Which of the following statements would not explain why a company may want to
repurchase its stock?
A) To demonstrate to investors that it believes its own stock is worth purchasing.
B) To obtain shares to reissue to employees as part of an employee stock plan.
C) To obtain shares that can be reissued as payment for purchase of another company.
D) To increase the number of shares of outstanding stock.
Travis County Bank agrees to lend Brickyard Corporation $200,000 on January 1.
Brickyard signs a $200,000, 4%, 9-month note. Interest is due at maturity on September
30. The company’s fiscal year ends June 30 and adjusting entries are recorded at that
time only.
Use the information above to answer the following question. On January 1, which of
the following journal entries will be made by Brickyard to record the issuance of the
note?
A) Debit Interest Expense for $6,000, debit Cash $194,000, and credit Notes Payable
for $200,000
B) Debit Cash and credit Notes Payable for $200,000
C) Debit Cash for $200,000, debit Interest Expense for $6,000, and credit Notes
Payable for $206,000
D) Debit Cash for $200,000, debit Interest Expense for $6,000, credit Notes Payable for
$200,000, and credit Interest Payable for $6,000
Inventory levels increase by 10% at your company during the fourth quarter. Based on
this increase, which of the following statements must be correct?
A) This must be good news because inventories are an asset to the company.
B) This could be good news if the company is ordering more goods because sales
appear to be rising.
C) This could be bad news if the company is ordering more goods because unit costs
are falling.
D) This must be bad news because higher inventories mean higher costs.
Bobby Darling is the only employee of Atlantic Records, Inc. During the first week of
January, Darling earned $800 and had federal and state income tax withholdings of $40
and $15, respectively. FICA taxes are 7.65% on earnings up to $117,000. State and
federal unemployment taxes for the period are $50 and $8, respectively.
Use the information above to answer the following question. What is the employer’s
payroll tax expense for the week?
A) $113.00
B) $119.20
C) $174.20
D) $235.40
In January, the Huntington Beach Resort (HBR) accepts your reservation and receives
your $2,000 payment for a week of sun and fun in California during spring break. In
January, HBR will record a journal entry that includes a debit to:
A) Cash and a credit to Unearned Revenue.
B) Accounts Payable and a credit to Service Revenue.
C) Cash and a credit to Service Revenue.
D) Service Revenue and a credit to Cash.
Assets totaled $24,250 and liabilities totaled $8,500 at the beginning of the year. During
the year, assets decreased by $3,500 and liabilities increased by $2,800.
Use the information above to answer the following question. What is the amount of the
change in stockholders ‘ equity during the year?
A) $5,750 increase
B) $700 decrease
C) $6,300 decrease
D) $550 increase
During 2015, Maverick Law Firm had the following transactions with it clients
(customers):
On February 1, 2015, the company received cash of $5,000 from clients in payment of
their account balances as of December 31, 2014.
On November 1, 2015, the company received $2,000 cash as payments in advance for
law services to be performed in 2016.
The company received a total of $13,000 in cash for law services that were performed
during 2015.
The company sent bills totaling $4,000 to clients for services performed during 2015;
this amount was unpaid as December 31, 2015.
Use the information above to answer the following question. Which of the following
statements about the activities for Maverick Law Firm for 2015 is correct?
A) If Accounts Receivable at December 31, 2014 totaled $25,000, the amount of
Accounts Receivable to be reported on the Balance Sheet at December 31, 2015 will be
$24,000.
B) The $2,000 received from clients for law services to be performed next year will be
reported as revenue on the 2015 income statement.
C) The $4,000 owed by clients for services performed this year will be reported as
Accounts Payable on the balance sheet at December 31, 2015.
D) The $5,000 received this year from clients in payment of their accounts will be
reported as Services Revenue on the 2015 income statement.
A current ratio of less than one is not so much of a concern when the company has a:
A) low fixed asset turnover ratio.
B) high days to collect number.
C) high inventory turnover ratio.
D) high debt-to-equity ratio.
The following information is taken from the financial statements of Lopez Company. :
The company’s times interest earned ratio is closest to:
A) 19.2
B) 4.7
C) 15.0
D) 18.2
Use the information above to answer the following question. What amount is
represented by letter L in the statement of cash flows?
A) $159,000
B) $85,000
C) ($85,000)
D) ($159,000)
Which of the following accounts would be classified as a current liability on a classified
balance sheet?
A) Dividends
B) Unearned Revenue
C) Wages Expense
D) Accounts Receivable
Purrfect Pets uses the perpetual inventory system. At the beginning of the quarter,
Purrfect Pets has $30,000 in inventory. During the quarter the company purchases
$7,900 of new inventory from a vendor, returned $700 of inventory to the vendor, and
took advantage of discounts from the vendor of $200. At the end of the quarter the
balance in inventory is $26,500. What is the cost of goods sold?
A) $10,500
B) $11,400
C) $3,500
D) $11,900
Which of the following statements about gross profit is correct?
A) Gross profit = Net sales – Cost of goods sold.
B) Gross profit is recorded by a credit to the Gross Profit account.
C) A company sells $10,000 of goods. If the gross profit percentage is 32%, net income
would be $3,200.
D) If net sales are $100 and cost of goods sold is $50 then the gross profit percentage is
100%.