Acct 201 Final Multiple Choice

Compute the current ratio using the following data: \ A) 1.73 B) 1.8 C) 0.35 D) 0.55

...

The ratio that tells whether the entity can pay all its current liabilities if they come due immediately is the: A) acid-test ratio. B) accounts receivable turnover. C) inventory turnover. D) earnings per share.

...

Which of the following is a disadvantage of the corporate form of business organization? A) Governmental regulation at both the federal and state levels B) Difficulty in transferring ownership C) Unlimited liability D) Mutual agency

A) Governmental regulation at both the federal and state levels

Which of the following is used as the base in a vertical analysis of an income statement? A) Net sales B) Net income C) Gross sales D) Cash

A) Net sales

Where would income taxes paid appear on the statement of cash flows? A) Operating activities B) Investing activities C) Financing activities D) Noncash activities

A) Operating activities

Analyzing the statement of cash flows may help analysts determine the financial health of a company. Which of the following signs is not an indicator of a financially healthy company? A) The company's operations are a major use (not a source) of cash. B) The company's operations are a major source (not a use) of cash. C) The company's financing activities are not dominated by borrowing. D) The company's investing activities include more purchases than sales of long-term assets.

A) The company's operations are a major use (not a source) of cash

A corporation is formed when the incorporators obtain: A) a charter from the state. B) a board of directors. C) stock. D) officers.

A) a charter from the state.

Leonard Textiles sold used weaving equipment with a book value of $60,000 for $56,000. The indirect method used to prepare the Statement of Cash Flows will reflect: A) an addition of $56,000 in the investing activities section and an addition of $4,000 in the operating activities section. B) an addition of $56,000 in the investing activities section and a deduction of $4,000 in the operating activities section. C) an addition of $60,000 in the investing activities section and an addition of $4,000 in the operating activities section. D) an addition of $60,000 in the investing activities section and a deduction of $4,000 in the operating activities section.

A) an addition of $56,000 in the investing activities section and an addition of $4,000 in the operating activities section

Big League Corporation owns 500 shares of Small Time Company's common stock. Small Time has 100,000 shares of common stock outstanding. Big League Corporation will show the investment on their books as: A) an asset. B) an equity. C) a liability. D) other comprehensive income.

A) an asset.

The amount of owners' equity attributable to each share of stock is known as the: A) book value per share. B) market value per share. C) earnings per share. D) liquidation value per share.

A) book value per share.

A financial statement showing each item on the statement as a percentage of one key item on the statement, called the base, is referred to as: A) common-size statement. B) trend analysis. C) horizontal analysis. D) benchmarking.

A) common-size statement.

The entry to record the declaration and distribution of a stock dividend includes a: A) credit to Common Stock and a debit to Retained Earnings. B) debit to Stock Dividends Payable and a credit to Stock Dividends. C) debit to Stock Dividends Payable and a credit to Retained Earnings. D) debit to Retained Earnings and a credit to Stock Dividends Payable.

A) credit to Common Stock and a debit to Retained Earnings.

Acme Company owns 35% of Superior Company. Superior Company paid $35,000 cash dividends for the year. Acme Company's journal entry to record the dividends includes a: A) credit to Long-Term Investments for $12,250. B) credit to Long-Term Investments for $35,000. C) credit to Dividend Revenue for $12,250. D) credit to Dividend Revenue for $35,000.

A) credit to Long-Term Investments for $12,250.

If treasury stock is sold at a price greater than its reacquisition costs, the difference is: A) credited to Paid-in Capital from Treasury Stock Transactions. B) debited to Paid-in Capital from Treasury Stock Transactions. C) credited to Retained Earnings. D) debited to Retained Earnings.

A) credited to Paid-in Capital from Treasury Stock Transactions.

Carmel Corporation purchased 5% bonds for $42,000 on January 1, 2012. On July 1, 2012, Carmel received cash interest of $1,050. The journal entry to record the receipt of interest on July 1 would include a: A) debit to Cash $1,050. B) debit to Long-Term Investment in Bonds $42,000. C) credit to Interest Receivable $1,050. D) credit to Interest Receivable $42,000.

