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# Accounting

1. The asset turnover ratio may be used to determine:
a. the average service life of plant assets
b. the average age of plane assets
c. the dollars of sales produced for each dollar invested in assets
d. the number of times you can divide depreciation expense into total assets

2. The times interest earned ratio provides an indication of the:
a. company's ability to meet interest payments as they become due
b. relationship between current liabilities and current assets
c. percentage of assets financed by debt
d. relationship between debt and interest expense

3. A company has a current ratio of 3: 1 at December 31, 2001. Which of the following transactions would decrease the ratio?
a. Pay an account balance
b. Sell bonds at a discount
c. Borrow cash by issuing a 90 day note payable
d. Issue stock for cash

4. In the cost equation Y = F+ VX, Y represents the
a. total cost at the X level of activity
b. fixed cost at the Y level of activity
c. variable cost per unit of activity X
d. variable cost of the F level of activity
e. None of the above

5. The cafeteria department at the Good Samaritan Health Center incurred the following costs in September 200x.
Monthly cost Sept. 200x amount
|---------------- -----------------------
Supervisor's salary \$ 4,000
Hourly workers' wages and benefits 18,903
Food 9,357
Equipment depreciation and rental 6,105
Supplies 2,763
--------
Total cafeteria costs \$ 41,128

The cafeteria served 11,523 meals during the month. Using an account analysis to classify the costs, the cost function for the cafeteria is:
a. \$4,000+ \$3.222 per meal
b. \$ 6,105+ \$3.039 per meal
c. \$10,105+ \$2.692 per meal
d. \$22,903+\$1.582 per meal
e. None of the above

6/7. Big M Clubs, Inc. (BMC) incurred the following cost in 200x in producing the finest quality golf clubs in Leon County, Florida:

Wages Materials issued
Machine operators \$350,000 Graphite shafts \$300,000
Factory janitors 20,000 Steel alloy club heads 500,000
Factory supervisor 70,000 Rubber grips 100,000
Glue and resins 25,000

6. BMC's 200x product indirect labor was :
a \$20,000 b \$70,000 c. \$90,000 d. \$ 350,000 e None of the above

7 BMC's product direct material cost for 200X were:
a. \$925,000 b \$900,000 c. \$600,000 d. \$ 25,000 e. None of the above

8. Which of the following transactions has no immediate effect on retained earnings?
a. The business incurred a \$25,000 loss for the year.
b. The business earned net income of \$10,000
c. A delivery truck was purchased for \$30,000 in cash
d. Dividends of \$5,000 were declared and paid.

9. The entry to record services performed on account [ for credit] affects:
a. Only the balance sheet.
b. Only the income statement
c. Only the statement of owners equity
d. Both the balance sheet and income statement

10. The Weston Company has assets of \$150,000, liabilities of \$50,000 and shareholders equity of \$100,000. It collected \$5,000 from customers on some accounts receivable. What effect would this transaction have on the accounting equation?
a. both assets and stockholders equity decrease \$5,000.
b. Assets decrease \$5,000 and stockholders' equity increases \$5,000.
c. Assets stay the same and stockholder's equity decreases \$5,000.
d. This transaction has no effect on the totals of the major categories in the accounting equation.

11. The accounting equation:
a. shows the relationship between revenues and expenses for the period.
b. must be in balance at the end of the year but will not normally balance during the year.
c. shows the relationship between cash and stockholders' equity.
d. reflects the assets of the business and the equities in those assets.

12. Profitability and solvency objectives in business are:
a. secondary to the objective of growth
b. complementary objectives
c. of primary importance in most businesses.
d. generally ignored by established businesses.

13. Which of the following accounts would be most likely to have a credit balance?
a. accounts payable, sales revenue, capital stock
b. accounts payable, notes payable, administrative expenses
c. accounts payable, sales revenue, dividends
d. accounts receivable, administrative expenses, dividends

14. A complete analysis of the effects of a business transaction can be found in:
a. the journal
b. the ledger
c. a T-account
d. Two of the other answers are correct.

15. The entry in the posting reference column of the journal is:
a. a check mark
b. normally left blank until the entry is posted to the ledger
c. for special situations only and is normally left blank
d. the ledger page number

16. Which of the following changes in the accounts is handled through an adjusting entry?
a. Gradual conversion of an asset into an expense
b. Gradual and equal growth of an expense and a liability over the accounting period
c. gradual and equal growth of an asset and a revenue over the accounting period
d. all of the other answers are correct

17. Which statement is false? Ratios:
a. are basically logical relationships
b. can be based on either a single financial statement or several financial statements
c. are never used in financial statement analysis
d. can be used to perform trend analysis

#### Solution Preview

1. The asset turnover ratio may be used to determine:
a. the average service life of plant assets
b. the average age of plane assets
c. the dollars of sales produced for each dollar invested in assets
d. the number of times you can divide depreciation expense into total assets

2. The times interest earned ratio provides an indication of the:
a. company's ability to meet interest payments as they become due
b. relationship between current liabilities and current assets
c. percentage of assets financed by debt
d. relationship between debt and interest expense

3. A company has a current ratio of 3: 1 at December 31, 2001. Which of the following transactions would decrease the ratio?
a. Pay an account balance
b. Sell bonds at a discount
c. Borrow cash by issuing a 90 day note payable
d. Issue stock for cash

4. In the cost equation Y = F+ VX, Y represents the
a. total cost at the X level of activity
b. fixed cost at the Y level of activity
c. variable cost per unit of activity X
d. variable cost of the F level of activity
e. None of the above

5. The cafeteria department at the Good Samaritan Health Center incurred the following costs in September 200x.
Monthly cost Sept. 200x amount
|---------------- -----------------------
Supervisor's salary \$ 4,000 Fixed cost
Hourly workers' wages and benefits 18,903
Food ...

#### Solution Summary

This solution is comprised of a detailed explanation to answer what can the asset turnover ratio may be used to determine.

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