360,000
• Net income, $306,000
• Interest expense, $30,000
• Interest cash payments, $20,000
• Income tax payments, $240,000
• Income tax expense, $246,000
What was Lucas’ times interest earned ratio?
A) 18.9
B) 19.4
C) 28.3
D) 31.0
93) Lucas Company has provided the following information:
• Cash flow from operating activities, $360,000
• Net income, $306,000
• Interest expense, $30,000
• Interest cash payments, $20,000
• Income tax payments, $240,000
• Income tax expense, $246,000
What was Lucas’ quality of income ratio?
A) 0.85
B) 0.74
C) 1.18
D) 0.93
94) Which of the following transactions does not affect earnings per share?
A) A 2-for-1 common stock split.
B) A 10% common stock dividend distribution.
C) Accruing revenue at year-end.
D) Issuing additional shares of preferred stock.
95) Which of the following transactions increase both the quick ratio and the current ratio
assuming that both ratios are greater than 1?
A) Collecting an account receivable.
B) Purchasing inventory on account.
C) Accruing revenue earned at year-end.
D) Selling inventory on account at the cost of the inventory.
96) Which of the following correctly describes the effect of Mogul Company declaring and
distributing a 10% common stock dividend?
A) Mogul’s current ratio decreased.
B) Mogul’s return on equity ratio decreased.
C) Mogul’s debt-to-equity ratio remained the same.
D) Mogul’s return on assets decreased.
97) Which of the following does not correctly describe the effect of Mylan Company declaring
and distributing a 2-for-1 common stock split?
A) Mylan’s current ratio remained the same.
B) Mylan’s return on equity ratio remained the same.
C) Mylan’s debt-to-equity ratio remained the same.
D) Mylan’s earnings per share remained the same.
98) Which of the following ratios increases when inventory is sold on account for a price equal
to its original cost?
A) Current.
B) Quick.
C) Return on assets.
D) Return on equity.
99) Which of the following ratios increases when cash is collected on an account receivable?
A) Current.
B) Quick.
C) Return on assets.
D) Receivable turnover ratio.
100) Which of the following ratios increases when a company switches from FIFO to LIFO
during a period of increasing unit costs?
A) Net profit margin.
B) Inventory turnover.
C) Quick.
D) Current.
101) Which of the following transactions decreases the quality of income ratio?
A) The accrual of interest expense.
B) Collecting cash on an account receivable.
C) Selling inventory on account for a profit.
D) Making a payment of principal on a loan.
102) The year-end adjusting entry to record bad debt expense will increase which of the
following ratios?
A) Current.
B) Quality of income.
C) Quick.
D) Net profit margin.
103) The year-end adjusting entry to adjust the unearned revenue account for revenue earned
decreases which of the following ratios?
A) Current.
B) Debt-to-equity.
C) Quick.
D) Net profit margin.
104) Which of the following ratios are not affected by issuing long-term bonds payable in
exchange for cash?
A) Debt-to-equity.
B) Current.
C) Cash Ratio.
D) Quality of income.
105) The journal entry to record depreciation expense decreases which of the following ratios?
A) Debt-to-equity.
B) Earnings per share.
C) Fixed asset turnover.
D) Quality of income.
106) The cash payment of a previously declared dividend increases which of the following
ratios?
A) Debt-to-equity.
B) Earnings per share.
C) Price/earnings ratio.
D) Total asset turnover.
107) Complete the following income statement for the dollar amounts and the component
percentages:
Dollar $
Amount
Component
Percentages %
Sales revenue
Cost of goods sold
40%
Gross profit
$120,000
Operating expenses
Interest expense
2%
Income before income tax
Income tax expense (rate 20%)
Net income
6%
Sales revenue
Cost of goods sold
Gross profit
Operating expenses
Interest expense
Income before income tax
Income tax expense (rate 20%)
Net income
108) Packers Corporation reported the following data for the year ended December 31, 2019:
Net sales revenue
$400,000
Net income
$25,000
Interest expense (net of tax)
$3,000
Average total assets
$200,000
Average stockholders’ equity
$160,000
Average net fixed assets
$100,000
Average shares of common stock
outstanding
10,000
Market value per share
$16.00
Calculate each of the following ratios:
A. Net profit margin
B. Return on assets
C. Return on equity
D. Earnings per share
E. Price/earnings ratio
F. Debt-to-equity ratio
G. Fixed asset turnover ratio
109) At the end of 2019, Jared Corporation reported a return on assets of 16%, average total
assets of $365,000, and average total liabilities of $165,000.
What was Jared’s net income?
110) At the end of 2019, Doran Corporation reported net income of $70,000, gross sales revenue
of $1,525,000, and sales returns of $125,000.
Calculate the net profit margin ratio.