| The useful life of a plant asset is: (Points : 2)
[removed] The length of time it is used productively in a company’s operations [removed] Never related to its physical life [removed] Its productive life, but not to exceed one year [removed] Determined by the FASB [removed] Determined by law |
| 2. Depreciation: (Points : 2)
[removed] Measures the decline in market value of an asset [removed] Measures physical deterioration of an asset [removed] Is the process of allocating to expense the cost of a plant asset [removed] Is an outflow of cash from the use of a plant asset [removed] Is applied to land |
| 3. Plant assets are: (Points : 2)
[removed] Tangible assets used in the operation of a business that have a useful life of more than one accounting period [removed] Current assets [removed] Held for sale [removed] Intangible assets used in the operations of a business that have a useful life of more than one accounting period [removed] Tangible assets used in the operation of business that have a useful life of less than one accounting period |
| 4. A company has net sales of $870,000 and average accounts receivable of $174,000. What is its accounts receivable turnover for the period? (Points : 2)
[removed] 0.20 [removed] 5.00 [removed] 20.0 [removed] 73.0 [removed] 1,825 |
| 5. FICA taxes include: (Points : 2)
[removed] Social Security taxes [removed] Charitable giving [removed] Employee income taxes [removed] Unemployment taxes |
| 6. Times interest earned is calculated by: (Points : 2)
[removed] Multiplying interest expense times income [removed] Dividing interest expense by income before interest expense [removed] Dividing income before interest expense and any income tax by interest expense [removed] Dividing interest and income tax expense by income before interest and income tax expense |
| 7. Amortization: (Points : 2)
[removed] Is the systematic allocation of the cost of an intangible asset to expense over its estimated useful life [removed] Is the process of allocating to expense the cost of a plant asset to the accounting periods benefiting from its use [removed] Is the process of allocating the cost of natural resources to periods when they are consumed [removed] Is an accelerated form of expensing an asset’s cost [removed] Is the same as depletion |
| 8. A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the: (Points : 2)
[removed] Direct write-off method [removed] Aging of accounts receivable method [removed] Percentage of sales method [removed] Aging of investments method [removed] Percent of accounts receivable method |
| 9. A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. The depletion expense per ton of ore is: (Points : 2)
[removed] $0.75 [removed] $0.625 [removed] $0.875 [removed] $6.00 [removed] $8.00 |
| 10. The matching principle requires: (Points : 2)
[removed] That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user [removed] The use of the direct write-off method for bad debts [removed] The use of the allowance method of accounting for bad debts [removed] That bad debts be disclosed in the financial statements [removed] That bad debts not be written off |
| 11. Liabilities: (Points : 2)
[removed] Must be certain [removed] Must sometimes be estimated [removed] Must be for a specific amount [removed] Must always have a definite date for payment [removed] Must involve an outflow of cash |
| 12. In the accounting records of a defendant, lawsuits: (Points : 2)
[removed] Are estimated liabilities [removed] Should always be recorded [removed] Should always be disclosed [removed] Should be recorded if payment for damages is probable and the amount can be reasonably estimated |
| 13. A contingent liability: (Points : 2)
[removed] Is always of a specific amount [removed] Is a potential obligation that depends on a future event arising out of a past transaction or event [removed] Is an obligation not requiring future payment [removed] Is an obligation arising from the purchase of goods or services on credit [removed] Is an obligation arising from a future event |
| 14. Total asset turnover is calculated by dividing: (Points : 2)
[removed] Gross profit by average total assets [removed] Average total assets by gross profit [removed] Net sales by average total assets [removed] Average total assets by net sales [removed] Net assets by total assets |
| 15. If the times interest ratio: (Points : 2)
[removed] Increases, then risk increases [removed] Increases, then risk decreases [removed] Is greater than 1.5, then the company is in default [removed] Is less than 1.5, the company is carrying too little debt |
| 16. Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are: (Points : 2)
[removed] Debentures [removed] Discounted notes [removed] Installment notes [removed] Indentures [removed] Investment notes |
| 17. A company borrowed $300,000 cash from the bank by signing a 5-year, 8% installment note. The present value factor for an annuity at 8% for 5 years is 3.9927. Each annuity payment equals $75,137. The present value of the note is: (Points : 2)
[removed] $75,137 [removed] $94,013 [removed] $300,000 [removed] $375,685 |
