Many lending agreements require the borrowing company to maintain certain financial
standards as demonstrated by its financial statements. This feature is known as a:
A) bond certificate.
B) loan covenant.
C) renegotiation.
D) contingent liability.
A stock dividend:
A) is accounted for like a stock split.
B) will reduce stockholders’ equity like a cash dividend does.
C) will not change any of the accounts within stockholders’ equity.
D) will reduce Retained Earnings like a cash dividend does.
The going-concern assumption states that the:
A) company will always maximize the profit for stockholders.
B) company is not expected to go out of business in the near future.
C) company is a separate concern from the stockholders.
D) company’s results will be reported in a consistent manner from period to period.
Your company sells $469,300 of goods during the year that have a cost of $398,600.
Inventory was $29,783 at the beginning of the year and $34,038 at the end of the year.
Use the information above to answer the following question. What is the inventory
turnover ratio?
A) 12.5 times
B) 13.4 times
C) 14.7 times
D) 2.2 times
Flynn Corporation had the following cash flows for the current year. The company uses
the direct method in preparing the statement of cash flows.
Use the information above to answer the following question. If the cash balance at the
beginning of the current year was $0, what is the amount of cash at the end of the year?
A) $112,500
B) $425,000
C) $737,500
D) $311,500
Which of the following would be reported on the income statement for Year 2?
A) Supplies that were purchased and used in Year 1 but paid for in Year 2.
B) Supplies that were purchased in Year 1, but used in Year 2.
C) Dividends that were paid in Year 2.
D) Accounts Receivable as of December 31, Year 2.
PayPal and national credit card companies charge Abbigail Company a 3% fee for their
services. Abbigail Company’s net sales revenue was $10,000 on the last weekend of
November. How much cash will be deposited into Abbigail’s bank account as a result of
these sales?
A) $30
B) $9,700
C) $10,000
D) $10,030
If a corporation declares and distributes a stock dividend on its common shares:
A) the amount of total assets increases.
B) stockholders’ equity decreases.
C) contributed capital decreases.
D) the account Retained Earnings is decreased.
DigDug Corporation had outstanding checks totaling $5,400 on its June bank
reconciliation. In July, DigDug issued checks totaling $38,900. The July bank statement
shows that $26,300 in checks cleared the bank in July. The amount of outstanding
checks on DigDug’s July bank reconciliation should be:
A) $12,600.
B) $18,000.
C) $5,400.
D) $7,200.
In a period of rising prices, the inventory costing method that will cause the company to
have the lowest income tax expense is:
A) LIFO.
B) FIFO.
C) Weighted average.
D) Specific identification.
What is the minimum number of accounts that must be involved in any transaction?
A) One
B) Two
C) Three
D) There is no minimum.
Which of the following is not an expense?
A) Wages of employees
B) Interest incurred on a note payable
C) Dividends
D) Corporate income tax
Carrington Inc. reported net sales revenues of $19.8 billion and cost of goods sold of
$6.0 billion. Its gross profit percentage was:
A) 30.3%.
B) 69.7%.
C) 3.3%.
D) 2.3 %
A company has $72,500 of inventory at the beginning of the year and $65,500 at the
end of the year. Sales revenue is $986,400, cost of goods sold is $572,700, and net
income is $124,200 for the year. The inventory turnover ratio is closest to:
A) 1.8
B) 8.3
C) 6.0
D) 14.3
In January, a company pays for advertising space in the local paper for ads to be run
during the months of January, February, and March at $1,500 a month. The journal
entry to record the payment would debit to:
A) Cash for $4,500, credit Advertising Expense for $1,500, and credit Prepaid
Advertising for $3,000.
B) Accounts Payable and a credit to Cash for $4,500.
C) Accounts Payable and a credit to Stockholders’ Equity for $4,500.
D) Advertising Expense for $1,500, debit Prepaid Advertising for $3,000, and credit
Cash for $4,500.
Companies that must comply with the requirements of the Sarbanes-Oxley Act (SOX)
include all:
A) U.S. companies.
B) companies that trade on U.S. stock exchanges.
C) U.S. companies that trade on U.S. stock exchanges.
D) foreign companies that trade on U.S. stock exchanges.
If a company uses the indirect method to determine cash flows from operating
activities, gains:
A) must be added to net income and losses subtracted from net income.
B) and losses must be added to net income.
C) must be subtracted from net income and losses added to net income.
D) and losses must be subtracted from net income.
When the effective-interest method of amortization is used, what happens to interest
expense as a bond moves toward maturity?
A) Interest expense falls for bonds sold at either a discount or a premium.
B) Interest expense rises for bonds sold at a discount and falls for bonds sold at a
premium.
C) Interest expense rises for bonds sold at either a discount or a premium.
D) Interest expense falls for bonds sold at a discount and rises for bonds sold at a
premium.
The Statement of Cash Flows for the current year contained the following:
The change in cash for the current year was an increase of $14,000.
Use the information above to answer the following question. What is the amount of
cash flows from (used in) financing activities?
A) ($40,000)
B) $5,000
C) $49,000
D) $10,000