Accounting Exam 3 Multiple Choice

ABC Company is authorized to issue 100,000 shares of common stock. The company issued 60,000 shares of common stock and later repurchased 15,000 shares of its own common stock. How many shares are outstanding? a. 60,000. b. 45,000. c. 100,000. d. 40,000.

b

At the end of the accounting period, Isaac Company had a balance of $5,100 in its common stock account, additional paid in capital of $5,100, retained earnings of $4,100, and $2,100 of treasury stock. The total amount of stockholders' equity is: a. 18500 b. 12200 c. 16400 d. 10200

b

CC Company wrote off a $100 uncollectible account receivable against the $1,200 balance in its allowance account. Compare the current ratio before the write-off (X) with the current ratio after the write-off (Y). a. X is greater than Y. b. X equals Y. c. X is less than Y. d. The answer cannot be determined from the information given.

b

Tyrone Gonzales started a sole proprietorship by depositing $43,000 cash in a business checking account. During the accounting period the business earned $29,000 of net income and Gonzales withdrew $16,500 cash from the business. Based on this information, at the end of the accounting period, Gonzales' capital account contained a balance of: a. 43000 b. 55500 c. 30500 d. 88500

b

which of the following entities would ahve a "paid-in capital in excess" account in the equity section of the balance sheet a. a partnership b. a corporation c. a sole proprietorship d. all of these

b

7.XYZ's return on assets is a. 7.86%. b. 14.57%. c. 23.4%. d. 6.86%.

d

Madison Co. paid dividends of $4,000; $11,000; and $20,000 during 2008, 2009 and 2010 respectively. The company had 1,000 shares of preferred stock outstanding with a $10 per share cumulative dividend. The amount of dividends received by the common shareholders during 2010 would be: a. 11,000 b. 10,000 c. 4,000 d. 5,000

d

When preparing a statement of cash flows, in which section is it permitted to use either the direct method or the indirect method? a. investing activities b. operating activities c. financing activities d. all of the above

d

10.EFG Company paid cash to purchase treasury stock. Which of the following reflects how this event affects the company's financial statements?

a

4.XYZ's current ratio is a. 6.0 to 1. b. 5.5 to 1. c. 4.0 to 1. d. 4.5 to 1.

a

6.XYZ's earnings per share is a. $7.50 per share. b. $7.00 per share. c. $0.13 per share. d. none of the above.

a

ABC Company's merchandise inventories and other selected amounts for 2010 follow: Sales $3,000,000 Cost of Goods Sold 2,200,000 Merchandise Inventory: Beginning of Year 500,000 End of Year 600,000 Assuming the merchandise inventory buildup was relatively constant, how many times did the merchandise inventory turn over during 2010? a. 4.00. b. 4.40. c. 5.00. d. 5.45.

a

EST, Inc. neglected to record the amortization of its intangible asset, a patent. Compare the company's net earnings without this amortization (X) and the company' net earnings with such amortization (Y). a. X is greater than Y. b. X equals Y. c. X is less than Y. d. The answer cannot be determined from the information given.

a

For the year ended December 31, 2011, Binford Company had cash collections from customers of $145,000, cash paid to employees of $25,000, cash paid to suppliers of $68,000, cash used to retire long-term bonds of $16,000, and cash payments for dividends of $14,500. Based on this information, the amount of cash provided by operating activities for 2011 is: a. 52000 b. 21500 b. 77000 d. 36000

a

Hogan Company, a small consulting firm, charges all of its operating expenses on Accounts Payable. On January 1, 2011, Hogan's Accounts Payable balance was $14,000 and, during the year, an additional $134,000 of operating expenses was charged on account. The ending Accounts Payable balance was $26,000. What is the amount of cash paid for expenses during 2011? a. 122000 b. 24000 c. 146000 d. 148000

a

Madison Co. paid dividends of $5,000; $16,000; and $30,000 during 2008, 2009 and 2010 respectively. The company had 1,500 shares of preferred stock outstanding with a $10 per share cumulative dividend. The amount of dividends received by the common shareholders during 2010 would be: a. 6000 b. 5000 c. 16000 d. 15000

a

Use the following information to answer the next four questions. The Kramer Company was started when it issued 200 shares of $5 par value common stock at a market price of $20 per share. The company repurchased 10 shares at a market price of $15 per share. Later the company reissued 5 shares at a market price of $20 per share. At the end of the first year of operations the company's equity included $1,200 of retained earnings in addition to its contributed capital. The total amount of stockholders' equity at the end of the first year would be a. $5,150. b. $5,200. c. $1,200. d. none of the above.