A) debit to Cash $1,050.

Acquisitions of treasury stock are reported on a Statement of Cash Flows as: A) financing activities. B) investing activities. C) operating activities. D) either investing activities or operating activities

A) financing activities.

Under the equity method, the Long-Term Investment account is debited when the: A) investee reports net income. B) investee reports net loss. C) investor receives a cash dividend. D) investment is sold

A) investee reports net income

Increases and decreases in the long-term assets available to a company are reported on the Statement of Cash Flows as: A) investing activities. B) financing activities. C) operating activities. D) both operating and investing activities.

A) investing activities.

Under the indirect method of preparing the Statement of Cash Flows, the starting point to determine net cash from operating activities is: A) net income. B) the ending cash balance. C) the beginning cash balance. D) sales.

A) net income.

Cash receipts from interest and dividends are classified as: A) operating activities. B) investing activities. C) financing activities. D) noncash activities.

A) operating activities.

The arbitrary amount assigned by a company to a share of its stock is the: A) par value. B) capital value. C) no-par value. D) total value.

A) par value

An increase in the number of authorized, issued and outstanding shares of stock coupled with a proportionate reduction in the stock's par value is a: A) stock split. B) stock dividend. C) cash dividend . D) deficit.

A) stock split.

If economic value added (EVA) is negative: A) stockholders' wealth has decreased. B) stockholders' wealth has increased. C) stockholders' wealth has stayed the same. D) stockholders' earnings per share have increased.

A) stockholders' wealth has decreased.

Cash received from customers is reported on the Statement of Cash Flows: A) under operating activities. B) under investing activities. C) under financing activities. D) in the schedule of noncash investing and financing activities.

A) under operating activities.

Creditors analyze the Statement of Cash Flows to determine: A) whether the company can pay interest on its debt. B) total interest earned during the period. C) the quality of the company's earnings. D) all of the above.

A) whether the company can pay interest on its debt.

Davis Company purchased 30% of the outstanding shares of Ocean Corporation on January 1 at a cost of $580,000. Ocean Corporation reported net income of $95,000 and paid total dividends of $25,000 for the year. At the end of the year, Ocean shares had a current market value of $590,000. After all necessary adjusting entries are made for the year, the balance in Davis Company's Long-Term Investment account will be: A) $601,000. B) $580,000. C) $675,000. D) $650,000.

Answer: A Calculations = $580,000 + (($95,000 - $25,000) * .3) LO: 8-3

During the year, New Liberty Corporation's treasury stock increased $30,000 from a cash purchase, cash dividends paid totaled $44,000 and the company reported net income of $220.000. Net cash used by financing activities is: A) $74,000. B) $14,000. C) $146,000. D) $206,000.

Answer: A Calculations = Cash used by financing activities = $30,000 + $44,000 LO: 12-3

On January 1, 2012, Cashew Corporation purchased 70,000 of the 210,000 shares of outstanding stock of Peanut Company for $550,000. Net income reported by Peanut Company for 2012 was $450,000. Dividends paid by Peanut Company during 2012 were $150,000. The long-term investment will appear on Cashew Corporation's December 31, 2012 balance sheet in the amount of: A) $650,000. B) $450,000. C) $850,000. D) $700,000.

Answer: A Calculations: $550,000 + (($450,000 - $150,000) * (70,000/210,000)) LO: 8-3

Beginning inventory was $28,000 and ending inventory was $22,000. Cost of goods sold was $190,000 and net sales were $360,000. Inventory turnover for the year was closest to: A) 7.6. B) 8.64. C) 6.79. D) 14.4.

Answer: A Calculations: 190,000 (CoGS)/(28,000 (Beginning inventory) + 22,000 (Ending inventory))/2 = 7.6 LO: 13.5

Wall Corporation issued 5,000 shares of its $1 par value common stock as a stock dividend when the shares were selling for $10 per share. At the time of the dividend, Wall had 100,000 shares of common stock outstanding. These shares were originally issued for $5 per share. The entry to record the stock dividend includes a debit to Retained Earnings for: A) $50,000. B) $5,000. C) $100,000. D) $105,000.

