1. Accounts receivable appear in the balance sheet
a. As either current assets or non-current assets, depending on whether the allowance method or direct write off method is used to account for uncollectible le accounts.
b. As current assets, immediately after cash and cash equivalents
c. Only if the balance sheet method of estimating uncollectible accounts is used.
d. As current assets, combined with cash and cash equivalents.
2. On April 30, 32009, Tilton Products purchased machinery for $88,000. The useful life of this machinery is estimated at 8 years, with an $8,000 residual value. Refer to the information above. Assume that in its financial statements, Tilton Products uses straight-line depreciation and the half-year convention. Depreciation expense recognized on this machinery in 2009 and 2010 will be:
a. $ 5,000 in 2009 and $10,000 in 2010
b. $7,500 in 2009 and $11,000 in 2010
c. $6,000 in 2009 and $12,000 in 2010
d. $5,500 in 2009 and $11,000 in 2010
3. On April 30, 2009, Tilton Products purchased machinery for $88,000. The useful life of this machinery is estimated at 8 years, with an $8,000 residual value. Refer to the information above. Assume that in its financial statements, Tilton Products uses straight line depreciation and the half-year convention. Refer to the information above. Assume that in its financial statements, Tilton Products uses straight-line depreciation and rounds depreciation for fractional years to the nearest month. Depreciation expenses recognized on this machinery in 2009 and 2010 will be:
a. $10,000 in 2009 and $10,000 in 2010
b. $6,667 in 2009 and $10,000 in 2010
c. $5,833 in 2009 and $10,000 in 2010
d. $2,333 in 2009 and $7,000 in 2010
4. During the current year, Carl Equipment Stores had net sales of $600 million, a cost of goods sold of $500 million, average accounts receivable of $75 million, and average inventory of $50 million. Carl Equipmentâ€™s inventory turnover rate is:
a. 10 times
b. 6.7 times
c. 12 times
d. 1.2 times
5. During the current year, Carl Equipment Stores had net sales of $600 million, a cost of goods sold of $500 million, average accounts receivable of $75 million, and average inventory of $50 million. Assuming a 365 day year, the number of days required for Carl Equipment to convert its average inventory into cash is:
6. Short-term creditors are likely to view a higher-than-average inventory turnover rate as indicating that:
a. The company probably has an excessive amount of inventory
b. The company has a longer-than-average operating cycle
c. The company is able to sell its inventory quickly
d. The company is in financial difficulty.
7. Book value per share of common stock is derived by which of the following:
a. Net income dividend by the number of share authorized
b. Stockholders equity divided by the number of share outstanding
c. Net income divided by the number of share outstanding
d. Stockholders equity divided by the number of share authorized
8. A liquidating dividend:
a. Occurs when a corporation pays a dividend that exceeds the balance on the retained earnings account
b. Occurs only when a company is going out of business
c. Occurs only when the corporation has a loss for the year
d. In an expense to the corporation
9. If bond is selling at 103, it is selling at:
a. Maturity value and yields a 2% interest rate
b. A premium
c. $103 per bond
d. A Discount
10. Watins, Inc,â€™s 2011 income statement reported net sales of $5,000,000. Watinâ€™s average accounts receivable during 2011 amounted to $450,000. Using 360 to a year, Watkinâ€™s:
a. average number of days to collect an account receivable is 32 days
b. Accounts receivable turnover rate is approximately 13.8 times
c. Accounts receivable turnover rate is approximately 1.25 times
d. Accounts receivable turnover rate is approximately 2 times
11. During the year 2009, Tosco Corporation suffered an $800,000 loss when its factory was destroyed in a flood. Assuming the corporate income tax rate is 36%, what amount will Tosco report as an extraordinary loss on its income statement for 2009? Assumes floods are not common in this area.
a. Nothing since this does not qualify as an extraordinary item
12. Topper Corporation has 60,000 shares of $1 par value common stock and 16,000 shares of cumulative 7 %, $100 par preferred stock outstanding. Topper has not paid a dividend for the prior year. If Topper declares a $1.95 per share dividend this year, what will be the total amount they must pay their shareholders?
