accounting final chapter 7-8

A fixed asset with a cost of $30,000 and accumulated depreciation of $25,000 is sold for $3,500. What is the amount of gain or loss on disposal of the fixed asset? a. $2,500 loss. b. $1,500 loss. c. $2,500 gain. d. $1,500 gain.

$1,500

A computer equipment was acquired at the beginning of the year at a cost of $56,000 with an estimated residual value of $5,000, and an estimated useful life of five years. Determine the second year's depreciation expense using the straight-line method. a. $10,200 b. $22,400 c. $11,200 d. $12,200

$10,200

A company acquires 1,000 shares of its own stock when the stock is trading for $20 in April. In June, it reissues 100 shares at $30 per share. How much would go into the treasury stock account? a. $30,000 b. $18,000 c. $20,000 d. $3,000

$18,000

Based on the following information, what is earnings per share? Common shares outstanding115,000Preferred stock dividend declared and paid$40,000Net income$350,000 a. $3.39 b. $3.04 c. $2.96 d. $2.69

$2.69

Assume that a company has 40,000 shares of preferred stock where the annual dividend rate is $0.50 per share, and $20,000 in total. Assume further that the company has not paid dividends for the previous two years. If the company's stock were non-cumulative, how much dividend would the stockholders receive in the current year? a. $60,000 b. $10,000 c. $20,000 d. None of these choices are correct.

$20,000

The following information is available for Zircon Inc.: Purchase price of equipment$25,000Freight costs1,800Installation costs1,100Damage during installing600 The equipment purchased would be recorded at _____.

$27,900

If interest paid is $4,000 and premium amortized is $200, how much will go into the interest expense account? a. $3,800 b. $4,200 c. $4,000 d. $0

$3,800

Determine Cost of Land Four Corners Delivery Company acquired an adjacent lot to construct a new warehouse, paying $38,000 and giving a short-term note for $243,000. Legal fees paid were $1,855, delinquent taxes assumed were $9,900, and fees paid to remove an old building from the land were $20,200. Materials salvaged from the demolition of the building were sold for $4,200. A contractor was paid $854,200 to construct a new warehouse. Determine the cost of the land to be reported on the balance sheet.

$308,755

Boron Co. purchased a machine on the first day of a year. The following data is available for the machine:Initial cost$45,000Expected useful life10 yearsEstimated residual value$5,000Determine the depreciation for the year using the straight-line method. a.$4,000 b.$8,000 c.$10,000 d.$7,000

$4,000

Thistle Inc. sold a product for $80,000. It includes 24-month warranty for repairs. The average cost of repair is 6% of the selling price. Calculate the warranty expenses which will be recorded by the company. a.$2,400 b.$4,800 c.$9,600 d.$200

$4,800

Based on the following information, calculate the earnings per share of common stock.Earnings before interest and income tax$500,000Dividends on preferred stock$6,000Interest on bonds$10,000Income tax rate40%Shares of common stock outstanding72,000 shares a.$6.0 b.$4.0 c.$7.2 d.$2.8

$4.0

Crimson Inc. had a gross payroll of $50,000. The FICA tax was 7.65% of the gross payroll. Federal and state withholding was $2,485 and $420 respectively. Which of the following amounts will be reported as a decrease on the statement of cash flows of the company? a.$47,295 b.$50,000 c.$46,175 d.$43,270

$43,270

If bonds with a face value of $50,000 are issued at 95, what amount would they be issued for? a. $52,500 b. $50,095 c. $47,500 d. $95

$47,500

If bonds with a face value of $100,000 are issued at 105, what amount is recorded in premium on bonds payable account? a. $105,000 b. $105 c. $5,000 d. $100,500

$5,000

If the interest paid is $5,000 and discount amortized is $500, the interest expense will be: a. $5,500 b. $4,500 c. $5,000 d. $500

$5,500

Straight-Line Depreciation A refrigerator used by a meat processor has a cost of $102,140, an estimated residual value of $10,940, and an estimated useful life of 15 years. What is the amount of the annual depreciation computed by the straight-line method?

