Archives: Quiz

1) Asymmetric information results when managers of a firm have more information about the firm’s operations and future prospects than investors have. 2) The cost of new common stock is normally greater than any other long-term financing cost. Answer: TRUE […]

1) In the U.S. over the past 30 years, foreign direct investment (FDI) came overwhelmingly in the form of mergers and acquisitions rather than through establishments. 2) The overriding goal for merging is the maximization of the owners’ wealth as […]

1) Dividends paid to stockholders is tax deductible. 2) An efficient portfolio is a portfolio that maximizes return for a given level of risk or minimizes risk for a given level of return. Answer: TRUE 3) A firm’s credit standard […]

1) A portfolio combining two assets with less than perfectly positive correlation can reduce total risk to a level below that of either of the components. 2) The Gordon model assumes that the value of a share of stock equals […]

1) The foreign direct investment (FDI) is a multi-national corporation’s transfer of capital, managerial, and technical assets from a foreign country to its home country. 2) A lease arrangement has many more restrictive covenants than those that are normally included […]

1) Float exists when a payee has received funds in a spendable form but these funds have not been withdrawn from the account of the payer. 2) Both warrants and rights result in new capital equity. However, warrants are issued […]

1) The ratio of exchange in market price indicates the market price per share of an acquiring firm paid for each dollar of market price per share of the target firm. 2) Maintenance clauses are provisions normally included in an […]

1) The market rewards firms that adopt a fixed or increasing level of dividends rather than a fixed dividend payout policy through higher share prices. 2) In theory, the rate of return on U.S. Treasury bills should always exceed the […]

1) Mail float is the delay between the deposit of a check by a payee and the actual availability of the funds. 2) One advantage of leasing is that in many cases, the return to the lessor is quite low […]

1) Unlike business bankruptcy and business failure, divestiture is often undertaken for positive motives in a manner that is consistent with the firm’s strategic goals. 2) The World Trade Organization is an international body established to police world trading practices […]

1) Electric Company borrowed on a one-year, 10%, $150,000 note on May 1, 2014 with interest and principal to be paid at maturity. How much interest should Electric Company report on its income statement for the year ending December 31, […]

1) Stanfield Equipment sells new tractors and pays each salesperson a commission of $1,000 for each tractor sold. During the month of August, a salesperson, Jason, sold 3 new tractors. Stanfield pays Jason on the 10th day of the month […]

1) Read the information about Webb Company. What is Webbs net income? A.$ 1,600 B.$ 2,000 C.$ 2,200 D.$ 2,800 2) All of the following events (transactions) would be identified from standard source documents except for A.freight charges for merchandise […]

1) Starlight Associates, Inc. recorded salary expense of $100,000 in 2014. However, additional salaries of $5,000 had been earned, but not paid or recorded at December 31, 2014. After the adjustments are recorded and posted at December 31, 2014, the […]

1) Aloha Company reports the following information at December 31, 2014: What is Aloha Companys net income? A.$ 15,000 B.$ 45,000 C.$ 55,000 D.$ 65,000 2) Maryland Vacations has a $2,200 account receivable from the Miami Kiwanis. On March 11, […]

1) The current and quick ratios have two limitations. These ratios A.emphasize the ineffectiveness of analysts’ calculations, and focus on liquid assets at a point in time instead of a period of time. B.focus on cash instead of working capital, […]

1) The following data is available for one of the products sold by Wild Optics Company, which uses the periodic inventory system: At the end of December, Wild Optics had 25 units on hand. The 75 units sold created revenue […]

1) Morton & Associates Use the following five transactions for Morton & Associates, Inc. to answer the question(s). See the transactions to Morton & Associates. The journal entry to record the May 9 transaction will include a credit of $1,220 […]

1) Match the terms to the definitions by selecting the letter of the term. Each term may be used more than once or not at all. 1>The holders of this stock have the right to dividends in arrears before the […]

1) Iowa Industries Inc. Selected data from the financial statements of Iowa Industries Inc. for the years ended December 31, 2014 and 2013, are presented below. Also, certain assumptions are presented. Use these data and assumptions to answer the questions […]

1) Which of the following categories on a statement of cash flows is used to report the cash flow effects of transactions involving a company’s stock? A.Operating Activities B.Investing Activities C.Financing Activities D.Profit Activities 2) If a company purchases $3,000 […]

1) Port, Inc. paid a cash dividend on January 2 that had been declared prior to the end of its fiscal year. The entry to pay the dividend will A.increase Cash and increase Cash Dividend Payable B.decrease Cash Dividend Payable […]

1) At the end of the first year of operations, the balance sheet of West Palm Beach Industries had the following balances: Accounts Receivable, $5,000; Accounts Payable, $6,000; Inventory, $3,000; and Unexpired Insurance, $2,000. The corporation reported net income of […]

1) Crimson Company declared and paid $1,000,000 in dividends to the common stockholders. The effect of this transaction is that the A.earnings per share decreased B.current ratio increased C.debt-to-equity ratio increased D.earnings per share increased 2) Stein Corp. reported the […]