13. The adjusting entries to record depreciation or amortization expense or to write down assets that have become impaired:
a. Decrease cash balances, but have no direct effect upon net income
b. Reduce both net income, and cash balances
c. Reduce net income. But have no direct effect on cash balances
d. Affect neither net income nor cash balances.
14. General Corporation was organized on January 1 and issued 500,000 share of common stock on that date. On July 1, an additional 200,000 shares were issued for cash. Net income for the year was $5,184,000. Net earnings per share amounted to:
15. Silver Company received a 60- day, 6% notes for $16,000 on August 5. Which of the following statements is true?
a. The principal of the note plus interest is due on October 5
b. Silver will receive $16,000 plus interest of $960 at maturity
c. The maturity value of this note is $16,000
d. Silver should record a total receivable due of $16,080 on August 5.
16. Red Pine Inc. established a $400 petty cash fund several months ago and replenishes it at the end of each month. During the first two weeks of March, $185 was disbursed from the petty cash box for miscellaneous items. If a surprise count of the fund is made on March 15, the petty cash box should contain:
a. $215 cash
b. $400 cash
c. $215 cash and receipts for $185 in expenditures
d. $215 cash left for March plus $400 cash for each month since creation of the petty cash.
17. When a company sells bonds between interest dates they will pay which of the following at the first interest payment date?
a. An amount less than the stated interest rate times the principal
b. The company may skip the first interest payment date since the appropriate time has not passed
c. An amount more than the stated interest rate times the principal
d. An amount equal to the stated interest rate times the principal
18. Harvard Company purchased equipment having an invoice price of $11,500. The terms of sale were 2/10, n/30, and Harvard paid within the discount period. In addition, Harvard paid a $160 delivery charge, $185 installation charge, and $931 sales tax. The amount recorded as the cost of this equipment is:
19. Which of the following individuals has the most power to influence corporate policy on a long-term basis?
a. The controller of the corporation
b. The treasurer of the corporation
c. A shareholder owning 80 % of the outstanding preferred stock
d. A shareholder owning 60 % of the outstanding common stock
20. If the inventory at the end of the current year is understated and the error is never caught. The effect is to:
a. Overstate income this year and understate income next year
b. Understate income this with no effect on income next year.
c. Understate income this year and overstate income next year
d. Overstate the cost of goods sold, but have no effect on net income
21. Coronet Corp has total stockholdersâ€™ equity of $7,400,000. The companyâ€™s outstanding capital stock includes 100,000 shares of $10 par value common stock and 20,000 shares of 6 %, $100 par value preferred stock. (No dividends are in arrears.) The book value per share of common stock is:
22. In the fixed percentage-of-declining balance depreciation method, the book value of the asset is multiplied by:
a. A constant depreciation rate
b. A rate that changes each year but is determined from a table
c. A decreasing depreciation rate
d. An increasing depreciation rate
23. Platinum Company reports net income of $520,000 for 2009 and declared a cash dividend of $1 per share on each of its 100,000 shares of common stock outstanding. What are earnings per share of 2009?
a. $5.20 per share
b. $1.00 per share
c. $1.20 per share
d. $4.80 per share
24. On November 1, Metro Corporation borrowed $55,000 from a bank and signed a 12%, 90-day note payable in the amount of $55,000. The November 30 adjusting entry will be: (assume 360 days in year)
a. Debit Interest Expenses $550 and credit Cash $550
b. Debit Discount on Notes payable $1,100 and credit interest payable $1,100
c. Debit interest expense $550 and credit notes payable $550
d. Debit interest expense $550 and credit interest payable $550
25. The current sheet of Apex reports total assets of $20 million, total liabilities of $2 million, and ownerâ€™s equity of $18 million. Apex is considering several; financing possibilities in order to expand operations. Each question based on this data is independent of any others. What will be the effect on Apexâ€™s debt ratio if Apexâ€™s owner invests an additional $2 million to finance its expansion?
a. Additional investment by owner will have no effect on the debt ratio
b. The debt ratio will increase from 20 before to 22 after the additional investment
c. The debt ratio will decrease from 2/9 before to 2/11 after the additional investment
d. The debt ratio will decrease from .1 (2/20) to .0909 (2/22) after the additional investment