Accounting Ch 2 MC
: Business Economics Solution: ($130,000 + $100,000 + $110,000 + $60,000) ÷ ($140,000 + $20,000) = 2.50:1 80. Use the following data to determine the total dollar amount of assets to be classified as current assets. Carne Auto Supplies Balance Sheet December 31, 2014 Cash $ 35,000 Accounts payable $ 65,000 Accounts receivable 50,000 Salaries and wages payable 10,000 Inventory 70,000 Mortgage payable 90,000 Prepaid insurance 40,000 Total liabilities $165,000 Stock investments 90,000 Land 95,000 Buildings $115,000 Common stock $120,000 Less: Accumulated Retained earnings 250,000 depreciation (30,000) 85,000 Total stockholders' equity $370,000 Trademarks 70,000 Total liabilities and Total assets $535,000 stockholders' equity $535,000 a. $195,000 b. $125,000 c. $285,000 d. $165,000
: A, LO: 1, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting 60. An intangible asset a. derives its value from the rights and privileges it provides the owner. b. is worthless because it has no physical substance. c. is converted into a tangible asset during the operating cycle. d. cannot be classified on the balance sheet because it lacks physical substance.
: A, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 62. Trademarks would appear in which balance sheet section? a. Intangible assets b. Investments c. Property, plant, and equipment d. Current assets
: A, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 64. Which of the following would not be classified as a long-term liability? a. Current maturities of long-term debt b. Bonds payable c. Mortgage payable d. Lease liabilities
: A, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 100. The following information is available for Bradshaw Corporation and Newell Corporation: (in millions) Bradshaw Corporation Newell Corporation 2014 2013 2014 2013 Preferred dividends 25 10 0 30 Net income 500 480 490 520 Shares outstanding at the end of the year 200 180 150 200 Shares outstanding at the beginning of the year 180 150 200 220 Based on this information, which of the following is suggested by the earnings per share calculations (rounded to two decimals) and the information given? a. There is lower performance in 2013 than in 2014 for Newell Corporation. b. There is higher performance in 2013 than in 2014 for Newell Corporation. c. There are fewer earnings available to Newell's common stockholders in 2014 than in 2013. d. There is a decrease in preferred shares of stock in 2014 as compared with 2013.
: A, LO: 2, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving,
: Business Economics 93. For 2014 Kuhlman Corporation reported net income of $28,000; net sales $400,000; and average share outstanding 16,000. There were no preferred dividends. What was the 2014 earnings per share? a. $1.75 b. $0.57 c. $25.00 d. $0.07
: A, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Business Economics Solution: $7,000 ÷ $4,000 = $1.75:1 135. Using the following balance sheet and income statement data, what is the earnings per share? Current assets $ 7,000 Net income $ 15,000 Current liabilities 4,000 Stockholders' equity 21,000 Average assets 44,000 Total liabilities 9,000 Total assets 30,000 Average common shares outstanding was 10,000. a. $1.50 b. $2.50 c. $0.67 d. $0.55
: A, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting 96. Earnings per share is a a. profitability ratio. b. liquidity ratio. c. solvency ratio. d. trending ratio.
: A, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 103 Dawson Corporation has the following information available for 2014: (in millions) Issued common stock $45 Retired common stock $65 Paid dividends $75 Net income $130 Beginning Common Stock balance $625 Beginning Retained Earnings balance $475 Based in this information, what is Dawson's Common Stock balance at the end of the year? a. $605 b. $735 c. $245 d. $680
: A, LO: 3, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting 111. McKinney Corporation had beginning retained earnings of $2,242,000 and ending retained earnings of $2,499,000. During the year they issued common stock totaling $141,000. No dividends were paid. What was their net income for the year? a. $257,000 b. $116,000 c. $398,000 d. $323,000
: A, LO: 3, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $2,499,000 − $2,242,000 = $257,000 112. Wilton Corporation had beginning retained earnings of $724,000 and ending retained earnings of $833,000. During the year they issued common stock totaling $47,000. No dividends were paid. What was Wilton's net income for the year? a. $109,000 b. $62,000 c. $156,000 d. $131,000
: A, LO: 3, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Business Economics 110. Reporting a net income of $95,000 will a. increase retained earnings. b. decrease retained earnings. c. increase common stock. d. decrease common stock.
: A, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 107. Dividends appear on a. the retained earnings statement only. b. the income statement only. c. both the retained earnings statement and the balance sheet. d. the balance sheet only.