$6,080

Based on the following information, calculate the depletion expense for the year.Cost of timber$2,000Estimated total units of resource500 tonsTons used during the year15 tons a.$20 b.$30 c.$19 d.$60

$60

On January 1, Zee Products sells bonds at a face value of $250,000. Interest rate is 6%, payable semi-annually. What is the amount of interest expense on July 1? a. $15,000 b. $7,500 c. $3,750 d. $0

$7,500

A company purchased an oil well for $25 million. It is estimated that 10 million barrels can be extracted from the well. Determine depletion expense assuming 3 million barrels are extracted and sold during the year. a. $7,350,000 b. $7,500,000 c. $5,000,000 d. $7,650,000

$7,500,000

If Interest on bonds of $4,500 is paid semi-annually for 10 years, what is the total cost of borrowing $150,000? a. $90,000 b. $45,000 c. $105,000 d. $60,000

$90,000

Calculate the asset turnover from the information given below.Sales$30,000Property14,000Equipment4,000Intangible asset2,000 a.5.35 b.3.25 c.1.50 d.2.50

1.50

The following data was adapted from recent financial statements of Hammond Corporation: Year 2Year 1Sales$43,650$39,400Beginning of year property, plant, and equipment24,30024,500End of year property, plant, and equipment24,20024,300 Compute the asset turnover for Year 2. Round to two decimal places. a. 1.62 b. 1.82 c. 1.60 d. 1.80

1.80

RedCord Company's earnings per share of common stock for Year 1 is $2.50 and market price is $40.50. At the end of the year, total assets is $36,000 and total stockholders' equity is $15,200. Calculate the price-earnings ratio. a. 1.73 times b. 9.4 times c. 16.2 times d. 1.4 times

16.2 times

Calculate the price-earnings ratio from the following information.Market price per share of common stock$42.5Earnings per share of common stock$2.5 a.22 b.17 c.16 d.18

17

A corporation has 50,000 shares of $100 par value stock outstanding. If the corporation issues a 4-for-1 stock split, the number of outstanding shares of stock after the split will be _____ a. 200,000 shares. b. 50,000 shares. c. 250,000 shares. d. 12,500 shares.

200,000 shares

Ray Inc. has 12,000 shares of $60 par common stock outstanding with a current market price of $100 per share. The board of directors declares a 6-for-1 stock split. A stockholder who owned 9 shares of $60 par stock before the split would now own _____ after the split. a.50 shares of $8 par stock b.34 shares of $9 par stock c.54 shares of $10 par stock d.22 shares of $10 par stock

54 shares and $10 par stock

Calculate the debt ratio from the following information.Total liabilities$35,000Total assets$50,000Current assets$12,000 a.70% b.92% c.290% d.142%

70%

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 75,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of outstanding shares of stock? a. 10,000 b. 70,000 c. 50,000 d. 60,000

70,000

Accrued Product Warranty Back in Time Inc. warrants its products for one year. The estimated product warranty is 7% of sales. Assume that sales were $835,000 for March. In April, a customer received warranty repairs requiring $37,993 of parts. a. Determine the warranty liability at March 31, the end of the first month of the current fiscal year. Round your answer to the nearest dollar? b. What accounts are decreased for the warranty work provided in April?

A. $58,450 B. Product Warranty Payable and Parts Inventory

Correct. Earnings per share =

Earnings before interest and income tax - Interest on bonds - Income tax - Dividends on preferred stock) ÷ Number of common shares outstanding

Which of the following is the effect of a stock dividend? a.A decrease in stockholders' equity b.No change in liabilities c.A decrease in revenues d.An increase in current assets

a change in liabilities

The journal entry to record the issuance of bonds will include: a. A credit to cash b. A debit to bonds payable c. A credit to bonds payable d. Both "A credit to cash" and "A debit to bonds payable" are correct.

a credit to bonds payable

The journal entry to record the payment of interest will include: a. A debit to cash b. A debit to interest expense c. A credit to interest expense d. Both "A debit to cash" and "A credit to interest expense" are correct.

a debit to interest expense

The market rate of a bond is higher than the stated rate when bonds are sold at: a. Face value b. A discount c. A premium d. None of these choices are correct.

