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Multiple choice question on Accoutning.

1 Which of the following is not considered a financial statement prepared to report company performance?
A income statement
B bank statement
C balance sheet
D cash flows statement

2 Which of the following is a stockholders' equity item
A property, plant and equipment
B accounts payable
C inventory
D contributed capital

3 Net income is
A assets minus liabilities
B revenues minus expenses
C contributed capital minus dividends
D stockholders' equity minus liabilities

4 Which of the following statements is prepared as of a point in time?
A income statement
B statement of retained earnings
C balance sheet
D statement of cash flows

5 The Hamlet Corp. has assets of $20,000, and stockholders' equity of $12,000. The amount of its liabilities is
A $8,000
B $12,000
C $20,000
D $32,000

6 ABC Company sold merchandise for $500,000. The merchandise that it sold had a cost of $300,000. ABC has revenues of
A $200,000
B $300,000
C $500,000
D $800,000

7 Able Corp. started business this year. For this year, it had revenues of $200,000, expenses of $150,000, cash flow from operations of $40,000, and dividends paid out of $5,000. Able's retained earnings at the end of its first year is http://highered.mcgraw-hill.com/olcweb/styles/shared/spacer.gif
A $35,000
B $40,000
C $45,000
D $95,000

8 A dividend paid by a company
A appears on the income statement
B is a distribution of a company earnings to its stockholders
C must be disclosed in the footnotes
D is a reduction of net income

9 ______________ includes cash, equipment and inventory
A stockholders equity
B net income
C revenues
D assets

10 The National Co. has contributed capital of $80,000, total assets of $170,000, and total liabilities of $70,000. Its retained earnings is
A $20,000
B $90,000
C $100,000
D $110,000

11 The three basic elements of the balance sheet are
A assets, liabilities and retained earnings
B assets, liabilities, and contributed capital
C assets, liabilities, and revenues
D assets, liabilities, and stockholders' equity

12 Investors and creditors look at the balance sheet to see whether the company
A is profitable
B Keeps track of its revenues and expenses
C owns enough assets to pay all that it owes to creditors
D has had a positive cash flow from operations

13 Investors and creditors look at the income statement to see
A the company's income over a period of time
B the amount of dividends paid during the year
C the company's cash balance
D the company's income at a point in time

14 Universal Corp. has beginning retained earnings of $80,000, cash flow from operations during the current year of $35,000, dividends paid during the year of $5,000, net income for the current year of $50,000, and contributed capital at the end of the year of $15,000. Its retained earnings at the end of the year is
A $125,000
B $140,000
C $160,000
D $175,000

15 The statement of cash flows indicates
A the assets of a company
B the profitability of a company
C the liabilities of a company
D the company cash flow over the reporting period

16 Which of the following will result in an increase in revenue.
A Borrowing $10,000 from a bank
B Shareholders investing $10,000 in a company
C Selling $10,000 of concert tickets 4 months before the performance
D Selling $10,000 of groceries delivered today.

17 Which of the following results in an expense for a company.
A purchase of land for last month
B payment of advertising for last month
C payment of a dividend for last month
D purchase of supplies for future use

18 Homerdale Corp. received an order from a customer on November 10. It manufactured the ordered items on November 15, shipped the goods on November 17, and received payment on December 2. Under the accrual basis of accounting, it recorded revenue on
A November 10
B November 15
C November 17
D December 2

19 Which of the following situations results in unearned revenue.
A collection of $100 from a customer who charged the purchase of goods a month ago
B the receipt of an order from a customer who will purchase and pay for goods in two weeks
C the sale of $100 of goods today with payment due from the customer in 30 days
D the receipt of $100 cash from a customer for an order of goods to be shipped next month

20 On February1, 20xx1, Eulcor Inc. paid $3,000 for its rent for the months of February, 2xx1, March, 2xx1, and April, 2xx1. In accordance with GAAP, what is the rent expense for March?
A $ - 0 -
B $1,000
C $2,000
D $3,000