: A, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 144. Kingery Corporation has current assets of $1,800,000 and current liabilities of $750,000. If they pay $250,000 of their accounts payable what will their new current ratio be? a. 3.1:1 b. 2.4:1 c. 3.6:1 d. 2.0:1
: A, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving,
: Business Economics Solution: ($1,600,000 − $250,000) ÷ ($750,000 − $250,000) = $2.7:1 147. Mitchell Corporation has current assets of $1,600,000 and current liabilities of $750,000. If they issue $100,000 of new stock what will their new current ratio be? (rounded) a. 2.27:1 b. 2.04:1 c. 1.88:1 d. 2.13:1
: A, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving,
: Business Economics Solution: ($1,800,000 + $100,000) ÷ $750,000 = $2.5:1 146. Mitchell Corporation has current assets of $1,600,000 million and current liabilities of $750,000. If they pay $250,000 of their accounts payable what will their new current ratio be? a. 2.7:1 b. 3.2:1 c. 1.69:1 d. 2.1:1
: A, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving,
: Business Economics Solution: ($1,800,000 − $250,000) ÷ ($750,000 − $250,000) = $3.1:1 145. Kingery Corporation has current assets of $1,800,000 and current liabilities of $750,000. If they issue $100,000 of new stock what will their new current ratio be? (rounded) a. 2.5:1 b. 2.1:1 c. 2.3:1 d. 2.4:1
: A, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving,
: Business Economics Solution: $16,000 − $8,000 = $8,000 130. Using the following balance sheet and income statement data, what is the current ratio? Current assets $ 16,000 Net income $ 21,000 Current liabilities 8,000 Stockholders' equity 39,000 Average assets 80,000 Total liabilities 21,000 Total assets 60,000 Average common shares outstanding was 10,000. a. 2.0 : 1 b. 2.6 : 1 c. 0.5 : 1 d. 2.9 : 1
: A, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $100,000 + $50,000 + $138,000 + $80,000 + $2,000 = $370,000 128. Based on the following data, what is the amount of working capital? Accounts payable................................................................. $64,000 Accounts receivable.............................................................. 114,000 Cash.................................................................................. 60,000 Intangible assets.................................................................. 100,000 Inventory............................................................................ 138,000 Long-term investments.......................................................... 160,000 Long-term liabilities.................................... ......................... 200,000 Short-term investments.......................................................... 80,000 Notes payable (short-term)...................................................... 56,000 Property, plant, and equipment................................................... 1,340,000 Prepaid insurance................................................................. 2,000 a. $274,000 b. $322,000 c. $360,000 d. $316,000
: A, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: Stock investments = $170,000 78. Use the following data to determine the total amount of working capital. Koonce Office Supplies Balance Sheet December 31, 2014 Cash $ 130,000 Accounts payable $ 140,000 Accounts receivable 100,000 Salaries and wages payable 20,000 Inventory 110,000 Mortgage payable 160,000 Prepaid insurance 60,000 Total liabilities $320,000 Stock investments 170,000 Land 180,000 Buildings $210,000 Common stock $240,000 Less: Accumulated Retained earnings 500,000 depreciation (40,000) 170,000 Total stockholders' equity $740,000 Trademarks 140,000 Total liabilities and Total assets $1,060,000 stockholders' equity $1,060,000 a. $240,000 b. $390,000 c. $130,000 d. $180,000
: A, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Business Economics 143. How can a company improve its current ratio? a. Work with a creditor to reclassify some current debt into long-term debt b. Use cash to reduce current liabilities c. Nothing can ethically be done to improve the current ratio d. Use excess cash to buy new equipment
: A, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Business Economics 116. Which of the following is a measure of liquidity? a. Working capital b. Profit margin c. Earnings per share d. Debt to assets ratio
: A, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 119. A short-term creditor is primarily interested in the __________ of the borrower. a. liquidity b. profitability c. consistency d. solvency
: A, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting Solution: $55,000 − $35,000 + $20,000 = $40,000 154. Suppose that Morgan Corporation produced and sold 4,800 laptop computers during 2014. It reported $150,000 cash provided by operating activities. In order to maintain production at 4,800 laptops, Morgan invested in $8,600 in equipment. Morgan paid $1,400 in dividends. What is Morgan's free cash flow? a. $140,000 b. $160,000 c. $157,000 d. $150,000
: A, LO: 5, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving,
: Reporting 152. In 2014 Grider Corporation had cash receipts of $56,000 and cash disbursements of $32,000. Grider's ending cash balance at December 31, 2014 was $88,000. What was Grider's beginning cash balance? a. $64,000 b. $80,000 c. $120,000 d. $112,000
: A, LO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $88,000 − $56,000 + $32,000 = $64,000 153. In 2014 Grider Corporation had cash receipts of $35,000 and cash disbursements of $20,000. Grider's ending cash balance at December 31, 2014 was $55,000. What was Grider's beginning cash balance? a. $40,000 b. $50,000 c. $75,000 d. $70,000
: A, LO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting 178. A company can change to a new method of accounting if management can justify that the new method results in a. more meaningful financial information. b. a higher net income. c. a lower net income for tax purposes. d. less likelihood of clerical errors.
: A, LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 182. Information is _________ if independent measures, using the same methods, obtain similar results. a. Verifiable b. Consistent c. Understandable d. Relevant
: A, LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 177. Which of the following statements is not true? a. Comparability means using the same accounting principles from year to year within a company. b. Faithful representation is the quality of information that gives assurance that it is free of error. c. Relevant accounting information must be capable of making a difference in the decision. d. The primary objective of financial reporting is to provide financial information that is useful to investors and creditors for making decisions.
: A, LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 199. The Mac Company has four plants nationwide that cost $350 million. The current fair value of the plants is $300 million. The plants will be reported as assets at a. $350 million. b. $700 million. c. $300 million. d. $600 million.
: A, LO: 7, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Business Economics 164. The two fundamental qualities of useful information are a. relevance and faithful representation. b. verifiability and timeliness. c. comparability and flexibility. d. understandability and consistency.
: A, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 189. Which accounting assumption requires that only those things that can be expressed in dollar values are included in the accounting records? a. monetary unit assumption. b. historical cost principle. c. periodicity assumption. d. full disclosure principle.
: A, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 174. Accounting information should be neutral in order to enhance a. faithful representation. b. consistency. c. comparability. d. relevance.
: A, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 196. Which of the following is not an accounting assumption? a. Integrity b. Going concern c. Periodicity d. Economic entity
: A, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 127. Based on the following data, what is the amount of current assets? Accounts payable................................................................. $62,000 Accounts receivable.............................................................. 100,000 Cash.................................................................................. 50,000 Intangible assets.................................................................. 100,000 Inventory............................................................................ 138,000 Long-term investments.......................................................... 160,000 Long-term liabilities............................................................... 200,000 Short-term investments.......................................................... 80,000 Notes payable...................................................................... 56,000 Property, plant, and equipment................................................... 1,340,000 Prepaid insurance................................................................. 2,000 a. $212,000 b. $370,000 c. $232,000 d. $230,000
: B, LO: 1, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting 76. Use the following data to determine the total dollar amount of assets to be classified as property, plant, and equipment. Koonce Office Supplies Balance Sheet December 31, 2014 Cash $ 130,000 Accounts payable $ 140,000 Accounts receivable 100,000 Salaries and wages payable 20,000 Inventory 110,000 Mortgage payable 160,000 Prepaid insurance 60,000 Total liabilities $320,000 Stock investments 170,000 Land 180,000 Buildings $210,000 Common stock $240,000 Less: Accumulated Retained earnings 500,000 depreciation (40,000) 170,000 Total stockholders' equity $740,000 Trademarks 140,000 Total liabilities and Total assets $1,060,000 stockholders' equity $1,060,000 a. $660,000 b. $350,000 c. $490,000 d. $390,000
: B, LO: 1, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting 61. Which of the following is not considered an asset? a. Equipment b. Dividends c. Accounts receivable d. Inventory
: B, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 66. Equipment is classified on the balance sheet as a. a current asset. b. property, plant, and equipment. c. an intangible asset. d. a long-term investment.