a

2.Based on horizontal analysis, which of the following is true? a. Sales grew more rapidly than cost of goods sold. b. Cost of goods sold grew more rapidly than selling expenses. c. Administrative expenses declined by 16.7%. d. both b and c are true.

b

9.XYZ's debt to equity ratio is a. 75.00%. b. 62.19%. c. 34.23%. d. 22.22%.

b

For the year ended December 31, 2011, Flanders Company made cash payments of $27,000 for dividends, paid interest of $11,400, paid $15,100 cash to suppliers, and purchased equipment for $44,000 cash. The amount of cash used by investing activities for 2011 is: a. 62500 b. 44000 c. 976500 d. 38400

b

Lauer Company reported net income of $75,300 on sales of $317,000. The company has total assets of $517,000 and total liabilities of $134,000. What is the company's return on equity ratio? (Round your answer to 2 decimal places.) a. 48.69% b. 19.66% c. 23.75% d. 14.56%

b

Pakeham Company has cash of $10,700, accounts receivable of $41,000, inventory of $29,500, and, equipment of $57,000. Assuming current liabilities of $27,500, this company's working capital is a. 28300 b. 53700 c. 5300 d. 85300

b

Use the following information to answer the next four questions. The Kramer Company was started when it issued 200 shares of $5 par value common stock at a market price of $20 per share. The company repurchased 10 shares at a market price of $15 per share. Later the company reissued 5 shares at a market price of $20 per share. At the end of the first year of operations the company's equity included $1,200 of retained earnings in addition to its contributed capital. The original issue of 200 shares of stock would a. increase cash by $4,000 / increase common stock by $4,000. b. increase cash by $4,000 / increase common stock and paid-in capital in excess of par value by $1,000 and $3,000, respectively. c. decrease cash by $4,000 / increase common stock by $4,000. d. increase cash by $1,000 / increase common stock by $1,000.

b

3.Based on vertical analysis of KLM's income statements, which of the following is true? a. KLM produced more net income per sales dollar in 2010 than in 2011. b. KLM's selling expenses were a smaller percentage of sales in 2010 than in 2011. c. KLM's total expenses were a greater percentage of sales in 2010 than in 2011. d. all of the above are true.

c

8.XYZ's return on equity is a. 2.56%. b. 8.98%. c. 11.13%. d. none of the above.

c

Jan Irving started a proprietorship on January 1, 2010 with a $1,000 cash contribution to the business. During the first year of operations the company generated $5,000 of cash revenue and incurred $2,000 of cash expenses. Also, Jan withdrew $500 from the business. At the end of 2010 the balance in the Jan Irving, Capital account was a. $1,000. b. $3,000. c. $3,500. d. $4,000.

c

Otteman Company reported net income of $24,700 on gross sales of $96,000. The company has average total assets of $131,200, of which $116,000 is property, plant and equipment. What is the company's return on investment? (Round your answer to 2 decimal places.) a. 25.73% b. 21.29% c. 18.83% d. 73.17%

c

The 2011 income statement of Greene Co. reported wages expense of $185,000; the 2010 balance sheet showed a balance in wages payable of $17,000, while the 2011 balance sheet included wages payable of $24,500. What amount of cash was paid for wages in 2011? a. 185000 b. 168000 c. 177500 d. 202000

c

The term "double taxation" refers to which of the following: a. limited liability companies are forced to pay income taxes to both the state and the federal governments b. sole proprietorships must pay income taxes on their net income and the owners are also to pay income takes on their withdrawals c. corporations must pay income taxes on their net income and their stockholders pay income tax on the dividends they receive d. in a partnership both partners are required to claim their share of net income on their tax returns

c

Under the indirect method, which of the following items would be added to net income to determine the cash flow from operating activities? a. decrease in the balance of accounts payable b. gain on the sale of equipment c. depreciation expense d. accrues interest receivable

c

Use the following information to answer the next four questions. The Kramer Company was started when it issued 200 shares of $5 par value common stock at a market price of $20 per share. The company repurchased 10 shares at a market price of $15 per share. Later the company reissued 5 shares at a market price of $20 per share. At the end of the first year of operations the company's equity included $1,200 of retained earnings in addition to its contributed capital. What effect would reissuing the 5 shares have on the company's paid-in capital from treasury stock transactions account? a. No effect. b. Increase additional paid-in capital by $100. c. Increase additional paid-in capital by $25. d. Decrease additional paid-in capital by $75.