| 18. A bond traded at 102 ½ means that: (Points : 2)
[removed] The bond pays 2.5% interest [removed] The bond traded at $1,025 per $1,000 bond [removed] The market rate of interest is 2.5% [removed] The bonds were retired at $1,025 each |
| 19. Dividend yield is the percent of cash dividends paid to common shareholders relative to the: (Points : 2)
[removed] Common stock’s market value [removed] Earnings per share [removed] Investors’ purchase price of the stock [removed] Amount of retained earnings [removed] Amount of cash |
| 20. A bondholder that owns a $1,000, 10%, 10-year bond has: (Points : 2)
[removed] Ownership rights [removed] The right to receive $10 per year until maturity [removed] The right to receive $1,000 at maturity [removed] The right to receive $10,000 at maturity |
| 21. A company issues at 9% bonds at par with a par value of $100,000 on April 1, which is 4 months after the most recent interest date. How much total cash interest is received on April 1 by the bond issuer? (Points : 2)
[removed] $750 [removed] $5,250 [removed] $1,500 [removed] $3,000 [removed] $6,000 |
| 22. Bonds owned by investors whose names and addresses are recorded by the issuing company and for which interest payments are made with checks to the bondholders, are called: (Points : 2)
[removed] Callable bonds [removed] Serial bonds [removed] Registered bonds [removed] Coupon bonds |
| 23. The right of common shareholders to protect their proportionate interest in a corporation by having the first opportunity to buy additional proportionate shares of common stock issued by the corporation is called a: (Points : 2)
[removed] Preemptive right [removed] Proxy right [removed] Right to call [removed] Financial leverage |
| 24. Owners of preferred stock often do not have: (Points : 2)
[removed] Ownership rights to assets of the corporation [removed] Voting rights [removed] Preference to dividends [removed] The right to sell their stock on the open market [removed] Preference to assets at liquidation |
| 25. The dividend yield is computed by dividing: (Points : 2)
[removed] Cash dividends per share by earnings per share [removed] Earnings per share by cash dividends per share [removed] Cash dividends per share by the market price per share [removed] Market price per share by cash dividends per share [removed] Cash dividends per share by retained earnings |
| 26. A company issues 9%, 20-year bonds with a par value of $750,000. The current market rate is 9%. The amount of interest owed to the bondholders for each semiannual interest payment is. (Points : 2)
[removed] $0 [removed] $33,750 [removed] $67,500 [removed] $750,000 [removed] $1,550,000 |
| 27. Secured bonds: (Points : 2)
[removed] Are also referred to as debentures [removed] Have specific assets of the issuing company pledged as collateral [removed] Are backed by the issuer’s bank [removed] Are subordinated to those of other unsecured liabilities [removed] Are the same as sinking fund bonds |
| 28. Bonds with a par value of less than $1,000 are known as: (Points : 2)
[removed] Junk bonds [removed] Baby bonds [removed] Callable bonds [removed] Unsecured bonds [removed] Convertible bonds |
| 29. A corporation’s distribution of additional shares of its own stock to its stockholders without the receipt of any payment in return is called a: (Points : 2)
[removed] Stock dividend [removed] Stock subscription [removed] Premium on stock [removed] Discount on stock [removed] Treasury stock |
| 30. A premium on common stock: (Points : 2)
[removed] Is the amount paid in excess of par by purchasers of newly issued stock [removed] Is the difference between par value and issue price when the amount paid is below par [removed] Represents profit from issuing stock [removed] Represents capital gain on sale of stock [removed] Is prohibited in most states |
| 31. A company had a market price of $83.12 per share, earnings per share of $4.87 and dividends per share of $5.40. Its price-earnings ratio is equal to: (Points : 2)
[removed] .056 [removed] .065 [removed] 8.09 [removed] 15.39 [removed] 17.07 |
| 32. Reporting of discontinued segments includes: (Points : 2)
[removed] Income or loss from operating the discontinued segment net of tax and gain or loss from disposal of the segment’s net assets net of tax [removed] Extraordinary items [removed] Changes in accounting principle [removed] Items that are both unusual and infrequent [removed] Writing off of receivables |
| 33. One of several ratios that reflects solvency includes the: (Points : 2)
[removed] Acid-test ratio [removed] Current ratio [removed] Times interest earned ratio [removed] Total asset turnover [removed] Days’ sales in inventory |
| 34. The ability to meet short-term obligations and to efficiently generate revenues is called: (Points : 2)
[removed] Liquidity and efficiency [removed] Solvency [removed] Profitability [removed] Market prospects [removed] Creditworthiness |
| 35. A company’s transactions with its creditors to borrow money and/or to repay the principal amounts of loans are reported as cash flows from: (Points : 2)