a discount

Which of the following is not a similarity between a stock split and a stock dividend? a. A stock split is not an accounting transaction, so no entry is recorded. b. A stock split applies to all authorized shares, not just outstanding shares. c. A stock split results in a proportional change in the par value of the stock. d. A stock split reduces the number of shares.

a stock split reduces the number of shares

costs that are classified and recorded as fixed assets last more than

a year and are used in normal operations

Compute payroll An employee earns $40 per hour and 1.5 times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 55 hours during the week. Assume that the FICA tax rate is 7.5% and that federal income tax of $575 was withheld. a. Determine the gross pay for the week? b. Determine the net pay for the week. Round intermediate calculations and your final answer to the nearest cent, if rounding is required?

a. $2,500 b. $1,737.5

Of the following distinguishing corporate characteristics, which one is specifically discussed in the video? a. Double taxation b. Ability to raise capital c. Limited liability of owners d. Transferability of ownership

ability to raise capital

To maintain _____, cost and accumulated depreciation of a fixed asset which is still being used remain in the books of accounts even if the asset is fully depreciated. a.accountability b.liquidity c.measurability d.profitability

accountability

_____ are an obligation to pay current assets of a company in the future. a.Amortization expenses b.Retained earnings c.Limited discounts d.Accrued liabilities

accrued liabilities

Which of the following is an item that is disclosed on a balance sheet? a.The asset turnover b.The return on debt c.Free cash flow d.Accumulated depletion

accumulated depletion

The legal fees incurred in purchasing a natural resource are _____. a.subtracted from the natural resource's cost b.reported as a current asset on a balance sheet c.added to the natural resource's cost d.reported as extraordinary expenses on an income statement

added to the natural resource's cost

What are the important dates to be considered when a cash dividend is declared? a. Date of declaration b. Payments date c. Date of record d. All of these choices are correct.

all of these choices are correct

What information does the amortization schedule provide? a. The amounts of cash to be paid b. The premium to be amortized c. The initial expense to be recognized d. All of these choices are correct.

all of these choices are correct

Which of the following is not true about preferred stock? a. Preferred stock is a form of capital stock that receives one or more priorities over common stock. b. Preferred stockholders surrender the right to vote in exchange for preference to dividends and assets upon liquidation of the company. c. A company reports its balances in both preferred stock and additional paid-in capital, in the stockholders' equity section of the balance sheet. d. All preferred stock is cumulative stock.

all preferred stock is cumulative stock

Which of the following is an effect of the sale of equipment at a loss on the profitability metric of a company? a.An increase in operating cash flow ratio b.A decrease in debt-equity ratio c.An increase in asset turnover d.A decrease in return on asset

an increase in asset turnover

Which of the following expenditures add service value to an asset? a.Functional depreciation b.Lease rental c.Deferred expenditure d.Asset improvement

asset improvement

A _____ is a form of an interest-bearing note requiring periodic interest payments with the face amount due at the maturity date. a.bond b.reserve c.credit note d.bad debt

bond

A company must first pay _____ from its earnings. a.equity dividends b.bond interest c.contingent liabilities d.preferred dividends

bond interest

The premium on bonds payable is added to _________ to yield the bond's carrying value. a. Cash account b. Bonds payable account c. Interest expense account d. Cash account and bonds payable account

bonds payable account

The net amount at which a fixed asset is shown in the balance sheet is called the asset's _____. a.fictitious value b.nominal value c.book value d.market value

book value

Which of the following is an effect of discarding a fully depreciated asset on free cash flow and asset turnover? a.Both free cash flow and asset turnover decrease. b.Free cash flow decreases and asset turnover remains unaffected. c.Both free cash flow and asset turnover remain unaffected. d.Free cash flow increases and asset turnover increases.

both free cash flow and asset turnover remain unaffected

Accumulated depletion is a(n) _____. a.contra asset account b.long-term asset account c.current liability account d.operating expense account

contra asset account

Depletion expense results in a(n) _____. a.increase in liabilities b.decrease in retained earnings c.decrease in free cash flow d.increase in free cash flow

decrease in retained earnings

Issuing shares at a premium will: a.decrease liabilities. b.decrease net assets. c.decrease retained earnings. d.decrease the earnings per share.