: B, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 68. The operating cycle of a company is the average time that is required to go from cash to a. sales in producing revenues. b. cash in producing revenues. c. inventory in producing revenues. d. accounts receivable in producing revenues.
: B, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 101. The following information is available for Bradshaw Corporation and Newell Corporation: (in millions) Bradshaw Corporation Newell Corporation 2014 2013 2014 2013 Preferred dividends 25 10 0 30 Net income 500 480 490 520 Shares outstanding at the end of the year 200 180 150 200 Shares outstanding at the beginning of the year 180 150 200 220 Based on this information, what is the amount of Bradshaw's earnings per share (rounded to two decimals) for 2014? a. $2.76 b. $2.50 c. $1.25 d. $1.32
: B, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting 74. Ratios that measure the income or operating success of a company for a given period of time are a. liquidity ratios. b. profitability ratios. c. solvency ratios. d. trending ratios.
: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting Solution: ($30,000 − 0) ÷ 16,000 = $1.88 95. Earnings per share are calculated by dividing a. gross profit by average common shares outstanding. b. (net income less preferred dividends) by average common shares outstanding. c. net income by average common shares outstanding. d. net sales by average common shares outstanding.
: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting Solution: $2,384,000 + $34,000 − $402,000 = $2,016,000 114. At December 31, 2014 Keen Company had retained earnings of $1,292,000. During 2014 they issued stock for $49,000, and paid dividends of $17,000. Net income for 2014 was $201,000. The retained earnings balance at the beginning of 2014 was a. $1,476,000. b. $1,108,000. c. $1,157,000. d. $1,427,000.
: B, LO: 3, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $833,000 − $724,000 = $109,000 113. At December 31, 2014 Lowery Company had retained earnings of $2,384,000. During 2014 they issued stock for $98,000, and paid dividends of $34,000. Net income for 2014 was $402,000. The retained earnings balance at the beginning of 2014 was a. $2,752,000. b. $2,016,000. c. $2,114,000. d. $2,654,000.
: B, LO: 3, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $625 + $45 − $65 = $605 104. Dawson Corporation has the following information available for 2014: (in millions) Issued common stock $45 Retired common stock $65 Paid dividends $75 Net income $130 Beginning Common Stock balance $625 Beginning Retained Earnings balance $475 Based on this information, what is Dawson's Retained Earnings balance at the end of the year? a. $680 b. $530 c. $420 d. $605
: B, LO: 3, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $475,000 + $130,000 − $75,000 = $530,000 105. Which of the following is the least likely consideration that management uses when deciding whether to pay a dividend? a. Does the company have more cash than it has opportunities? b. Is the company's average number of common shares outstanding decreasing? c. Does the company have uses for cash that will increase its value? d. What are the company's cash needs?
: B, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Decision Modeling, AICPA PC: Project Management,
: Business Economics 109. Declaring a cash dividend will a. increase retained earnings. b. decrease retained earnings. c. increase common stock. d. decrease common stock.
: B, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Business Economics Solution: ($84,000 + $80,000 + $140,000 + $60,000) − ($110,000 + $20,000) = $234,000 91. Use the following data to calculate the current ratio. Eddy Auto Supplies Balance Sheet December 31, 2014 Cash $ 84,000 Accounts payable $ 110,000 Accounts receivable 80,000 Salaries and wages payable 20,000 Inventory 140,000 Mortgage payable 180,000 Prepaid insurance 60,000 Total liabilities $310,000 Stock investments 170,000 Land 190,000 Buildings $226,000 Common stock $240,000 Less: Accumulated Retained earnings 500,000 depreciation (40,000) 186,000 Total stockholders' equity $740,000 Trademarks 140,000 Total Liabilities and Total assets $1,050,000 stockholders' equity $1,050,000 a. 2.34 : 1 b. 2.80 : 1 c. 3.31 : 1 d. 1.26 : 1
: B, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $15,000 ÷ $10,000 = $1.50 136. Using the following balance sheet and income statement data, what is the debt to assets ratio? Current assets $ 7,000 Net income $ 15,000 Current liabilities 4,000 Stockholders' equity 21,000 Average assets 44,000 Total liabilities 9,000 Total assets 30,000 Average common shares outstanding was 10,000. a. 20.5 percent b. 30 percent c. 33.3 percent d. 40.9 percent
: B, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: Stock investments = $170,000 90. Use the following data to determine the total amount of working capital. Eddy Auto Supplies Balance Sheet December 31, 2014 Cash $ 84,000 Accounts payable $ 110,000 Accounts receivable 80,000 Salaries and wages payable 20,000 Inventory 140,000 Mortgage payable 180,000 Prepaid insurance 60,000 Total liabilities $310,000 Stock investments 170,000 Land 190,000 Buildings $226,000 Common stock $240,000 Less: Accumulated Retained earnings 500,000 depreciation (40,000) 186,000 Total stockholders' equity $740,000 Trademarks 140,000 Total liabilities and Total assets $1,050,000 stockholders' equity $1,050,000 a. $404,000 b. $234,000 c. $254,000 d. $174,000
: B, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: Stock investments = $90,000 83. Use the following data to determine the total amount of working capital. Carne Auto Supplies Balance Sheet December 31, 2014 Cash $ 35,000 Accounts payable $ 65,000 Accounts receivable 50,000 Salaries and wages payable 10,000 Inventory 70,000 Mortgage payable 90,000 Prepaid insurance 40,000 Total liabilities $165,000 Stock investments 90,000 Land 95,000 Buildings $115,000 Common stock $120,000 Less: Accumulated Retained earnings 250,000 depreciation (30,000) 85,000 Total stockholders' equity $370,000 Trademarks 70,000 Total liabilities and Total assets $535,000 stockholders' equity $535,000 a. $130,000 b. $120,000 c. $80,000 d. $210,000
: B, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Business Economics 141. Bathlinks Corporation has a debt to assets ratio of 73%. This tells the user of Bathlinks's financial statements that a. Bathlinks is getting a 27% return on its assets. b. there is a risk that Bathlinks cannot pay its debts as they come due. c. 73% of the assets are financed by the stockholders. d. based on this measure, the user should not invest in Bathlinks.