[removed] Operating activities [removed] Investing activities [removed] Financing activities [removed] Direct activities [removed] Indirect activities |
| 36. A company had net cash flows from operations of $120,000, total cash flows of $500,000 and average total assets of $2,500,000. The cash flow on total assets ratio equals: (Points : 2)
[removed] 4.8% [removed] 5.0% [removed] 20.0% [removed] 20.8% [removed] 24.0% |
| 37. Net sales divided by average accounts receivable is equal to the: (Points : 2)
[removed] Days’ sales uncollected [removed] Average accounts receivable ratio [removed] Current ratio [removed] Profit margin [removed] Accounts receivable turnover ratio |
| 38. The comparison of a company’s financial condition and performance across time is known as: (Points : 2)
[removed] Horizontal analysis [removed] Vertical analysis [removed] Political analysis [removed] Financial reporting [removed] Investment analysis |
| 39. Selected information from Doodle Company’s for 2010 is below (in millions): Inventory decreased $6.0 Accounts Payable increased by $7.0 Cost of goods sold $36.50 Salaries Expense $24.0 Salaries Payable decreased $6.0 Accounts Receivable increased by $10.0 Sales $56.4 What is the amount of cash paid for salaries by Doodle during 2010? (Points : 2)
[removed] $4.0 [removed] $6.0 [removed] $24.0 [removed] $30.0 [removed] $18.0 |
| 40. A company has sales of $5,417,000, a gross profit ratio of 35%, ending merchandise inventory of $201,425, and total current assets of $1,539,600. What is the days sales’ in inventory ratio for the year? (Points : 2)
[removed] 6.10 [removed] 20.88 [removed] 26.15 [removed] 22.67 [removed] 15.77 |
| 41. Financial statements with data for two or more successive accounting periods placed in columns side by side, sometimes with changes shown in dollar amounts and percents, are referred to as: (Points : 2)
[removed] Period-to-period statements [removed] Controlling statements [removed] Successive statements [removed] Comparative statements [removed] Serial statements |
| 42. The average number of times a company’s inventory is sold during an accounting period, calculated by dividing cost of goods sold by the average inventory balance is equal to the: (Points : 2)
[removed] Accounts receivable turnover [removed] Inventory turnover [removed] Days’ sales uncollected [removed] Current ratio |
| 43. Which of the following items is not likely to be considered an extraordinary item? (Points : 2)
[removed] Loss from an unexpected union strike [removed] Condemnation of property by the city government [removed] Loss of use of property due to a new and unexpected environmental regulation [removed] Loss due to an earthquake in Florida [removed] Expropriation of property by a foreign government |
| 44. Net income divided by net sales is equal to the: (Points : 2)
[removed] Return on total assets [removed] Profit margin [removed] Current ratio [removed] Total asset turnover [removed] Days’ sales in inventory |
| 45. Comparative financial statements in which each amount is expressed as a percentage of a base amount and in which the base amount is expressed as 100%, are called: (Points : 2)
[removed] Comparative statements [removed] Common-size comparative statements [removed] General-purpose financial statements [removed] Base line statements [removed] Index statements |
| 46. The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts, such as receipts from customers and subtracts the major items of operating cash disbursements, such as cash paid for merchandise is referred to as the: (Points : 2)
[removed] Direct method of reporting net cash provided or used by operating activities [removed] Cash basis of accounting [removed] Classified statement of cash flows [removed] Indirect method of reporting net cash provided or used by operating activities [removed] Net method of reporting cash flows from operating activities |
| 47. The indirect method for the preparation of the operating activities section of the statement of cash flows: (Points : 2)
[removed] Separately lists each major item of operating cash receipts [removed] Separately lists each major item of operating cash payments [removed] Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities [removed] Is required if the company is a merchandiser |
| 48. A company has a profit margin of 5%. If net income is equal to $83,000 and average total assets is equal to $45,000, how much are net sales? (Points : 2)
[removed] $4,150 [removed] $2,250 [removed] $1,660,000 [removed] $6,400 [removed] $128,000 |
| 49. A component of operating efficiency and profitability, calculated by expressing net income as a percent of net sales is equal to the: (Points : 2)
[removed] Acid-test ratio [removed] Merchandise turnover [removed] Price earnings ratio [removed] Accounts receivable turnover [removed] Profit margin ratio |
| 50. An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes is a(n): (Points : 2)
[removed] Short-term marketable equity security [removed] Operating activity [removed] Common stock [removed] Cash equivalent [removed] Financing activity |