decrease the earnings per share

Which of the following statements is true about depletion? a.Depletion increases operating assets, which decreases asset turnover. b.Depletion decreases operating assets, which increases asset turnover. c.Depletion decreases operating assets, which decreases asset turnover. d.Depletion increases operating assets, which increases asset turnover.

depletion decreases operating assets, which increases asset turnover

An expense account that is increased for a portion of the cost of a natural resource asset removed from its source is called _____. a.operating expense b.accrued expense c.administrative expense d.depletion expense

depletion expense

A contingent liability that may be probable but cannot be estimated is _____. a.disclosed in the notes to financial statements b.recorded as a long-term liability c.disclosed in the statement of retained earnings d.recorded as an expense

disclosed in the notes to financial statements

A contingent liability that may be probable but cannot be estimated is _____. a.recorded as a long-term liability b.recorded as an expense c.disclosed in the statement of retained earnings d.disclosed in the notes to financial statements

disclosed in the notes to financial statements

Depletion rate is calculated by _____. a.dividing the cost of a resource by its estimated life b.dividing the cost of a resource by the units sold during the year c.dividing the cost of a resource by the estimated total units of the resource d.dividing the cost of a resource by the quantity removed

dividing the cost of a resource by the estimated total units of the resource

How would you calculate the amount of premium amortized? a. Dividing the premium at issuance with the number of interest payments. b. Dividing the premium at issuance with the life of the bond. c. Dividing the premium at issuance with the amount at maturity. d. Dividing the premium at issuance with the face value of the bond.

dividing the premium at issuance with the number of interest payments

Which of the following is an example of a fixed asset? a.An unearned revenue b.Equipment c.A prepaid expense d.Treasury stock

equipment

Discounts on bonds payable are calculated as the bonds' _____. a.selling price less maturity value b.selling price less interest paid on the bonds c.face amount less its current yield d.face amount less the selling price

face amount less the selling price

Depletion is the process of transferring the cost of intangible assets to an expense account.

false

If the proceeds from a sale of an equipment is greater than the book value of the equipment, as on the date of sale, a loss is recorded.

false

Physical depreciation occurs when changes in customer needs causes a fixed asset to no longer provide services for which it was intended.

false

The asset turnover is a measure of a company's use of its inventories.

false

The debt ratio measures a company's ability to repay its debt using its total assets.

false

The declaration of a cash dividend decreases a corporation's stockholders' equity and decreases its assets.

false

The issuance of common stock affects both paid-in capital and retained earnings.

false

When the market rate of interest is less than the contract rate of a bond, the bond will sell for a discount.

false

a cost incurred could be classified as a

fixed asset, investment, or an expense

_____ are owned, used, and not offered for sale as part of normal operations of an organization. a.Accounts receivable b.Accrued reserves c.Fixed assets d.Finished goods

fixed assets

Which of the following is a characteristic of fixed assets? A. Fixed assets are offered for sale as part of normal operations. B. Fixed assets do not exist physically. C. Fixed assets are long-term or relatively permanent assets. D. Fixed assets that are no longer used in operations are still classified as fixed assets.

fixed assets are long-term or relatively permanent assets

Which of the following is an effect of selling equipment for no gain or loss? a.Free cash flow will increase. b.Free cash flow will decrease. c.Asset turnover will remain the same. d.Profitability will decrease.

free cash flow will increase

_____ are a variety of benefits that are provided to employees in addition to salary and wages earned. a.Gearing benefits b.Floating benefits c.Fringe benefits d.Principal benefits

fringe benefits

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount _______ a. less than the face value. b. equal to the face value. c. greater than the face value. d. that cannot be determined.