: B, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 126. The ability of a business to pay obligations that are expected to become due within the next year or operating cycle is a. leverage. b. liquidity. c. profitability. d. wealth.
: B, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 121. Working capital is calculated by taking a. current assets plus current liabilities. b. current assets minus current liabilities. c. current assets divided by current liabilities. d. current assets times current liabilities.
: B, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 122. Working capital is a measure of a. consistency. b. liquidity. c. profitability. d. solvency.
: B, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 125. Working capital is a. calculated by dividing current assets by current liabilities. b. used to evaluate a company's liquidity and short-term debt paying ability. c. used to evaluate a company's solvency and long-term debt paying ability. d. calculated by subtracting current assets from current liabilities.
: B, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 117. Current assets divided by current liabilities is known as the a. working capital. b. current ratio. c. profit margin. d. capital structure.
: B, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting Solution: $1,292,000 + $17,000 − $201,000 = $1,108,000 115. The relationship between current assets and current liabilities is important in evaluating a company's a. profitability. b. liquidity. c. market value. d. solvency.
: B, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics Solution: $150,000 − $8,600 − $1,400 = $140,000 155. The following information is available for Cooke Corporation: (in million) Cash receipts from operating activities $980 Cash payments from operating activities $240 Net cash used by investing $210 Net cash provided by financing $750 Net increase in cash and equivalents ? Cash and equivalents at start of year $550 Cash and equivalents at year-end ? What is the net increase in cash and equivalents? a. $1,700 b. $1,280 c. $730 d. $2,250
: B, LO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting 160. The agency of the United States Government that oversees the U.S. financial markets is the a. Internal Revenue Service. b. Security Exchange Commission. c. Financial Accounting Standards Board. d. International Auditing Standards Committee.
: B, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 1 84. The assumption that requires only those things that can be expressed in money are included in the accounting records is the a. economic entity assumption. b. monetary unit assumption. c. going concern assumption. d. periodicity assumption.
: B, LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 192. It is assumed that the activities of Ford Motor company can be distinguished from those of General Motors because of the a. going concern assumption. b. economic entity assumption. c. monetary unit assumption. d. periodicity assumption.
: B, LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 181. A company using the same accounting principles from year to year is an application of a. timeliness. b. consistency. c. full disclosure. d. materiality.
: B, LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 187. For accounting information to have relevance, it must be a. consistent. b. timely. c. verifiable. d. understandable.
: B, LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 200. The historical cost principle requires that when assets are acquired, they be recorded at a. market value. b. the amount paid for them. c. selling price. d. list price.
: B, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Business Economics 165. The convention of consistency refers to consistent use of accounting principles a. among firms. b. among accounting periods. c. throughout the accounting periods. d. within industries.
: B, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 185. Which of the following is a constraint in accounting? a. Comparability b. Cost c. Consistency d. Relevance
: B, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 168. In order for accounting information to be relevant, it must a. have very little cost. b. help predict future events or confirm prior expectations. c. not be reported to the public. d. be used by a lot of different firms.
: B, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 197. The periodicity assumption states a. the business will remain in operation for the foreseeable future. b. the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared. c. every economic entity can be separately identified and accounted for. d. only those things that can be expressed in money are included in the accounting records.
: B, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: FSA 201. Valuing assets at their fair value rather than at their cost is inconsistent with the a. economic entity assumption. b. historical cost principle. c. periodicity assumption. d. full disclosure principle.
: B, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 169. Accounting information should be verifiable in order to enhance a. comparability. b. faithful representation. c. consistency. d. relevance.
: B, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 173. Which of the following is not a quality associated with faithful representation? a. Complete b. Materiality c. Neutral d. All of these answer choices are correct.
: B, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 175. Characteristics associated with relevant accounting information are a. comparability and timeliness. b. predictive value and confirmatory value. c. neutral and verifiable. d. consistency and understandability.
: B, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 190. The principle that indicates that assets should be reported at the price received to sell an asset is the a. historical cost principle. b. fair value principle. c. full disclosure principle. d. consistency principle.
