To determine whether generally accepted accounting principles (GAAP) were followed
in the preparation of financial statements, an examination of:
A) tax documents would be performed by the IRS.
B) the company’s accounting records would be performed by the SEC.
C) the financial statements and related documents would be performed by an
independent auditor.
D) the financial statements and related documents would be performed by the FASB.
A company has gross profit of $58,300 and a gross profit percentage of 25%. What
were the company’s net sales?
A) $233,200.
B) $14,575.
C) $72,825.
D) $711,260
Assume a company uses the direct method to prepare its statement of cash flows. If the
company’s Accounts Receivable increase during the accounting period, the change in
Accounts Receivable is:
A) added to the change in the Cash account to calculate cash collected from customers.
B) subtracted from Sales Revenue to calculate the cash collected from customers.
C) added to Sales Revenue to calculate the cash collected from customers.
D) subtracted from the change in the Cash account to calculate cash collected from
customers.
Choose the appropriate letter to match the characteristics with the type of company. A
given characteristic may match more than one type of company.
CHARACTERISTIC
1) ________ Issues shares of stock that are traded on a stock exchange such as the
NYSE
2) ________ The owners of the business are personally liable for the debts of the
company
3) ________ Shares of stock must be purchased directly from current owners
4) ________ Can raise more financial capital by selling stock to the greatest number of
investors
5) ________ The easiest form of business to start
6) ________ The business ceases to exist upon the departure of one of the owners
7) ________ The owners pay taxes on the profits of the business
TYPE OF COMPANY
A. Partnership
B. Publicly traded corporation
C. Privately traded corporation
D. Sole Proprietorship
Your company sells $50,000 of bonds for an issue price of $52,000. Which of the
following statements is correct?
A) The bond sold at a price of 52, implying a premium of $2,000.
B) The bond sold at a price of 104, implying a discount of $2,000.
C) The bond sold at a price of 52, implying a discount of $2,000.
D) The bond sold at a price of 104, implying a premium of $2,000.
The net cash flow provided by operating activities is an inflow of $37,042, the net cash
flow used in investing activities is $16,831, and the net cash flow used in financing
activities is $26,397. If the beginning cash account balance is $11,283, what is the
ending cash account balance?
A) $5,097
B) ($6,186)
C) $38,759
D) $27,476
Which of the following statements is correct when the straight-line method is used to
compute depreciation?
A) The carrying value of an asset is a constant amount during the asset’s useful life
B) Accumulated depreciation is a constant amount during the asset’s estimated useful
life
C) Depreciation Expense is a constant amount each year
D) The book value of an asset is an increasing amount during the asset’s useful life
Use the information above to answer the following question. If Alphabet Company uses
the specific identification method, what is the cost of its ending inventory?
A) $31
B) $69
C) $76
D) $100
Preferred stock differs from common stock in that:
A) preferred stock has more voting power and, as such, greater control over the
management of the company.
B) preferred stockholders are paid dividends before common stockholders.
C) preferred stock pays tax-free dividends.
D) preferred stock has no preemptive rights or residual claims.
A company has 110,000 shares authorized, 50,000 shares issued, and 5,000 shares of
treasury stock. How many shares are outstanding?
A) 45,000
B) 155,000
C) 55,000
D) 145,000
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.
Some bonds allow the issuing company to retire the bond with cash at any time. These
bonds are known as:
A) convertible bonds.
B) debenture bonds
C) callable bonds.
D) coupon bonds.
Receivables might be sold (“factored”) to:
A) lengthen the time to collect from customers.
B) reduce the receivables turnover ratio.
C) generate cash immediately.
D) generate a gain on sale.