greater than the face value

Which of the following is a difference between the straight-line method and the double-declining-balance method of depreciation? a.According to the straight-line method, depreciation declines over an asset's useful life, whereas according to the double-declining-balance method, depreciation increases over an asset's useful life. b.The straight-line method depreciates an asset below its residual value, whereas the double- declining-balance method does not depreciate an asset below its residual value. c.In the straight-line method, depreciable cost is calculated as cost less residual value, whereas in the double-declining-balance method, depreciable cost is recorded as declining book value over the fixed asset's useful life. d.The straight-line method does not require an outlay of cash when depreciation is recorded, whereas in the double-declining-balance method an outlay of cash is required when depreciation is recorded.

in the straight-line method, depreciable cost is calculated as cost less residual value, whereas in the double-declining-balance method, depreciable cost is recorded as declining book value over the fixed asset's useful life

Magenta Inc. issued 5,000 shares of $1 par common stock for cash at $20. This transaction will cause the net assets of the company to _____. a.decrease by $100,000 b.decrease by $5,000 c.increase by $100,000 d.increase by $5,000

increase by $100,000

The initial cost of a purchased patent is recorded by _____. a.increasing an asset account b.decreasing an equity account c.decreasing a liability account d.increasing an expense account

increasing an asset account

One of the factors determining the depreciation expense for a fixed asset is the fixed asset's _____. a.operating cost b.allocated value c.turnover ratio d.initial cost

initial cost

Undeveloped land acquired for future resale would be classified and reported as a(n) _____.

investment

if an item purchased has been determined be long-lived what is the next question you ask yourself? if yes? if no?

is the asset going to be used in normal operations. if yes then the asset is recorded as a fixed asset. if no then the asset is recorded as an investment

A stock split is a process by which a corporation reduces the par or stated value of its common stock and _____. a.distributes the stock dividend to stockholders b.determines which stockholders will receive the dividend c.issues a proportionate number of additional shares d.decreases the retained earnings of the corporation

issues a proportionate number of additional shares

When bonds are issued at a discount, how is the discount amount treated by the issuing company? a. It is amortized over the life of the bond. b. It is recorded as a loss on issuance. c. It is adjusted with the interest payment. d. It is collected at the time of maturity.

it is amortized over the life of the bond

Which of the following statements is true about the debt ratio? a.It measures the percent of a company's assets financed by debt. b.It measures the percent of a company's sales contributed by debt. c.It measures the percent of a company's income earned by debt d.It measures the current value of long-term debt.

it measures the percent of a company's assets financed by debt

Which of the following statements is true about the debt ratio? a.It measures the percent of a company's income earned by debt b.It measures the current value of long-term debt. c.It measures the percent of a company's sales contributed by debt. d.It measures the percent of a company's assets financed by debt.

it measures the percent of a company's assets financed by debt

What is not true about a stock dividend? a. It's a distribution of cash to stockholders. b. It's a distribution of a company's common stock to existing stockholders. c. It transfers an amount from retained earnings to contributed capital. d. It reduces the market price of a capital stock.

it's a distribution of cash to stockholders

Blue Inc.'s board of directors declares a cash dividend of $25,000 on February 20. Which of the following is the effect of recording the declaration of the dividend on the profitability and liquidity metrics of Blue Inc.? a.Its net assets will increase. b.Its earnings per share will increase. c.Its earnings per share will decrease. d.Its net assets will decrease.

its net assets will decrease

A bond payable is an example of _____. a.a contingent liability b.long-term debt c.an account payable d.deferred expense

long-term debt

A note or a bond that is paid from noncurrent assets or that is going to be refinanced is reported as a(n) _____. a.long-term liability b.current liability c.deferred tax liability d.accounts receivable

long-term liability

fixed assets

long-term or relatively permanent assets. equipment, machinery, buildings, and land

Which of the following is not used to calculate the amount of interest to be paid on bonds? a. Stated interest rate b. Face value c. Maturity date d. Market value

market value

Legal capital maintained by a corporation refers to the _____. a.minimum stockholder contribution maintained to earn estimated net income b.stock that has various preference rights c.stock issued without par d.minimum stockholder contribution maintained to protect creditors

minimum stockholder contribution maintained to protect creditors

Gross earnings for a payroll period less payroll deductions are referred to as: a. overtime pay. b. bonus pay. c. gross pay. d. net pay.

net pay

When a company issues a note payable to satisfy an account payable, there will be: a.a decrease in expenses. b.no change in net assets. c.an increase in liabilities. d.an increase in revenue.

