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Net income is $200,000, preferred dividends are $20,000, and average common shares outstanding are 50,000. How much is earnings per share?

$0.28 $0.25 $3.60 $4.00 Correct! Earnings per share of $3.60 is calculated by dividing earnings available to common stockholders ($200,000 - $20,000) by the average number of common shares outstanding (50,000) = $3.60/share.

The following balances and amounts were taken from the financial statements of Ortiz, Inc. The data are presented in alphabetical order. Accounts payable $35,000 Cash provided by operations $90,000 Accounts receivable 37,500 Net income 36,000 Average common shares 20,000 Salaries and wages payable 8,000 Average current liabilities 110,000 Stockholders' equity 240,000 Average and total assets 600,000 Total current assets 300,000 Average total liabilities 320,000 Total current liabilities 120,000 Cash 100,000 How much is earnings per share?

$0.56 $1.80 $1.20 $0.15 Correct! Earnings per share is the result of net income being divided by the average common shares; $36,000 / 20,000 shares = $1.80.

At December 31, 2014, Shorts Company had retained earnings of $2,184,000. During 2014, the company issued stock for $98,000, and paid dividends of $34,000. Net income for 2014 was $402,000. How much was the retained earnings balance at the beginning of 2014?

$1,816,000 $1,914,000 $2,454,000 $2,552,000 Correct! The beginning balance of retained earnings is the ending balance minus net income plus dividends. Working backwards, $X + $402,000 - $34,000 = $2,184,000. Therefore, beginning retained earnings = $1,816,000.

The following balances and amounts were taken from the financial statements of Ortiz, Inc. Capital expenditures $55,000 Cash provided by operations $ 90,000 Cash 100,000 Net Income 80,000 Cash dividends paid 20,000 How much is free cash flow?

$15,000 $35,000 $5,000 $25,000 Correct! Free cash flow is computed by subtracting capital expenditures and cash dividends from cash provided by operations. $90,000 - $55,000 - $20,000 = $15,000.

For 2014, Stoneland Corporation reported net income, $24,000; net sales, $400,000; and average shares outstanding, 6,000. There were no preferred stock dividends. How much was the 2014 earnings per share?

$16.67 $66.67 $4.00 $0.06 Correct! Net income ($24,000) divided by average shares outstanding (6,000) = $4.00/share.

The following balances and amounts were taken from the financial statements of Ortiz, Inc. Accounts payable $35,000 Cash provided by operations $90,000 Accounts receivable 37,500 Net income 36,000 Average common shares 20,000 Salaries and wages payable 8,000 Average current liabilities 110,000 Stockholders' equity 240,000 Average and total assets 600,000 Total current assets 300,000 Average total liabilities 320,000 Total current liabilities 120,000 Cash 100,000 How much is working capital?

$280,000 None of the answer choices are correct $180,000 2.50 Correct! Working capital is current assets minus current liabilities. $300,000 - $120,000 = $180,000

Current liabilities are $10,000, long-term liabilities are $20,000, common stock is $50,000, and retained earnings totals $70,000. How much is total stockholders' equity?

$70,000 $120,000 $140,000 $150,000 Correct! Common stock and retained earnings are both elements of stockholders' equity. Common stock of $50,000 plus retained earnings of $70,000 equals $120,000 in stockholders' equity.

Which of the following does not properly reflect a financial ratio?

18.4% 7:1 $0.60 per dollar $7,200

The following balances and amounts were taken from the financial statements of Ortiz, Inc. Accounts payable $35,000 Cash provided by operations $90,000 Accounts receivable 37,500 Net income 36,000 Average common shares 20,000 Salaries and wages payable 8,000 Average current liabilities 110,000 Stockholders' equity 240,000 Total assets 600,000 Total current assets 300,000 Average total liabilities 320,000 Total current liabilities 120,000 Cash 100,000 How much is the debt to assets ratio?

20% 40% 30% 60% Correct! The debt to asset ratio is total liabilities divided by total assets.

The following balances and amounts were taken from the financial statements of Ortiz, Inc. Accounts payable $35,000 Cash provided by operations $90,000 Accounts receivable 37,500 Net income 36,000 Average common shares 20,000 Salaries and wages payable 8,000 Average current liabilities 110,000 Stockholders' equity 240,000 Average and total assets 600,000 Total current assets 300,000 Average total liabilities 320,000 Total current liabilities 120,000 Cash 100,000 How much is Ortiz's current ratio?

3.40 3.27 2.50 2.38 Correct! The current ratio is total current assets divided by total current liabilities; ($300,000 / $120,000) = 2.5 to 1.

What are generally accepted accounting principles?

A set of accounting rules and practices that have authoritative support Usually established by the Internal Revenue Service The guidelines used to resolve ethical dilemmas Fundamental truths that can be derived from the laws of nature Correct! All U.S. companies get guidance from a set of rules and practices that have authoritative support, referred to as generally accepted accounting principles (GAAP). Standard-setting bodies, in consultation with the accounting profession and the business community, determine these accounting standards.

Which of the following is an example of an intangible asset?

Accounts receivable Trademarks Prepaid expenses Property, plant, and equipment

In what order are current assets listed?

By importance By longevity By liquidity Alphabetically

Under IFRS, which of the following current assets section would be presented correctly in accordance with IFRS standards?

Cash, Intangibles, Short term notes receivable Short term investments, Cash, Land Short term notes receivable, Accounts receivable, Cash Marketable securities, Land, Cash Correct! Current assets are presented in reverse order of liquidity under IFRS.

Which of the following is the correct order for listing current assets on the balance sheet?