Answer: A Calculations: Small stock dividend uses market value 5,000 x 10 = 50,000 LO: 10.4

Cost of goods sold for the current year was $170,000. Last year's cost of goods sold was $190,000. The percentage change and direction of change for the current year was a: A) 11.7% increase. B) 10.5% decrease. C) 10.5% increase. D) 11.7% decrease.

Answer: B Calculations: (170,000 (Current year) - 190,000 (Last year))/190,000 (Last year) -20,000/190,000 = 10.5% decrease LO: 13.1

When 100 shares of $10 par value Common Stock are issued at $53 per share, Paid-in Capital in Excess of Par value - Common will: A) increase $1,000. B) increase $4,300. C) increase $5,300. D) not be affected.

Answer: B Calculations: 100 x (53-10) = 4,300 LO: 10.2

Trudy Corporation has $10 par value Common Stock with 1,000,000 shares authorized, and a value of $7,000,000 before purchasing 3,000 shares of common stock. The resulting number of common shares issued and outstanding is: A) 750,000 shares issued and 697,000 shares outstanding. B) 700,000 shares issued and 697,000 shares outstanding. C) 750,000 shares issued and 747,000 shares outstanding. D) 700,000 shares issued and 747,000 shares outstanding.

Answer: B Calculations: 7,000,000 value/10 par = 700,000 shares issued 700,000 shares issued - 3,000 treasury = 697,000 shares outstanding LO: 10.3

Gertrudis Corporation has $10 par value Common Stock and has 1,000,000 shares authorized, 750,000 shares issued. The entry to record Gertrudis' purchase of 10,000 shares of common stock at $15 per share is a: A) credit to Paid-in Capital in Excess of Par Value-Common for $65,000. B) debit to Treasury Stock for $150,000. C) credit to Common Stock for $130,000. D) debit to Retained Earnings for $65,000.

Answer: B Calculations: Treasury Stock (10,000 shares x 15) 150,000 Cash 150,000 LO: 10.3

Total revenues and net income for 2011 for Clam Corporation is $3,500,000 and $280,000, respectively. Clam Corporation has had 400,000 common shares of stock outstanding for all of 2011. The selling price of a share of Clampton common stock on December 31, 2011 is $18. Earnings per share for 2011 is: A) $8.75. B) $12.50. C) $0.70. D) $35.00.

Answer: C Calculations: 280,000 (Net income)/400,000 (Shares of common stock) = .70 LO: 13.5

The entry to record the issuance of 1,000 shares of $1 par value common stock at $10 per share includes a: A) credit to Common Stock for $10,000. B) debit to Common Stock for $1,000. C) credit to Paid-in Capital in Excess of Par Value-Common for $9,000. D) debit to Paid-in Capital in Excess of Par Value-Common for $1,000.

Answer: C Calculations: Common stock at par value = 1000 * 1 = 1,000 Paid-in-capital in excess of par value = 1000 * (10-1) = 9,000 LO: 10.2

Frost Corporation issues 100 shares of no-par common stock for $10 per share. The stock has a stated value of $1 per share. This transaction includes a credit to Common Stock for: A) $100 and a Gain on Issue of Common Stock for $900. B) $100 and a credit to Retained Earnings for $900. C) $100 and a credit to Paid-in Capital in Excess of Stated Value for $900. D) $1,000 and no entry to Paid-in Capital.

Answer: C Calculations: Common stock at stated value = 100 * 1=100 Paid-in-capital in excess of stated value = 100 * (10-1) = 900 LO: 10.2

Nantucket Company owns a 30% interest in the stock of Franklin Corporation. During the year, Nantucket debited the Investment account for $22,500 and credited the account for $15,000. Based on this information, Franklin must have paid dividends of: A) $7,000. B) $15,000. C) $25,000. D) $50,000.

Answer: D Calculation: $15,000/.3 LO: 8-3

Tech Support, Inc. issued common stock for $470,000 cash in 2012. The company paid cash dividends of $50,000 and purchased treasury stock at a cost of $20,000. The financing section of the statement of cash flows will report net cash inflows of: A) $540,000. B) $500,000. C) $440,000. D) $400,000.