no change in net assets

Which of the following is the effect of a stock split? a.An increase in the earnings per share b.An increase in net assets c.An increase in expenses d.No change in net assets

no change in net assets

What is the effect of a stock dividend on the balance sheet? a. Decreases total assets and decreases total stockholders' equity b. Decreases total assets and increases total stockholders' equity c. Increases total liabilities and decreases total stockholders' equity d. No effect on total assets, total liabilities, or total stockholders' equity

no effect on total assets, total liabilities, or total stockholders' equity

In the _____ method of depreciation, the depreciation expense is higher in the initial years of the asset's utilization than in the later years. a. units of activity b. double declining balance c. straight-line d. None of these choices are correct.

none of these choices are correct

_____ are exclusive rights granted by the federal government to inventors to produce and sell goods with one or more unique features. a.Copyrights b.Patents c.Natural resource assets d.Trademarks

patents

other descriptive titles for fixed assets are

plant assets, or property, plant, and equipment

Which of the following is true of preferred stock? a.Preferred stock is the only class of stock issued by a corporation. b.The payment of preferred stock dividend is not authorized by the corporation's board of directors. c.Preferred stock has various preference rights such as a preference to dividends. d.Preferred stock is a minimum stockholder contribution maintained to protect creditors.

preferred stock has various preference rights such as a preference to dividends

If a company's stock is cumulative: a. Preferred stockholders receive the current-year annual dividend along with the previous year's dividends in arrears. b. Preferred stockholders receive only the current-year annual dividend. c. Preferred stockholders receive cumulative dividends after the payment to common stockholders. d. Preferred stockholders do not receive dividends.

preferred stockholders receive the current-year annual dividend along with the previous year's dividends in arrears

The face value of a bond is called the bond's _____. a.principal b.coupon rate c.premium d.residual value

principal

When a contingent liability is _____, it is recorded by increasing an expense and a liability. a.remote b.reasonably possible c.probable and cannot be estimated d.probable and can be reasonably estimated

probable and can be reasonably estimated

The likelihood of a potential liability occurring is classified as: a.probable, reasonably possible, and remote. b.probable, current, and neutral. c.probable, operational, and current. d.current, accrued, and quantifiable.

probable, reasonably possible, and remote

investments are assets that are

reported on the balance sheet in a section entitled investments

Routine maintenance and repair costs are recorded as a(n) _____. a.capital expenditure b.public expenditure c.revenue expenditure d.investing expenditure

revenue expenditure

Which of the following rights enables stockholders to maintain their ownership percentage in the case of a new issue? a. Right to vote b. Right to participate proportionally in dividends c. Right to participate proportionally in residual assets d. Right of preemption

right of preemption

Notes payable of a company are issued to: a.debtors while selling products. b.shareholders for raising capital. c.satisfy an account payable. d.defer income taxes in the books of accounts.

satisfy an account payable

_____ includes the purchasing of goods and services on account as well as issuing notes payable which are due in one year. a.A cash equivalent b.A contingent liability c.Short-term debt d.Gross payroll

short-term debt

In the _____ method of depreciation, the depreciation expense is the same for each accounting period. a. units of activity b. double declining balance c. straight-line d. None of these choices are correct.

straight-line

Which of the following costs is considered a cost of acquiring a fixed asset? a.The cost of uninsured theft b.The cost of damages during unpacking and installing c.Fines paid for not obtaining proper permits from government agencies d.Surveying fees

surveying fees

characteristics of fixed assets

tangible assets owned and used by the company in its normal operations not offered for sale as part of normal operations

Which of the following ratios measures how efficiently a company is using its operating assets to generate sales? a.The asset turnover b.The operating ratio c.Free cash flow d.The current ratio

the asset turnover

Free cash flow represents _____. a.the cash left unutilized after purchasing intangible assets b.the cash available after paying taxes c.the cash left unutilized after operating activities d.the cash available after maintaining and expanding current operating capacity

the cash available after maintaining and expanding current operating capacity

What is treasury stock? a. The stock that the company reissues in the marketplace. b. The common stock that a company reacquires from stockholders. c. The stock that has been accumulated by the company over the years. d. A special stock that the company issues to its owners.