: B, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Risk Management, AICPA PC: None,
: Business Economics 75. Use the following data to determine the total dollar amount of assets to be classified as current assets. Koonce Office Supplies Balance Sheet December 31, 2014 Cash $ 130,000 Accounts payable $ 140,000 Accounts receivable 100,000 Salaries and wages payable 20,000 Inventory 110,000 Mortgage payable 160,000 Prepaid insurance 60,000 Total liabilities $320,000 Stock investments 170,000 Land 180,000 Buildings $210,000 Common stock $240,000 Less: Accumulated Retained earnings 500,000 depreciation (40,000) 170,000 Total stockholders' equity $740,000 Trademarks 140,000 Total liabilities and Total assets $1,060,000 stockholders' equity $1,060,000 a. $570,000 b. $400,000 c. $340,000 d. $290,000
: B,Solution: $130,000 + $100,000 + $110,000 + $60,000 = $400,000 LO: 1, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Business Economics Solution: ($35,000 + $50,000 + $70,000 + $40,000) ÷ ($65,000 + $10,000) = $2.60:1 85. N3 Corporation has assets of $3,000,000, common stock of $780,000, and retained earnings of $475,000. What are the creditors' claims on their assets? a. $2,695,000 b. $1,255,000 c. $1,745,000 d. $3,305,000
: C, LO: 1, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $180,000 + $170,000 = $350,000 77. Use the following data to determine the total dollar amount of assets to be classified as investments. Koonce Office Supplies Balance Sheet December 31, 2014 Cash $ 130,000 Accounts payable $ 140,000 Accounts receivable 100,000 Salaries and wages payable 20,000 Inventory 110,000 Mortgage payable 160,000 Prepaid insurance 60,000 Total liabilities $320,000 Stock investments 170,000 Land 180,000 Buildings $210,000 Common stock $240,000 Less: Accumulated Retained earnings 500,000 depreciation (40,000) 170,000 Total stockholders' equity $740,000 Trademarks 140,000 Total liabilities and Total assets $1,060,000 stockholders' equity $1,060,000 a. $0 b. $350,000 c. $170,000 d. $310,000
: C, LO: 1, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $190,000 + $186,000 = $376,000 89. Use the following data to determine the total dollar amount of assets to be classified as investments. Eddy Auto Supplies Balance Sheet December 31, 2014 Cash $ 84,000 Accounts payable $ 110,000 Accounts receivable 80,000 Salaries and wages payable 20,000 Inventory 140,000 Mortgage payable 180,000 Prepaid insurance 60,000 Total liabilities $310,000 Stock investments 170,000 Land 190,000 Buildings $226,000 Common stock $240,000 Less: Accumulated Retained earnings 500,000 depreciation (40,000) 186,000 Total stockholders' equity $740,000 Trademarks 140,000 Total liabilities and Total assets $1,050,000 stockholders' equity $1,050,000 a. $0 b. $310,000 c. $170,000 d. $390,000
: C, LO: 1, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $2,400,000 − $624,000 − $380,000 = $1,396,000 87. Use the following data to determine the total dollar amount of assets to be classified as current assets. Eddy Auto Supplies Balance Sheet December 31, 2014 Cash $ 84,000 Accounts payable $ 110,000 Accounts receivable 80,000 Salaries and wages payable 20,000 Inventory 140,000 Mortgage payable 180,000 Prepaid insurance 60,000 Total liabilities $310,000 Stock investments 170,000 Land 190,000 Buildings $226,000 Common stock $240,000 Less: Accumulated Retained earnings 500,000 depreciation (40,000) 186,000 Total stockholders' equity $740,000 Trademarks 140,000 Total liabilities and Total assets $1,050,000 stockholders' equity $1,050,000 a. $534,000 b. $224,000 c. $364,000 d. $304,000
: C, LO: 1, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $3,000,000 − $780,000 − $475,000 = $1,745,000 86. K2 Corporation has assets of $2,400,000, common stock of $624,000, and retained earnings of $380,000. What are the creditors' claims on their assets? a. $2,156,000 b. $1,004,000 c. $1,396,000 d. $2,644,000
: C, LO: 1, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $35,000 + $50,000 + $70,000 + $40,000 = $195,000 81. Use the following data to determine the total dollar amount of assets to be classified as property, plant, and equipment. Carne Auto Supplies Balance Sheet December 31, 2014 Cash $ 35,000 Accounts payable $ 65,000 Accounts receivable 50,000 Salaries and wages payable 10,000 Inventory 70,000 Mortgage payable 90,000 Prepaid insurance 40,000 Total liabilities $165,000 Stock investments 90,000 Land 95,000 Buildings $115,000 Common stock $120,000 Less: Accumulated Retained earnings 250,000 depreciation (30,000) 85,000 Total stockholders' equity $370,000 Trademarks 70,000 Total liabilities and Total assets $535,000 stockholders' equity $535,000 a. $270,000 b. $250,000 c. $180,000 d. $210,000
: C, LO: 1, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $95,000 + $85,000 = $180,000 82. Use the following data to determine the total dollar amount of assets to be classified as investments. Carne Auto Supplies Balance Sheet December 31, 2014 Cash $ 35,000 Accounts payable $ 65,000 Accounts receivable 50,000 Salaries and wages payable 10,000 Inventory 70,000 Mortgage payable 90,000 Prepaid insurance 40,000 Total liabilities $165,000 Stock investments 90,000 Land 95,000 Buildings $115,000 Common stock $120,000 Less: Accumulated Retained earnings 250,000 depreciation (30,000) 85,000 Total stockholders' equity $370,000 Trademarks 70,000 Total liabilities and Total assets $535,000 stockholders' equity $535,000 a. $0 b. $160,000 c. $90,000 d. $140,000
: C, LO: 1, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Business Economics 69. On a classified balance sheet, companies usually list current assets a. in alphabetical order. b. with the largest dollar amounts first. c. in the order in which they are expected to be converted into cash. d. in the order of acquisition.
: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 57. On a classified balance sheet, short-term investments are classified as a. an intangible asset. b. property, plant, and equipment. c. a current asset. d. a long-term investment.
: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 70. Intangible assets are a. listed directly under current assets on the balance sheet. b. not listed on the balance sheet because they do not have physical substance. c. listed after property, plant, and equipment. d. listed as a long-term investment on the balance sheet.
: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting Solution: ($500 − $25) ÷ [(200 + 180) ÷ 2] = $2.50 102. The following information is available for Bradshaw Corporation and Newell Corporation: (in millions) Bradshaw Corporation Newell Corporation 2014 2013 2014 2013 Preferred dividends 25 10 0 30 Net income 500 480 490 520 Shares outstanding at the end of the year 200 180 150 200 Shares outstanding at the beginning of the year 180 150 200 220 Based on the information for both Bradshaw and Newell over the two-year period, the earnings per share calculations (rounded to two decimals) indicate that a. Bradshaw is seeing a greater performance improvement than Newell. b. the earnings available to common stockholders is decreasing for Newell and increasing for Bradshaw. c. the earnings per share calculations for both companies assume that changes in shares between 2013 and 2014 occur in the middle of the year. d. Newell is more financially stable than Bradshaw.