Answer: D Calculations = $470,000 - $50,000 - $20,000 LO: 12-2

On January 1, 2012, Plymouth Company purchases $100,000, 6% bonds at a price of 90.4 and a maturity date of January 1, 2016. Interest is paid semiannually, on January 1 and July 1. Plymouth Company has a calendar year end. The entry to record the purchase of the bond investment on January 1, 2012, includes a: A) debit to Short-Term Investment in Bonds for $100,000. B) debit to Short-Term Investment in Bonds for$ 90,400. C) debit to Long-Term Investment in Bonds for $100,000. D) debit to Long-Term Investment in Bonds for$ 90,400

Answer: D Calculations: $100,000 * .904 LO: 8-1

Given the following data: In a vertical analysis, cash is expressed as: A) 830%. B) 1435%. C) 12%. D) 7%.

Answer: D Calculations: 115,000 (Cash)/1,650,000 (Total assets) = 6.9% rounded to 7% LO: 13.2

A corporation purchased 10,000 shares of its own $20 par value common stock for $30 per share. The effect on total stockholders' equity is: A) $200,000 increase. B) $200,000 decrease. C) $300,000 increase. D) $300,000 decrease.

Answer: D Calculations: 30 x 10,000 = 300,000 LO: 10.3

Depots Clothing Store had an accounts receivable balance of $420,000 at the beginning of the year and a year-end balance of $510,000. Net sales for the year totaled $2,100,000. The average collection period of the receivables was: A) 162 days. B) 41 days. C) 51 days. D) 81 days.

Answer: D Calculations: Day's sales = $2,100,000/365 days = $5,753 Average days = ($420,000 + $510,000)/$5,753 = 80.82 or 81 days LO: 13-5

Dole Company, the subsidiary company, borrowed $80,000 from Anderson Company, the parent company, on a note payable during the year. Before the consolidation entries were made, the balances in Anderson Company's Notes Receivable and Notes Payable accounts were $180,000 and $275,000, respectively. A consolidated balance sheet shows: A) Notes Receivable of $180,000 and Notes Payable of $275,000. B) Notes Receivable of $260,000 and Notes Payable of $275,000. C) Notes Receivable of $260,000 and Notes Payable of $355,000. D) Notes Receivable of $100,000 and Notes Payable of $275,000.

Answer: D Calculations: Only Notes Rec. from the parent eliminated = $180,000 - $80,000 LO: 8-4

The Allowance to Adjust Investment to Market account has a current credit balance of $892. Available-for-sale investments with a cost of $17,000 have a current market value of $18,500. The adjusting entry will require a: A) credit to Allowance to Adjust Investments to Market for $608. B) credit to Allowance to Adjust Investments to Market for $2,392. C) debit to Allowance to Adjust Investments to Market for $608. D) debit to Allowance to Adjust Investments to Market for $2,392.

Answer: D LO: 8-2 Calculation = Allowance debit balance = ($18,500 - $17,000) + (-$892)

Kelsey Company owns 30% interest in the stock of David Corporation. During the year, David pays $25,000 in dividends, and reports $100,000 in net income. Kelsey Company's investment in David will increase by: A) $30,000. B) $25,000. C) $24,000. D) $22,500.

Answer: D LO: 8-3 Calculation = .3 * ($100,000 - $25,000)

A company's balance in its land account, which represented one piece of land, was $100,000. During the year, the piece of land was sold for $165,000. The amount reported in the investing activities section of the Statement of Cash Flows is: A) $100,000. B) $165,000. C) $65,000. D) none of the above.

B) $165,000.

Ace Company purchased 1,000 shares of Nott Company at $40 per share. Ace received an additional 250 shares from Nott Company as a stock dividend. After receiving the stock dividend, the total value of the investment in Nott and cost per share of Nott, respectively is: A) $50,000 and $40. B) $40,000 and $32. C) $50,000 and $32. D) $40,000 and $40.

B) $40,000 and $32.