The following information comes from the balance sheet and income statement of the Rocket Co. for the years 2xx2 and 2xx1: This financial information pertains to question 21 - 24. Year ended December 31

Year ended December 31
Cash
accounts receivable
inventory
property and equipment
current liabilities
long-term liabilities
stockholders' equity
net sales revenues
cost of goods sold
operating expenses
interest expense
income tax expense

2xx2
$12,000
19,000
32,000
112,000
44,000
53,000
78,000
$340,000
220,000
80,000
5,000
9,000

2xx1
$ 10,000
22,000
25,000
109,000
40,000
50,000
76,000
315,000
210,000
75,000
4,000
8,000

21 What is the current ratio as of December 31, 2xx2?
A .70
B 1.43
C 1.80
D 3.98

22What is the net profit margin for the year ended December 31, 2xx2?
A 7.6%
B 11.8%
C 19.4%
D 21.7%

23 What is the receivables turnover for the year ended December 31, 2xx2?
A 3.80
B 15.45
C 16.59
D 17.89

24 What is the times interest earned ratio for the year ended December 31, 2xx2?
A 2.2
B 5.2
C 6.2
D 8.0

25Which ratio is a test of liquidity?
A net profit margin
B inventory turnover
C times interest earned
D debt-to-assets

26Which ratio is not a test of profitability?
A fixed asset turnover
B net profit margin
C inventory turnover
D earnings per share

This information pertains to Questions 27 & 28.
net cash flow from operating activities
total assets
interest paid
net income
income taxes paid
accounts receivable
cash paid for property, plant, and equipment
stockholders' equity $ 80,000
500,000
55,000
100,000
12,000
320,000
60,000
75,000

27 What is the cash coverage?
A 2.45
B 2.67
C 9.09
D 10.09

28 What is the quality of income ratio?
A .80
B .94
C 1.07
D 1.25

Company
A
B
C
D Total assets

$ 20,000
10,000
35,000
30,000 Net income

$ 5,000
3,000
8,000
15,000 Liabilities

$ 30,000
20,000
20,000
40,000 Average
stockholders' equity
$ 15,000
12,000
40,000
55,000

29 From the information above, which company has the highest return on equity?
A Company A
B Company B
C Company C
D Company D

30 If the rate of foreign currency exchange rate between US Dollars and Euros, goes from "1.20 US Dollars buys 1 Euro", to "1.45 US Dollars buys 1 Euro", which of the following is true for the US
A Foreign goods become more expensive
B Foreign goods become less expensive

31 Which of the following items is most likely a current asset?
A contributed capital
B supplies
C furniture and equipment
D land

32Which of the following is not an asset:
A accounts payable
B furnishings and equipment
C supplies
D cash

33Stockholders' equity is
A the fair market value of a company
B liabilities minus assets
C contributed capital plus retained earnings
D revenue minus expenses

34 If supplies are purchased for cash
A total assets will increase
B total assets will decrease
C total assets will remain the same
D stockholders' equity will increase

35 Which of the following requires a debit?
A decrease in assets
B decrease in liabilities
C increase in liabilities
D increase in stockholders' equity

36If a company does not receive cash until after it delivers goods
A it must wait to receive cash until it can record revenue
B it must record unearned revenue at the time it delivers goods
C it must record revenue at the time it delivers the goods
D it must increase the amount of accounts receivable at the time it gets paid by its customer

37 ABC Company had revenues of $600,000, expenses of $300,000, paid dividends of $100,000 and sold $50,000 of common stock during the year. At the end of the year, ABC Company's net income was:
A $200,000
B $250,000
C $300,000
D $350,000

8 Who creates US GAAP
A SEC
B FASB
C IRS
D AICPA

39 The revenue principle states that revenue be recorded when
A a customer order is received
B cash is received
C the customer is reasonably satisfied
D earned

40
Which of the following results in an expense for a company.
A purchase of land
B payment of advertising for last month
C payment of a dividend
D purchase of supplies

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Solution Summary

The problem deals with issues in Accounting. The problems covered include calculation of net income, dividend, ratios, cash coverage etc

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