A company purchases software; it has an estimated useful life of three years. The
adjustment to recognize amortization for the use of software would cause which of the
following?
A) An increase in liabilities, an increase in expenses, and a decrease in stockholders’
equity
B) A decrease in assets, a decrease in stockholders’ equity, and an increase in expenses
C) A decrease in assets, an increase in liabilities, and an increase in expenses
D) An increase in assets, an increase in liabilities, and a decrease in expenses
Which of the following would be in the raw materials inventory of a company making
cheese?
A) Milk and cream used to make the cheese
B) Cheese that has been made but is curing before being ready to sell
C) Cured cheese that is waiting to be shipped to retailers
D) Partially processed cheese
Which of the following statements best describes a contingent liability?
A) The amount of a contingent liability is known and will definitely have to be paid in
the future.
B) A contingent liability is a potential liability that has arisen because of a past
transaction or event, but its ultimate outcome will not be known until a future event
occurs or fails to occur.
C) A contingent liability will only be incurred if a particular future event takes place.
D) A contingent liability is a potential liability that will be incurred if a natural disaster
happens.
A company originally issues 180,000 shares of stock at a price of $22; one year later the
stock price is $40 per share, the number of outstanding shares is unchanged, and the
company’s net income for the year is $230,400. The P/E ratio at the end of the recent
year is:
A) 0.0002.
B) 24.22.
C) 31.25.
D) 0.0001.
Before reconciling its bank statement, Lauren Cosmetics Corporation’s general ledger
had a month-end balance in the cash account of $5,250. The bank reconciliation for the
month contained the following items:
Given the above information, what up-to-date ending cash balance should Lauren report
at month-end?
A) $4,500
B) $4,820
C) $5,160
D) $5,590
Goodwill
A) is not amortized, but is tested annually for impairment.
B) is amortized using the straight-line method.
C) is amortized using the units-of-production method.
D) is not amortized and is not tested for impairment.
The following amounts were reported by the two companies:
Required:
Part a. Calculate each company’s net profit margin expressed as a percent.
Part b Which company has generated a greater return of profit from each revenue
dollar?
The entry to record a recovery causes:
A) an increase in net accounts receivable.
B) a decrease in net accounts receivable.
C) net accounts receivable to stay the same.
D) an increase in total revenues.
Company X has a P/E ratio of 16 in year 2013 and 16.5 in 2014. In 2015, its P/E ratio is
24. The best way to interpret these data is to conclude that:
A) the stock is overpriced and should be sold.
B) the stock has great growth capacity and should be bought.
C) other financial results and news should be examined to determine the cause of the
P/E ratio change.
D) the stock is underpriced and should be bought.
Langston Company updates its inventory periodically. The company ‘s cost of goods
sold was $2,700 and purchases were $5,600 during the year. The company ‘s ending
inventory count was $5,000. What was the amount of beginning inventory?
A) $3,300
B) $13,300
C) $7,900
D) $2,100
Financial statements are most commonly prepared:
A) daily.
B) monthly, quarterly and annually.
C) as needed.
D) weekly.