Which of the following statements is true? A) A positive EVA suggests a decrease in stockholder wealth. B) A positive EVA suggests an increase in stockholder wealth. C) A positive EVA suggests no change in stockholder wealth. D) EVA has no relationship to in stockholder wealth.

B) A positive EVA suggests an increase in stockholder wealth.

Which of the following groups of ratios measure a company's ability to pay its current liabilities? A) Current ratio, acid-test ratio and the times-interest-earned ratio B) Current ratio and acid-test ratio C) Current ratio and times-interest-earned D) Current ration and debt ratio

B) Current ratio and acid-test ratio

Which of the following is not an advantage of forming a corporation as compared to organizing as a partnership or proprietorship? A) Ease of transferring ownership B) Limited taxation C) Limited liability of stockholders D) Corporation is separate legal entity distinct from its owners

B) Limited taxation

When preparing the statement of cash flows using the indirect method, which statement is false? A) Gains on the sale of long-term assets are subtracted from net income. B) Losses on the sale of long-term assets are subtracted from net income. C) Depreciation expense is added to net income. D) Increases in current liabilities are added to net income.

B) Losses on the sale of long-term assets are subtracted from net income.

A measure of a company's ability to collect cash from credit customers is the: A) acid-test ratio. B) accounts receivable turnover. C) inventory turnover. D) earnings per share.

B) accounts receivable turnover.

Salem, Inc. uses the indirect method to prepare its statement of cash flows. Salem's Accumulated Depreciation-Trucks account increased during the period. Salem did not purchase or sell equipment during the period. The increase in Accumulated Depreciation-Trucks is: A) subtracted from net income to determine net cash provided by operating activities. B) added to net income to determine net cash provided by operating activities. C) shown as a cash outflow on the investing activities section. D) shown as a cash outflow on the financing activities section.

B) added to net income to determine net cash provided by operating activities.

On January 1, 2012, Winston Company purchased 6% bonds for $50,000 cash. Interest is payable semiannually on July 1 and January 1. The entry to record the July 1 semiannual interest payment would include a: A) debit to Interest Receivable for $1,500. B) credit to Interest Revenue for $1,500. C) credit to Interest Revenue for $3,000. D) debit to Interest Receivable for $3,000.

B) credit to Interest Revenue for $1,500.

Perdue Company had the following transactions pertaining to stock investments: - February 1, Purchased 3,000 shares of Hudson Company (10% ownership) at the market price of $17 per share. - June 1, Received cash dividends of $6,000 on Hudson Company stock. - October 1, Sold 3,000 shares of Hudson stock for $54,000. The entry to record the sale of the stock includes a: A) debit to Long-Term Investment for $51,000. B) credit to Long-Term Investment for $51,000. C) debit to Gain on Sale of Investment $3,000. D) debit to Loss on Sale of Investment $3,000.

B) credit to Long-Term Investment for $51,000.

If $350,000 of bonds are issued during the year, but $150,000 of old bonds are retired during the year, the statement of cash flows will show a(n): A) net gain on retirement of bonds of $200,000. B) increase in cash of $350,000 and a decrease in cash of $150,000. C) net increase in cash of $200,000. D) net decrease in cash of $200,000.

B) increase in cash of $350,000 and a decrease in cash of $150,000.

The purchase of held-to-maturity securities is reported on a Statement of Cash Flows as: A) financing activities. B) investing activities. C) operating activities. D) none of the above. Held-to-maturity securities is not reported on a statement of cash flows.

B) investing activities.

Horizontal analysis focuses on: A) the balance sheet only. B) percentage changes in comparative financial statements. C) the change in key financial statement ratios over a certain time frame. D) the changes in individual financial statement amounts as a percentage of some related total.

B) percentage changes in comparative financial statements.

The Allowance to Adjust Investment to Market has a debit balance. Therefore: A) the Allowance account is subtracted from the carrying amount. B) the Allowance account is added to the carrying amount. C) the Allowance account is neither added nor subtracted from the carrying amount. D) the Allowance account is added to Unrealized Gain or Loss.

B) the Allowance account is added to the carrying amount.

A corporation's own stock that it has issued and later reacquired is called: A) authorized stock. B) treasury stock. C) issued stock. D) outstanding stock.

