1) A solvency measure that focuses specifically on the extent to which a company relies
on outsiders for funds is:
A.cash flow from operations to capital expenditures ratio
B.debt service coverage ratio
C.times interest earned ratio
D.debt-to-equity ratio
2) Fashion Company reported the following:
Common stock, $3 par, 10,000 shares authorized, 5,000 shares issued and outstanding
What is the effect of a 10% stock dividend if the market price of the common stock is
$30 per share when the dividend is declared?
A.Retained earnings in the amount of $15,000 is transferred to the contributed capital
accounts
B.Cash decreases $30,000
C.Additional Paid-in Capital decreases $30,000
D.A stock dividend has no effect on any stockholders’ equity accounts
3) Which of the following statements is true?
A.The method of preparing the operating activities section of a statement of cash flows
which adjusts net income to remove the effects of deferrals and accruals for revenues
and expenses is the direct method
B.The method of preparing the operating activities section of a statement of cash flows
which reports major classes of gross cash receipts and cash payments for revenues and
expenses is the indirect method
C.The FASB prefers the indirect method of preparing the operating activities section of
the statement of cash flows
D.Most companies use the indirect method of preparing the operating activities section
of the statement of cash flows
4) Hopper, Inc.
Use the information from Hopper Inc. to answer the following question(s).
Read the information about Hopper, Inc. Which of the following statements is the best
answer regarding the companys profit margin?
A.The profit margin was 15.8% in 2014
B.The profit margin was 15.8% in 2013
C.The profit margin was 31.5% in 2014
D.The profit margin was 31.5% in 2013
5) Which of the following accounts is not classified as a current liability?
A.Taxes payable
B.Note payable, due in three (3) years
C.Salaries payable
D.Accounts payable
6) Phoenix Corp. reported the following information for 2013 and 2014.
How much cash was paid for interest during 2014?
A.$11,750
B.$12,250
C.$12,500
D.$12,750
7) Micro Company wishes to issue $400,000 of 5-year, 6% bonds, with interest paid
annually at the end of the year. The market rate of interest is currently 5%. What
information is needed in order to determine the selling price?
A.The market rate of interest, the stated rate of interest, the bond rating, and the bond
life
B.The face amount of the bonds, the stated rate of interest, the market rate of interest,
and the bond life
C.The life of the bonds, the market rate of interest, the bond rating, and the face amount
of the bonds
D.The face amount of the bonds, the market rate of interest, the purpose of the issue,
and the bond life
8) Which profitability ratio requires the use of earnings per share in its calculation?
A.Price/earnings ratio
B.Return on common stockholders equity
C.Dividend yield ratio
D.Profit margin
9) Given a current ratio of 5 to 3, what is the effect of paying a supplier within 30 days
of the purchase?
A.The current ratio would increase
B.The current ratio would decrease
C.The current ratio would remain the same
D.Unable to determine
10) Which of the following is an example of a credit memorandum?
A.Service charge notice
B.Collection of a note receivable by the bank
C.Outstanding check
D.Company error in recording a $600 deposit as $500
11) The purchase of office equipment at a cost of $2,600 with an immediate down
payment of $1,200 and agreement to pay the balance within 60 days is recorded by:
A.A debit of $2,600 to Office Equipment, a debit of $1,200 to Accounts Receivable,
and a credit of $1,400 to Accounts Payable
B.A debit of $1,400 to Accounts Receivable, a debit of $1,200 to Cash, and a credit of
$2,600 to Office Equipment
C.A debit of $2,600 to Office Equipment, a credit of $1,200 to Cash, and a credit of
$1,400 to Accounts Payable
D.A debit of $2,600 to Office Equipment, a credit of $1,200 to Cash, and a credit of
$1,400 to Accounts Receivable
12) Venture Enterprises’ accountant determined the following:
Where would this item be reported on Ventures financial statements?
A.In the Stockholders’ Equity section of the balance sheet
B.In the Treasury Stock section of the balance sheet
C.On the statement of retained earnings
D.On both the balance sheet and statement of retained earnings
13) On May 1, 2014, Meehan Inc. lends $125,000 to Solar Power Inc. The loan will be
repaid in 90 days with interest at 12%.
REQUIRED:
1> Identify and analyze the effect of the transaction on Meehans books on May 1, 2014.
2> Assume that Meehan prepares quarterly statements on May 30, 2014. Identify and
analyze the adjustment on Meehans books on May 30, 2014 regarding the loan.
3> Identify and analyze the effect of the transaction on Meehans books on July 29,
2014, when Solar Power repays the principal and interest.
14) The mechanism that keeps track of the balances owed by individual customers is
called a(n) _________________________.
15) Describe how the inventories of manufacturers differ from the inventories of
retailers.
16) Why is stockholders equity viewed as a residual amount?
17) An important __________________________ activity for many companies is
acquiring property.
18) Loren Corporation
Listed below is information from the financial records of Loren Corporation at
December 31, 2014:
Read the information about Loren Corporation.
Required:
Prepare the current assets section of the balance sheet for Loren Corp. at December 31,
2014. You may omit the heading. How does the concept of liquidity apply?