Cash, accounts receivable, inventories, short-term investments, prepaid expenses Cash, short-term investments, inventories, prepaid expenses, accounts receivable Cash, short-term investments, accounts receivable, inventories, prepaid expenses Cash, accounts receivable, prepaid expenses, inventories, short-term investments

Which of the following is not a characteristic of relevance?

Confirmatory value Verifiability Predictive value Materiality Correct! Verifiability refers to the process or capability of being able to prove or verify that the data is free from error. This is one of the enhancing qualities of useful information.

Which of the following is considered property, plant, and equipment on a classified balance sheet?

Copyright Supplies Investment in Intel Corporation stock Land

In a classified balance sheet, how are assets usually classified?

Current assets; long-term investments; property, plant, and equipment; and common stock Current assets; long-term assets; property, plant, and equipment; and intangible assets Current assets; long-term investments; property, plant, and equipment; and intangible assets Current assets; long-term investments; tangible assets; and intangible assets

Which is an indicator of profitability?

Debt to total assets ratio Earnings per share Free cash flow Current ratio

Which one of the following is not an alternate means of expressing a ratio?

Dollar amount Percentage Rate Proportion

What are the accounting rules that have substantial authoritative support and are recognized as a general guide for financial reporting purposes in the U. S.?

General accounting principles Generally accepted accounting principles Generally accepted auditing principles Generally accepted accounting standards

What organization issues International Financial Reporting Standards?

International Auditing Standards Committee International Accounting Standards Board Financial Accounting Standards Board IFRS

Which of the following is not classified as a current asset?

Inventory Prepaid expenses Accounts receivable Patents

Which one of the following does not affect retained earnings?

Net income Issuance of common stock Net loss Dividends

Verifiability is an ingredient of Faithful Representation Relevance

No No Yes No No Yes Yes Yes Correct! Verifiability is an enhancing qualities that makes information more useful and is not one of the fundamental qualities.

Which of these measures is an evaluation of a company's ability to pay current liabilities?

None of these answer choices are correct Current ratio Both earnings per share and current ratio Earnings per share Correct! The current ratio measures liquidity. Higher current ratios indicate higher liquidity.

Under IFRS, what is the label used for common stock?

Ordinary shares Share common stock Common shares Share capital

Which of the following ratios measures the ability of the company to survive over a long period of time?

Profitability ratios Solvency ratios Current ratios Liquidity ratios

A company purchased a tract of land on which it expects to build a production plant on in approximately five years. During the five years before construction, the land will be idle. In what classification should the land be reported?

Property, plant, and equipment Land expense An intangible asset A long-term investment

What is the primary accounting standard-setting body in the United States?

Public Company Accounting Oversight Board (PCAOB) IFRS Financial Accounting Standards Board Securities and Exchange Commission

What is measured by current assets minus current liabilities?

Solvency Cash flow Working capital Profitability Correct! By definition, working capital is the difference between current assets and current liabilities.

Which statement is used by most corporations instead of the retained earnings statement?

Statement of owners' equity Statement of stockholders' equity Balance sheet Statement of cash flows Correct! Most companies use a statement of stockholders' equity instead of the retained earnings statement, since the statement of stockholders' equity reports the changes in all of the stockholders' accounts. A statement of retained earnings reports only the changes in retained earnings

What will vary between countries when statements are prepared using IFRS?

The monetary unit Faithful representation The number of shares outstanding Accounting time period Correct! The monetary unit will change depending on the currency in each country.

Consistency means that a company uses the same accounting principles and methods as the other companies in the same industry.

True False

Current assets are economic resources that are expected to be converted to cash or used up by the business within one year or the normal operating cycle, whichever is shorter.

True False

he current ratio is a liquidity ratio that is computed as current assets divided by current liabilities.

True False

The historical cost principle requires that if a company buys a building for $2,000,000 in 2012 that increases in value to $2,900,000 in 2014, the company will have to report the building at $2,000,000 in the balance sheet for 2014.

True False Correct! The historical cost principle requires that an asset continue to be reported at original cost over the life of the asset.

Going concern is the qualitative characteristic of accounting information that allows a statement reader to compare a company's performance from one year to the next.

True False Correct! The going concern assumption states that the business will remain in operation for the foreseeable future.

The monetary unit assumption assures that all important information needed by investors, creditors, and managers is contained in the financial statements.

True False Correct! The monetary unit assumption requires that only those things that can be expressed in monetary terms are included in the accounting records. Some important information needed by investors, creditors, and managers is not reported in the financial statements.

The correct order of presentation in a classified balance sheet for the following current assets is

accounts receivable, cash, prepaid insurance, inventories. cash, inventories, accounts receivable, prepaid insurance. cash, accounts receivable, inventories, prepaid insurance. inventories, cash, accounts receivable, prepaid insurance.

The following ratios are available for Leer Inc. and Stable Inc. Current Ratio Debt to Assets Ratio Earnings per Share Leer Inc. 2:1 75% $3.50 Stable Inc. 1.5:1 40% $2.75 Compared to Stable Inc., Leer Inc. has

higher liquidity, lower solvency, and higher profitability. higher liquidity and lower solvency, but profitability cannot be compared based on information provided. higher liquidity, higher solvency, but profitability cannot be compared based on information provided. lower liquidity, higher solvency, and higher profitablility. Correct! The current ratio measures liquidity and higher means the company is more liquid. The debt to assets ratio measures solvency and higher is not always better. We don't know how many outstanding shares each company has so we cannot compare profitability

Issuing new shares of common stock will

increase common stock. decrease retained earnings. decrease common stock. increase retained earnings.

Earnings per share is computed by dividing net income

less preferred stock dividends by the ending common shares outstanding. by the average common shares outstanding. by the ending common shares outstanding. less preferred stock dividends by the average common shares outstanding.