c

What effect will the declaration and distribution of a stock dividend have on net income and cash flows? a. increase net income no effect on cash flows b. no effect on net income decrease cash flows c. no effect on net income or cash flows d. decrease net income decrease cash flows

c

Which answer would represent the financial statement presentation of stockholders equity after the following transactions? Issued 200 shares of $12 par value common stock for $25 a share. Five hundred shares are authorized. Purchased 75 shares of treasury stock at $22 a share. a.Common Stock, $25 market value, 500 shares authorized, 200 shares issued, 125 outstanding $5,000 Less: Treasury Stock, 75 shares @ $22 per share ($1,650) b. Common Stock, $12 par value, 500 shares authorized, 200 shares issued, 425 outstanding $5,100 Paid in Capital in Excess of Par - Common $5,525 Less: Treasury Stock, 75 shares @ $22 per share ($1,650) c. Common Stock, $12 par value, 500 shares authorized, 200 shares issued, 125 outstanding $2,400 Paid in Capital in Excess of Par - Common $2,600 Less: Treasury Stock, 75 shares @ $22 per share ($1,650) d. Common Stock, $12 par value, 500 shares authorized, 200 shares issued and outstanding $2,400 Paid in Capital in Excess of Par - Common $2,600 Less: Treasury Stock, 75 shares @ $12 par share ($900)

c

Which of the following is an advantage of the corporate form of business organization? a. double taxation. b. amount of regulation. c. limited liability. d. entrenched management.

c

which of the following statements about types of business entities is true a. ownership in a partnership is represented by having shares of capital stock b. for accounting purposes a sole proprietorship is not a separate entity from its owner c. one advantage of corporations is limited liability for stockholders d. sole proprietorships are subject to double taxation

c

1.Horizontal analysis indicates that KLM's sales grew by a. (23.97)%. b. (31.52)%. c. 23.97%. d. 31.52%.

d

5.XYZ's quick (acid-test) ratio is a. 4.0 to 1. b. 4.5 to 1. c. 3.5 to 1. d. 3.0 to 1.

d

Cash receipts from interest on a note receivable would be classified on the statement of cash flows in the: a. non-cash financing and investing section b. financing activity section c. investing activity section d. operating activity section

d

Mitchell Company has total current assets of $74,500 including inventory of $9,000, and current liabilities of $24,000. The company's current ratio is (round your answer to 2 decimal places) a. 2.73 b. .37 c. .32 d. 3.10

d

Mitchell Company was authorized to issue 52,000 shares of common stock. The company issued 28,000 shares of stock and later purchased 5,200 shares of treasury stock. The number of outstanding shares of common stock is: a. 17600 b. 46800 c. 29200 d. 22800

d

The Knight Company reported depreciation expense of $28,000 and net income of $34,000 on its 2011 income statement. During 2011 the company's accounts receivable balance decreased by $5,800. Based on this information alone, what was the amount of cash flow from operating activities? a. 28200 b. 69800 c. 34000 d. 67800

d

The ZZ Corporation had the following shares of stock outstanding at December 31, 2010: Common Stock, $50 par value, 40,000 shares outstanding; and Preferred Stock, 6 percent, $100 par value, cumulative, 10,000 shares outstanding. Dividends for 2008 and 2009 were in arrears. On December 31, 2010, ZZ declared total cash dividends of $250,000. The total amounts payable to preferred stockholders and common stockholders, respectively, are: a. $60,000 / $190,000. b. $120,000 / $130,000. c. $125,000 / $125,000. d. $180,000 / $70,000.

d

The following partial balance sheet is provided for Templeton Company: Liabilities and Stockholder's Equity Accounts payable $ 2,440 Salaries payable 4,440 Bonds payable (due 2020) 11,200 Capital stock, no par 17,200 Retained earnings 17,200 Total liabilities and stockholder's equity $ 52,480 What is the company's debt to assets ratio? a. 13.11% b. 65.55% c. 52.56% d. 34.45%

d

Use the following information to answer the next four questions. The Kramer Company was started when it issued 200 shares of $5 par value common stock at a market price of $20 per share. The company repurchased 10 shares at a market price of $15 per share. Later the company reissued 5 shares at a market price of $20 per share. At the end of the first year of operations the company's equity included $1,200 of retained earnings in addition to its contributed capital. The entry to record the purchase of the 10 shares of the company's own stock would a. decrease assets / decrease equity. b. decrease assets / increase equity. c. decrease assets / increase treasury stock. d. both a and c.

d

Which of the following statements concerning a two-for-one stock split is true? a. The number of shares outstanding will decrease. b. The market price of the stock would be expected to increase. c. The company's assets will decrease. d. The amount of stockholders' equity is not affected.

d

accrual accounting requires the use of many estimates including a. warranty costs b. uncollectible accounts expense c. assets useful lives d. all of these

d