the common stock that a company reacquires from stockholders

The book value of a fixed asset on Balance Sheet is _______ a. the cost of an asset less accumulated depreciation for the same asset. b. the accumulated depreciation of an asset less cost of same asset. c. the same as market value of the fixed asset. d. None of these choices are correct

the cost of an asset less accumulated depreciation for the same asset

Which of the following statements is true about the debt ratio? a.The debt ratio is useful in assessing the solvency and future earning potential of a company. b.The use of the debt ratio decreases the financial leverage of a company. c.The debt ratio measures the percent of the company's debt that is financed by its assets. d.The higher the debt ratio, the less risk a company is taking in managing its operations

the debt ratio is useful in assessing the solvency and future earning potential of a company

Which of the following statements is true about the debt ratio? a.The higher the debt ratio, the less risk a company is taking in managing its operations. b.The debt ratio measures the percent of the company's debt that is financed by its assets. c.The debt ratio is useful in assessing the solvency and future earning potential of a company. d.The use of the debt ratio decreases the financial leverage of a company.

the debt ratio is useful in assessing the solvency and future earning potential of a company

If a company purchases treasury stock, _____. a.revenue increases b.expenses increase c.the earnings per share increases d.net assets increase

the earnings per share increases

When bonds are issued at a discount, the carrying value of the bond is: a. The face value less discount on bonds payable b. The face value plus discount on bonds payable c. The face value d. None of these choices are correct.

the face value less discount on bonds payable

if an asset purchased is determined to be long-lived then

the item is capitalized on the balance sheet as a fixed asset or an investment

if the asset purchased is determined not to be long-lived then

the item is classified and recorded as an expense

Which of the following factors affects the accounting for a contingent liability? a.The potential liability's yield value b.The probable losses of the potential liability c.The likelihood of the potential liability occurring d.The perpetual value of the potential liability

the likelihood of the potential liability occurring

Which of the following statements is true about a stock split? a.A stock split discourages investors from investing in the stock and reduces the types and numbers of stockholders. b.A stock split distributes shares of stock in the form of stock dividend to stockholders. c.A stock split applies only to unissued shares. d.The major objective of a stock split is to reduce the market price per share of the stock.

the major objective of a stock split is to reduce the market price per share of the stock

What is an outstanding share? a. The number of shares that have been issued and are still held by stockholders. b. The number of shares a company has distributed to owners to date. c. The number of shares of stock that a company can legally issue. d. None of these choices are correct.

the number of shares that have been issued and are still held by stockholders

Which of the following factors influences the price that buyers are willing to pay for bonds? a.The coupon rate of notes payable b.The market value of the bonds on their maturity date c.Stockholders' equity balance of a company d.The periodic interest to be paid on the bonds

the periodic interest to be paid on the bonds

When bonds are issued at a premium: a. The market rate of interest is higher than the stated rate b. The market rate and the stated rate of interest are the same c. The stated rate of interest exceeds the market rate d. None of these choices are correct.

the stated rate of interest exceeds the market rate

Which of the following is a formula to calculate the debt ratio? a.Current assets / Current liabilities b.Total liabilities / Total assets c.Total liabilities / Average inventory d.(Net income - Preferred dividends) / Long-term liabilities

total liabilities/ total assets

A _____ is a name, term, or symbol used to identify a business and its products. a.patent b.copyright c.commercial paper d.trademark

trademark

A lease is a contract for the use of an asset for a period of time.

true

Fixed assets are reported at their book value on the balance sheet.

true

Liabilities that are due and payable within one year are known as short-term liabilities.

true

Short-term debt includes the purchasing of goods and services on account as well as issuing short-term notes payable.

true

The reduction in the par or stated value of common stock, accompanied by the issuance of a proportionate number of additional shares, is called a stock split.

true

In the _____ method of depreciation, the depreciation expense fluctuates as per the use of the fixed asset in each accounting period. a. units of activity b. double declining balance c. straight-line d. None of these choices are correct.

units of activity