: C, LO: 2, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Business Economics Solution: $16,000 ÷ $8,000 = $2.0:1 131. Using the following balance sheet and income statement data, what is the earnings per share? Current assets $ 16,000 Net income $ 21,000 Current liabilities 8,000 Stockholders' equity 39,000 Average assets 80,000 Total liabilities 21,000 Total assets 60,000 Average common shares outstanding was 10,000. a. $3.90 b. $6.00 c. $2.10 d. $0.48
: C, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Business Economics Solution: ($84,000 + $80,000 + $140,000 + $60,000) ÷ ($110,000 + $20,000) = 2.80:1 92. A measure of profitability is the a. current ratio. b. debt to assets ratio. c. earnings per share. d. working capital.
: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 108. Issuing new shares of common stock will a. increase retained earnings. b. decrease retained earnings. c. increase common stock. d. decrease common stock.
: C, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Business Economics Solution: $21,000 ÷ $60,000 = $35% 133. Using the following balance sheet and income statement data, what is the total amount of working capital? Current assets $ 7,000 Net income $ 15,000 Current liabilities 4,000 Stockholders' equity 21,000 Average assets 44,000 Total liabilities 9,000 Total assets 30,000 Average common shares outstanding was 10,000. a. $7,000 b. $5,000 c. $3,000 d. $2,000
: C, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Business Economics 142. Ace Company is a retail store. Due to competition, it is having trouble selling its products. Thus, inventory has been building up. Ace's current ratio has not changed for the past three years, in spite of the inventory build up. Which of the following statements is true? a. As long as the current ratio remains constant, there is no need for concern. b. The composition of current assets and current liabilities does not matter. c. The management of Ace should consider the effect of slow moving inventory on its liquidity. d. Since inventory is a current asset, any increases should automatically cause the current ratio to rise.
: C, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving,
: Business Economics 118. The most important information needed to determine if companies can pay their current obligations is the a. net income for this year. b. projected net income for next year. c. relationship between current assets and current liabilities. d. relationship between short-term and long-term liabilities.
: C, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 123. Long-term creditors are usually most interested in evaluating a. liquidity and profitability. b. consistency and profitability. c. liquidity and solvency. d. consistency and solvency.
: C, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 124. A liquidity ratio measures the a. income or operating success of a company over a period of time. b. ability of a company to survive over a long period of time. c. short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash. d. percentage of total financing provided by creditors.
: C, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 140. Which measure would a long-term creditor be least interested in reviewing? a. Free cash flow b. Debt to assets ratio c. Current ratio d. Solvency measure
: C, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 120. The current ratio is a. current assets plus current liabilities. b. current assets minus current liabilities. c. current assets divided by current liabilities. d. current assets times current liabilities.
: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 139. Which of the following is not considered a measure of liquidity? a. Current ratio b. Working capital c. Debt to assets ratio d. Each of these answer choices are liquidity measures
: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics Solution: $9,000 ÷ $30,000 = $30% 137. The debt to assets ratio is computed by dividing a. long-term liabilities by total assets. b. long-term liabilities by average assets. c. total liabilities by total assets. d. total liabilities by average assets.
: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics Solution: ($1,600,000 + $100,000) ÷ $750,000 = $2.27:1 148. The debt to assets ratio is a a. liquidity ratio. b. profitability ratio. c. solvency ratio. d. None of the answer choices is correct.
: C, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting Solution: $980,000 − $240,000 − $210,000 + $750,000 = $1,280,000 156. The following information is available for Cooke Corporation: (in million) Cash receipts from operating activities $980 Cash payments from operating activities $240 Net cash used by investing $210 Net cash provided by financing $750 Net increase in cash and equivalents ? Cash and equivalents at start of year $550 Cash and equivalents at year-end ? What is the cash and equivalents amount at year-end? a. $1,290 b. $730 c. $1,830 d. $2,730
: C, LO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Business Economics 151. Free cash flow is Net cash provided by operating activities a. less capital expenditures. b. less cash dividends. c. less capital expenditures and cash dividends. d. less capital expenditures and salaries expense.
: C, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 158. Which of the following organizations issues accounting standards for countries outside the United States? a. SEC b. GAAP c. IASB d. FASB
: C, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 159. Generally accepted accounting principles a. are accounting rules formulated by the Internal Revenue Service. b. are sound in theory but rarely used in real life. c. are accounting rules that are recognized as a general guide for financial reporting. d. have eliminated all errors in accounting.
: C, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 186. The accounting concept that indicates assets should be reported at the price received to sell an asset is the a. economic entity assumption. b. monetary unit assumption. c. fair value principle. d. historical cost principle.
: C, LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 202. Jackson Cement Corporation reported $35 million for sales when it only had $20 million of actual sales. Which of the following qualities of useful information has Jackson most likely violated? a. Comparability b. Relevance c. Faithful representation d. Consistency
: C, LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 179. An item is considered material if a. it doesn't costs a lot of money. b. it is of a tangible good. c. its size is likely to influence the decision of an investor or creditor. d. the cost of reporting the item is greater than its benefits.
: C, LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 198. The TNT Company has five plants nationwide that cost $300 million. The current fair value of the plants is $500 million. The plants will be reported as assets at a. $200 million. b. $800 million. c. $300 million. d. $500 million.
: C, LO: 7, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting 162. Which one of the following is not an enhancing quality of useful information? a. Timeliness b. Understandability c. Materiality d. Comparability
: C, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 167. Information that is presented in a clear fashion, so that users of that information can interpret it is an example of a. relevance. b. faithful representation. c. understandability. d. comparability.
: C, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 170. Accounting information is relevant to business decisions because it a. has been verified by external audit. b. is prepared on an annual basis. c. confirms prior expectations. d. is neutral in its representations.
: C, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 166. The quality of consistency enhances a. relevance. b. materiality. c. comparability. d. faithful representation.