B) treasury stock.

A company sold an unused building for $177,000. The building's book value on the date of sale was $172,000. How will this transaction appear in a Statement of Cash Flows prepared using the indirect method? A) A $172,000 increase in investing activities and $5,000 increase in operating activities B) A $177,000 increase in investing activities and $5,000 increase in operating activities C) A $177,000 increase in investing activities and $5,000 decrease in operating activities D) A $172,000 increase in investing activities and $5,000 decrease in operating activities

C) A $177,000 increase in investing activities and $5,000 decrease in operating activities

Which statement is false? A) An increase in a non-cash current asset decreases cash. B) A decrease in a non-cash current asset increases cash. C) A decrease in a current liability increases cash. D) An increase in a current liability increases cash.

C) A decrease in a current liability increases cash

The balance in the Unrealized Gains and Losses on Available-for-sale Securities account appear in which financial statement? A) The balance sheet as a contra asset account. B) The income statement under Other Expenses and Losses. C) The balance sheet, as part of the stockholders' equity section. D) Not shown on the financial statements until the securities are sold.

C) The balance sheet, as part of the stockholders' equity section.

If one company owns more than 50% of the common stock of another company: A) the equity method should be used to account for the investment. B) a partnership exists. C) a parent-subsidiary relationship exists. D) the company whose stock is owned must be liquidated.

C) a parent-subsidiary relationship exists.

On a Statement of Cash Flows prepared using the indirect method, an increase in Accounts Payable during the period is: A) deducted from net income to determine net cash provided by operating activities. B) added to net income to determine net cash provided by financing activities. C) added to net income to determine net cash provided by operating activities. D) deducted from net income to determine net cash provided by financing activities.

C) added to net income to determine net cash provided by operating activities.

The group elected by the stockholders to set policy for a corporation and to appoint its officers is the: A) incorporators. B) directors. C) board of directors. D) audit committee

C) board of directors.

When a company issues its stock, it: A) can recognize a gain, but not a loss. B) can recognize a loss, but not a gain. C) cannot recognize a gain or a loss. D) can recognize a gain or a loss.

C) cannot recognize a gain or a loss.

Unrealized gains and losses from available-for-sale investments arise from: A) the purchase of an investment. B) the sale of the investment. C) changes in the market value of the investment. D) management's decision to adjust the value of the investment.

C) changes in the market value of the investment

The entry to record common stock issued at its par value includes a: A) debit to the Common Stock account. B) debit to Retained Earnings. C) credit to the Common Stock account. D) credit to Retained Earnings.

C) credit to the Common Stock account.

The number of shares of stocks outstanding is the same as the number of stock that is: A) issued to the shareholders. B) authorized by the board of directors. C) currently in the hands of the stockholders. D) ready to be sold to shareholders.

C) currently in the hands of the stockholders.

On a Statement of Cash Flows prepared using the indirect method, an increase in Accounts Receivable during the period is: A) added to net income to determine net cash provided by investing activities. B) deducted from net income to determine net cash provided by investing activities. C) deducted from net income to determine net cash provided by operating activities. D) added to net income to determine net cash provided by operating activities.

C) deducted from net income to determine net cash provided by operating activities.

Increases and decreases in the long-term liability accounts are reported on the Statement of Cash Flows as : A) investing activities. B) operating activities. C) financing activities. D) both operating and investing activities.

C) financing activities.

The Unrealized Gain or the Unrealized Loss Account appears: A) in Other expense. B) in Other comprehensive income. C) in Other comprehensive income and Accumulated other comprehensive income. D) in Other revenue.

C) in Other comprehensive income and Accumulated other comprehensive income.

The receipt of interest on loans is reported on a Statement of Cash Flows under: A) financing activities. B) investing activities. C) operating activities. D) none of these categories, because interest received on loans is not reported on a Statement of Cash Flows.

C) operating activities.

Horizontal analysis evaluates financial data: A) for one year. B) for the future. C) over a period of time. D) none of the above.

