Select the ratio that each statement below most properly satisfies.
a. Dividend yield ratio
b. Cash flow from operations to capital expenditures ratio
c. Debt service coverage ratio
d. Return on common stockholders’ equity ratio
e. Times interest earned ratio
f. Asset turnover ratio
g. Debt-to-equity ratio
h. Dividend payout ratio
i. Price/earnings ratio
The relationship between net sales and total assets
The only reason a company needs to create an internal control system is to deter
intentional fraudulent acts.
a. True
b. False
Match the following business forms with their characteristics below.
a. Sole proprietorship
b. Partnership
c. Corporation
Must file articles of incorporation with the state
Which of the following entries causes a decrease in assets and in net income?
a. The entry to record the payment of utilities with cash.
b. The entry to record the payment of rent for three months in advance.
c. The entry to record accrued wages payable.
d. The entry to record revenue earned but not yet received.
All of the following statements about current liabilities are true except:
a. Current liabilities are obligations which will be satisfied within one year.
b. Current liabilities are normally recorded at face value.
c. The current liability section never contains any portion of long-term liabilities.
d. Current liabilities finance the working capital of the company.
The following stockholders’ equity section of Petal Pusher Company’s balance sheet
appeared at December 31, 2015.
Answer the following: A) Has the company been profitable since its inception? How do
you know? B) What does the balance in retained earnings represent?
The three forms of business entities are:
a. Government, cooperatives, and philanthropic organizations
b. Financing, investing, and operating
c. Sole proprietorships, partnerships, and corporations
d. Wholesaler, manufacturer, and retailer
A company has $8,000 in cash, $9,250 in accounts receivable, and $19,500 in
inventory. If current liabilities are $14,350, then the quick ratio would be
a. 5.0 to 1
b. 2.6 to 1
c. 2.0 to 1
d. 1.2 to 1
Which one of the following best explains the distinction between inventory and an
operating asset?
a. ownership
b. intent
c. cost
d. purchase price
Which of the following is an example of a debit memorandum?
a. Service charge notice
b. Interest earned on the account balance
c. Outstanding check
d. Company error in recording a $500 deposit as $600
Sawaddee Enterprises began the year with total assets of $450,000 and total liabilities
of $230,000. If Sawaddee’s total assets increased by $80,000 and its total liabilities
increased by $57,000 during the year, what is the amount of Sawaddee’s owners’ equity
at the end of the year?
a. $197,000
b. $543,000
c. $243,000
d. $220,000
Contrast the two parts of stockholders’ equity.
Assume that a company is experiencing increasing inventory prices and prepares its
financial statements in accordance with IFRS. Which costing method should it use to
pay the least amount of taxes? Explain your answer.
List the four financial statements. Explain the connection between these four
statements.
If an entity overstates its ending inventory for the current year, what are the effects on
assets, cost of goods sold, income before taxes, and retained earnings for the current
year?
Bower Corp.’s cost of sales has remained steady over the last two years. During this
same time period, however, its inventory has increased considerably. What does this
information tell you about the company’s inventory turnover? Explain your answer.
Terry CompanyTransactions
Refer to the Terry Company transactions.Required: Indicate the economic effects of
each transaction above on the accounting equation. Use the following format for your
answers. Show the dollar amounts in the appropriate columns and use a “+” (plus) sign
to indicate an increase and a “-” (minus) sign to indicate a decrease.
The understatement of ending inventories in one period leads to a(n)of cost of goods
sold expense in the same period.
Assume that Milo Company’s Stockholders’ Equity category of the balance sheet
appears as follows as of January 1, 2015:
What is the effect on the Stockholders’ Equity section of Milo’s balance sheet if the
company issues a 3ÂforÂ1 stock split on January 2, 2015?
Would a banker be more interested in the liquidity or the profitability of a company?
Explain.