A company had been selling its product for $20 per unit, but recently lowered the
selling price to $15 per unit. The company’s current inventory consists of 200 units
purchased at $16 per unit. The market value of this inventory is currently $13 per unit.
At what amount should the company’s inventory be reported on the balance sheet?
A) $2,600
B) $3,200
C) $3,000
D) $4,000
If interest revenue for the period is $14,000 and the beginning and ending interest
receivable balances are $1,320 and $5,900, respectively, cash received for interest is:
A) $14,000.
B) $9,420.
C) $18,500.
D) $8,100.
As of November 29, it appears that Notel will report earnings per share (EPS) of $1.15
for the quarter ended November 30. Which of the following events would cause this
EPS number to decrease, assuming the event occurs the morning of November 30?
A) The company pays a supplier for inventory bought on account.
B) The company declares, but does not pay, a cash dividend.
C) The company purchases 10 shares of common stock in another company.
D) The company reissues the treasury stock it holds.
A fixed asset turnover ratio of 4.3 indicates that for every:
A) $1 in sales revenue, the firm acquired $4.30 of assets.
B) $1 in fixed assets, the firm earned $4.30 of net income.
C) $1 in assets, the firm paid $4.30 of expenses.
D) $1 in fixed assets, the firm generated $4.30 of net sales.
Use the information above to answer the following question. What is the employer’s
payroll tax expense for the week?
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.
A) $113.00
B) $119.20
C) $174.20
D) $235.40
If you wish to examine how one aspect of a business is doing relative to other aspects of
the business at the current time, you are most likely to use:
A) time-series analysis.
B) ratio analysis.
C) horizontal analysis.
D cross-sectional analysis.
Which of the following statements regarding inventory counts is not correct?
A) Companies need to perform a physical count of their inventory at least yearly
regardless of which inventory system is being used.
B) A perpetual inventory system does not require a physical count during the
accounting period to determine cost of goods sold.
C) In a perpetual inventory system, the inventory count is compared to the inventory
account balance to reveal shrinkage.
D) If a company uses a perpetual inventory system and the inventory count at the end of
the accounting period is greater than the balance in the inventory ledger account, there
must have been shrinkage.
Which of the following would not be considered a contingent liability?
A) Products sold with a warranty
B) Pending lawsuits
C) Frequent flyer miles earned by passengers
D) Cash received from advance ticket sales
The separate entity assumption means:
A) a company’s financial statements reflect only the business activities of that company.
B) each separate owner’s finances must be revealed in the financial statements.
C) each separate entity that has a claim on a company’s assets must be shown in the
financial statements.
D) if the business is a sole proprietorship, the owners’ personal activities are included in
the company’s financial statements.
Every transaction:
A) increases one account and decreases another account.
B) has at least two effects on the basic accounting equation.
C) affects only balance sheet accounts or only income statement accounts.
D) is analyzed from the standpoint of the business owners.
Assume a company uses the indirect method to prepare its statement of cash flows. If
Inventory decreases and Unearned Revenue increases during an accounting period,
what does the company do with the changes in these accounts to calculate cash flows
from operating activities?
A) Both are added to net income.
B) The change in inventory is added to net income; the change in unearned revenue is
subtracted.
C) Both are subtracted from net income.
D) The change in unearned revenue is added to net income; the change in inventory is
subtracted.
Use the information above to answer the following question. If Charter Company uses
the LIFO method, what is the cost of goods sold for the year?
A) $38
B) $34
C) $44
D) $72