1) Checks presented for payment and paid by the bank are known as A.Canceled checks B.Certified checks C.NSF checks D.Outstanding checks 2) Effective cash management and control includes all of the following except A.The use of a petty cash fund […]

1) Which one of the following items would be subtracted from the balance per bank statement in a bank reconciliation? A.Outstanding checks B.Deposit in transit C.Service charges D.Interest on customer note 2) Which one of the following is not a […]

1) Assume that you have received copies of the financial statements for PepsiCo for the years ending December 31, 2014 and 2013. Answer the following questions: A) If you were a banker, why would you need information from PepsiCos financial […]

1) How would outstanding checks be dealt with in a bank reconciliation? A.added to companys book balance B.deducted from companys book balance C.added to bank statement balance D.deducted from bank statement balance 2) Arizona Inc. reported the following information for […]

1) A ten-year lease obligation appears on the balance sheet of Generic Products Company. How would it most likely be classified on the balance sheet? A.Current asset B.Long-term liability C.Long-term asset D.Contra-liability 2) Quan uses a periodic inventory system. At […]

1) Francis Real Estate purchased a building for $600,000 in 200 At the end of 2013, when it had a book value of $450,000, it was appraised for $1,000,000. A potential buyer offered $900,000. Francis rejected the offer. What amount […]

1) All of the following statements are true about a 3-for-1 split, except: A.Total contributed capital increases B.The market price will probably decrease C.Par value per share is reduced to one-third of what it was before the split D.A stockholder […]

1) When determining the amount of interest to be paid on a bond, which of the following information is not necessary? A.The face amount of the bonds B.The selling price of the bonds C.The face rate of interest on the […]

1) Comfort Shoes received a promissory note from a customer on April 1, 2014. The face amount of the note is $2,000; the terms are 12 months and 8% annual interest. At the maturity date, the customer pays for the […]

1) Grout, Inc. offers terms of 2/10, n/30 to credit customers. Tile Mart Corp. purchased 100 tile cutters with a list price of $20 each on March 5, 2014, on account. Tile Mart Corp. paid the invoice on March 31, […]

1) Presented below is a partially completed income statement of Deep Sea, Inc. for 2014. Using the partially completed income statement for Deep Sea, Inc., determine each of the following for 2014. A) Net Sales B) Beginning Inventory C) Ending […]

1) Irrigation Corp. purchased supplies at a cost of $5,200 during 2014. At January 1, 2014, supplies on hand were $1,600. During the year, the company used $4,000 of supplies. Irrigations accounting year ends on December 31. 2) Which of […]

1) On November 2, 2014, Quaint General Store concluded that a customers $400 account receivable was uncollectible and that the account should be written off. What effect will this write-off have on Quaints 2014 net income and balance sheet totals […]

1) When a company wishes to purchase and retire its own stock, the company must A.decrease the stock account balances by the original issue price B.record a gain or loss depending on the difference between original selling price and repurchase […]

1) Utah Corp. Use the following selected data and additional information from the records of Utah Corp. to answer the questions that follow. Additional information: Review the data for Utah Corp. REQUIRED: (A) What amount of cash was collected from […]

1) Cerrato Company has assets of $350,000, liabilities of $130,000, and retained earnings of $180,000. How much is total owners equity? A.$ 40,000 B.$ 170,000 C.$ 220,000 D.$ 350,000 2) Which one of the following is correct? A.Inventory losses can […]

1) The solution to this problem requires time value of money calculations. Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. Barton Company has just purchased a machine with a cost of $100,000, and […]

1) Carpenter Transport Company purchased a truck at a cost of $60,000 on January 1, 2010. The truck has an estimated useful life of 9 years and a $15,000 residual value. A. How much depreciation expense should be reported for […]

1) The cash flow from operations to capital expenditures ratio measures a company’s ability to A.use operations to finance its acquisitions of productive assets. B.use cash flows from capital expenditure transactions to maintain working capital. C.increase its capital expenditures as […]

1) Dimension Inc. had net income for 2014 of $24,000. It declared and paid a $13,000 cash dividend in 2014. If the companys retained earnings for the end of the year was $39,600, what was the companys retained earnings balance […]

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 […]

1) Stitt Homes, Inc. pays its sales personnel 6% commission of the selling price of each home. During November of 2014, sales people sold $18,400,000 of homes. During December, 2014, sales people sold $20,050,000 of homes. Because its policy is […]

1) The record in which transactions are initially recorded in chronological order as they occur is a(an) A.Account B.General Journal C.General Ledger D.Chart of Accounts 2) Which of the following terms best describes a distribution of the net income of […]

1) The following set of items describes activities completed by a company in collecting cash for merchandise sales. For each activity, identify whether or not the activity adheres to or violates sound internal control procedures. An employee in the accounting […]

1) Which of the following concepts is important to accrual accounting? A.Time period, because accrual accounting divides earnings into time periods B.Monetary unit, because inflation is a big factor in the environment C.Cash basis, because if cash is not received, […]

1) Owners of Thibeau Industries, Carl and Stefanie, are sent a dividend check from the company. For this transaction, what is the effect on the accounting equation for Thibeau Industries? A.Assets decrease and stockholders equity decreases B.Assets increase and stockholders […]