: C, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 176. Characteristics associated with faithfully representative accounting information are a. verifiable and timely. b. verifiable and neutral. c. complete and neutral. d. relevance and verifiable.
: C, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 188. The periodicity assumption states that the economic life of a business can be divided into a. equal time periods. b. cyclical time periods. c. artificial time periods. d. perpetual time periods.
: C, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 72. These are selected account balances on December 31, 2014. Land $100,000 Land (held for future use) 150,000 Buildings 800,000 Inventory 200,000 Equipment 450,000 Furniture 100,000 Accumulated Depreciation 300,000 What is the total amount of property, plant, and equipment that will appear on the balance sheet? a. $1,500,000 b. $1,300,000 c. $1,800,000 d. $1,150,000
: D Solution: $100,000 + $800,000 + $450,000 + $100,000 − $300,000 = $1,150,000, LO: 1, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $84,000 + $80,000 + $140,000 + $60,000 = $364,000 88. Use the following data to determine the total dollar amount of assets to be classified as property, plant, and equipment. Eddy Auto Supplies Balance Sheet December 31, 2014 Cash $ 84,000 Accounts payable $ 110,000 Accounts receivable 80,000 Salaries and wages payable 20,000 Inventory 140,000 Mortgage payable 180,000 Prepaid insurance 60,000 Total liabilities $310,000 Stock investments 170,000 Land 190,000 Buildings $226,000 Common stock $240,000 Less: Accumulated Retained earnings 500,000 depreciation (40,000) 186,000 Total stockholders' equity $740,000 Trademarks 140,000 Total liabilities and Total assets $1,050,000 stockholders' equity $1,050,000 a. $686,000 b. $516,000 c. $556,000 d. $376,000
: D, LO: 1, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting 73. What is the order in which assets are generally listed on a classified balance sheet? a. Current and long-term b. Current; property, plant and equipment; long-term investments; intangibles c. Current; property, plant and equipment; intangibles; long-term investments d. Current; long-term investments; property, plant and equipment, intangibles
: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 58. A current asset is a. the last asset purchased by a business. b. an asset which is currently being used to produce a product or service. c. usually found as a separate classification in the income statement. d. expected to be converted to cash or used in the business within a relatively short period of time.
: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 59. Which of the following is not classified properly as a current asset? a. Supplies b. Debt investments c. A fund to be used to purchase a building within the next year d. A receivable from the sale of an asset to be collected in two years
: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 63. Liabilities are generally classified on a balance sheet as a. small liabilities and large liabilities. b. present liabilities and future liabilities. c. tangible liabilities and intangible liabilities. d. current liabilities and long-term liabilities.
: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 65. Which of the following is not a current liability? a. Salaries and Wages Payable b. Accounts Payable c. Taxes Payable d. Bonds Payable
: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 67. It is not true that current assets are resources that are expected to be a. realized in cash within one year. b. sold within one year. c. consumed within one year. d. acquired within one year.
: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 71. Which statement about long-term investments is not true? a. They will be held for more than one year. b. They are not currently used in the operation of the business. c. They include investments in stock of other companies and land held for future use. d. They do not include long-term notes receivable.
: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
MULTIPLE CHOICE QUESTIONS 56. In a classified balance sheet, assets are usually classified as a. current assets; long-term assets; property, plant, and equipment; and intangible assets. b. current assets; long-term investments; property, plant, and equipment; and common stocks. c. current assets; long-term investments; tangible assets; and intangible assets. d. current assets; long-term investments; property, plant, and equipment; and intangible assets.
: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 99. The following information is available for Bradshaw Corporation and Newell Corporation: (in millions) Bradshaw Corporation Newell Corporation 2014 2013 2014 2013 Preferred dividends 25 10 0 30 Net income 500 480 490 520 Shares outstanding at the end of the year 200 180 150 200 Shares outstanding at the beginning of the year 180 150 200 220 Based on this information, the earnings per share calculations (rounded to two decimals) suggest a. lower performance in 2013 than in 2014 for Bradshaw Corporation. b. higher performance in 2014 than in 2013 for Bradshaw Corporation. c. fewer earnings available to Bradshaw's common stockholders in 2014 than in 2013. d. an increase in the average number of common shares outstanding between 2013 and 2014 for Bradshaw Corporation.
: D, LO: 2, Bloom: AN, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: ($28,000 − 0) ÷ 16,000 = $1.75 94. For 2014 Fielder Corporation reported net income of $30,000; net sales $400,000; and average share outstanding 16,000. There were no preferred dividends. What was the 2014 earnings per share? a. $0.08 b. $0.53 c. $25.00 d. $1.88
: D, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Business Economics 97. Which of the following statements is true? a. Earnings per share is an internal measure and is not used by stockholders. b. The denominator used in computing earnings per share represents the shares of common stock outstanding on the last day of the accounting period. c. Net income is not adjusted when computing earnings per share. d. By comparing earnings per share of a single corporation over time, a stockholder can evaluate the corporation's relative earnings performance.
: D, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 98. Earnings available to common stockholders is equal to a. total revenues b. net income + preferred dividends. c. preferred dividends - net income. d. net income - preferred dividends.
: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 106. Most companies use a(n) _________ rather than a retained earnings statement. a. balance sheet b. income statement c. statement of cash flows d. statement of stockholders' equity
: D, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics Solution: ($130,000 + $100,000 + $110,000 + $60,000) − ($140,000 + $20,000) = $240,000 79. Use the following data to calculate the current ratio. Koonce Office Supplies Balance Sheet December 31, 2014 Cash $ 130,000 Accounts payable $ 140,000 Accounts receivable 100,000 Salaries and wages payable 20,000 Inventory 110,000 Mortgage payable 160,000 Prepaid insurance 60,000 Total liabilities $320,000 Stock investments 170,000 Land 180,000 Buildings $210,000 Common stock $240,000 Less: Accumulated Retained earnings 500,000 depreciation (40,000) 170,000 Total stockholders' equity $740,000 Trademarks 140,000 Total liabilities and Total assets $1,060,000 stockholders' equity $1,060,000 a. 2.13 : 1 b. 1.44 : 1 c. 2.86 : 1 d. 2.50 : 1
: D, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Business Economics Solution: ($35,000 + $50,000 + $70,000 + $40,000) − ($65,000 + $10,000) = $120,000 84. Use the following data to calculate the current ratio. Carne Auto Supplies Balance Sheet December 31, 2014 Cash $ 35,000 Accounts payable $ 65,000 Accounts receivable 50,000 Salaries and wages payable 10,000 Inventory 70,000 Mortgage payable 90,000 Prepaid insurance 40,000 Total liabilities $165,000 Stock investments 80,000 Land 95,000 Buildings $100,000 Common stock $120,000 Less: Accumulated Retained earnings 250,000 depreciation (30,000) 85,000 Total stockholders' equity $370,000 Trademarks 70,000 Total liabilities and Total assets $535,000 stockholders' equity $535,000 a. 2.07 : 1 b. 1.67 : 1 c. 3.00 : 1 d. 2.60 : 1
: D, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: $21,000 ÷ $10,000 = $2.10 132. Using the following balance sheet and income statement data, what is the debt to assets ratio? Current assets $ 14,000 Net income $ 21,000 Current liabilities 8,000 Stockholders' equity 39,000 Average assets 80,000 Total liabilities 21,000 Total assets 60,000 Average common shares outstanding was 10,000. a. 26 percent b. 13 percent c. 65 percent d. 35 percent
: D, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Reporting Solution: ($114,000 + $60,000 + $138,000 + $80,000 + $2,000) − ($64,000 + $56,000) = $274,000 129. Using the following balance sheet and income statement data, what is the total amount of working capital? Current assets $ 16,000 Net income $ 21,000 Current liabilities 8,000 Stockholders' equity 39,000 Average assets 80,000 Total liabilities 21,000 Total assets 60,000 Average common shares outstanding was 10,000. a. $ 4,000 b. $16,000 c. $ 5,000 d. $ 8,000
: D, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Business Economics Solution: $7,000 − $4,000 = $3,000 134. Using the following balance sheet and income statement data, what is the current ratio? Current assets $ 7,000 Net income $ 15,000 Current liabilities 4,000 Stockholders' equity 21,000 Average assets 44,000 Total liabilities 9,000 Total assets 30,000 Average common shares outstanding was 10,000. a. 0.78 : 1 b. 3.33 : 1 c. 0.57 : 1 d. 1.75: 1
: D, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving,
: Business Economics 138. A useful measure of solvency is the a. current ratio. b. earnings per share. c. return on assets ratio. d. debt to assets ratio.
: D, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting Solution: $980 − $240 − $210 + $750 + $550 = $1,830 157. If Morris Corporation has a negative $131 million free cash flow, which of the following statements is most likely true? a. Morris' capital expenditures plus its cash dividends are less than its cash provided by operations. b. This free cash flow indicates that Morris is in good shape to repay its long-term obligations when they come due. c. This free cash flow indicates that Morris presents good cash generating ability to retire stock. d. Morris' cash provided by operations is less than its cash dividends plus capital expenditures.
: D, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Risk Management, AICPA PC: None,
: Business Economics 150. Free cash flow represents a. cash provided by operations less adjustments for capital expenditures and dividends. b. a measurement of a company's cash generating ability. c. a measure of solvency. d. All of these answer choices are correct.
: D, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 149. Free cash flow provides an indication of a company's ability to a. generate cash to invest in new capital expenditures. b. generate net income. c. generate cash to pay dividends. d. generate cash to invest in new capital expenditures and to pay dividends.
: D, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 161. What organization issues U.S. accounting standards? a. Security Exchange Commission b. International Accounting Standards Committee c. International Auditing Standards Committee d. Financial Accounting Standards Board
: D, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 183. Different companies using the same accounting principles is an application of a. consistency. b. materiality. c. full disclosure. d. comparability.
: D, LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Reporting 203. Connor Corporation hired a new accountant. Over the next four years, the accountant used four different accounting methods to depreciation for Connor's equipment. Which of the following qualities of useful information has Connor most likely violated? a. Comparability b. Relevance c. Faithful representation d. Consistency
: D, LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 204. Garrison Company prepares quarterly reports, which it distributes to all stockholders and other entities that rely on its accounting information. Which of the following is the best term for the key assumption in financial reporting that Garrison is following? a. Monetary unit assumption b. Going concern assumption c. Economic entity assumption d. Periodicity assumption.
: D, LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 163. All of the following are qualities of useful information except a. faithful representation. b. materiality. c. relevance. d. flexibility.
: D, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
: Business Economics 195. The concept that a business has a reasonable expectation of remaining in business for the foreseeable future is called the a. economic entity assumption. b. monetary unit assumption. c. periodicity assumption. d. going concern assumption.
: D, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 191. Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments? a. Monetary unit assumption b. Economic entity assumption c. Periodicity assumption d. Going concern assumption
: D, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Business Economics 194. The economic entity assumption states that economic events a. of different entities can be combined if all the entities are corporations. b. must be reported to the Securities and Exchange Commission. c. of a sole proprietorship cannot be distinguished from the personal economic events of its owners. d. of every entity can be separately identified and accounted for.
: D, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 171. If accounting information has relevance, it is useful in making predictions about a. future IRS audits. b. new accounting principles. c. foreign currency exchange rates. d. the future events of a company.
: D, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 172. Relevant accounting information a. is information that has been audited. b. must be reported within the operating cycle or one year, whichever is longer. c. has been objectively determined. d. is information that is capable of making a difference in a business decision.
: D, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 180. Information presented in a clear and concise fashion so that users can comprehend its meaning is an application of a. consistency. b. timeliness. c. verifiability. d. understandability.
: D, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
: Reporting 193. The going concern assumption assumes that the business a. will be liquidated in the near future. b. will be purchased by another business. c. is in a growth industry. d. will remain in operation for the foreseeable future.
: D, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