C) over a period of time

Of the items listed below, the one most helpful in the comparison of different size companies is: A) comparison of their net incomes. B) horizontal analysis. C) preparation of common-size financial statements. D) comparison of their working capital balances.

C) preparation of common-size financial statements.

Under the indirect method of preparing a Statement of Cash Flows, dividends paid during the year are: A) added to net income. B) reflected in the investing activities section. C) reflected in the financing activities section. D) deducted from net income.

C) reflected in the financing activities section.

A company wishing to improve its acid-test or quick ratio should: A) purchase additional inventory for cash. B) purchase additional inventory on account. C) sell inventory on account. D) do all of the above.

C) sell inventory on account.

If an investor owns less than 20% of the common stock of another company as a long-term investment: A) the equity method of accounting should be used for the investment. B) no dividends are expected to be received. C) the investor usually has little or no influence on the investee. D) the investor has significant influence on the investee.

C) the investor usually has little or no influence on the investee.

Shareholder rights may include: A) the right to an equal share of dividends. B) the right to vote for managers of the corporation. C) the right to proportionate share of assets in the event of a liquidation. D) all of the above.

C) the right to proportionate share of assets in the event of a liquidation.

Which of the following ratios do not directly relate to the analysis of a given stock as an investment? A) Earnings per share B) Dividend yield C) Book value per share of common stock D) Current ratio

D) Current ratio

Limited liability of a corporation means that: A) shareholders are not responsible for the decisions of management. B) the corporation is not required to earn net income. C) the corporation is not required to pay dividends. D) a shareholders' potential loss is limited to their investment in the corporation.

D) a shareholders' potential loss is limited to their investment in the corporation.

Under the indirect method of preparing a statement of cash flows, amortization expense for the current period is: A) added in the investing activities section. B) subtracted in the investing activities section. C) added in the financing activities section. D) added in the operating activities section.

D) added in the operating activities section.

Rocky Company uses the indirect method to prepare its Statement of Cash Flows. Rocky's Accumulated Depreciation-Equipment account increased during the period. Rocky did not purchase or sell equipment during the period. The increase in Accumulated Depreciation-Equipment is: A) deducted from net income to determine net cash provided by operating activities. B) reported in the investing activities section. C) not reported. D) added to net income to determine net cash provided by operating activities.

D) added to net income to determine net cash provided by operating activities.

Red flags in financial statement analysis can include: A) a slowdown in inventory turnover. B) quick or acid test ratio declining. C) debt ratio higher than average. D) all of the above.

D) all of the above.

If ABC Corporation's debt ratio is higher than its major competitors, ABC may: A) purchase treasury stock. B) sell treasury stock. C) invest in another company. D) be unable to pay its debts.

D) be unable to pay its debts.

The market value of an available-for-sale security has decreased from the last carrying value. The journal entry to record this decrease will include: A) a debit to the Allowance to Adjust Investment to Market. B) a credit to the Allowance to Adjust Investment to Market. C) a debit to the Unrealized Loss on Investment. D) both B and C.

D) both B and C

On January 1, 2012, Plymouth Company purchases $100,000, 6% bonds at a price of 90.4 and a maturity date of January 1, 2016. Interest is paid semiannually, on January 1 and July 1. Plymouth Company has a calendar year end. The entry to record the purchase of the bond investment on January 1, 2012, would include a: A) debit to Short-Term Investment in Bonds for $100,000. B) debit to Short-Term Investment in Bonds for$ 90,400. C) debit to Long-Term Investment in Bonds for $100,000. D) debit to Long-Term Investment in Bonds for$ 90,400.

D) debit to Long-Term Investment in Bonds for$ 90,400

On the balance sheet, available-for-sale investments in stock are reported as: A) long-term assets. B) current assets. C) both long-term assets and stockholders' equity. D) either current assets or long-term assets, depending on when the investment is expected to be sold.

D) either current assets or long-term assets, depending on when the investment is expected to be sold.

A vertical analysis is primarily concerned with: A) the change in key financial statement ratios over a specified period of time. B) the dollar amount of the change in various financial statement amounts from year to year. C) percentage changes in the balances shown in comparative financial statements. D) individual financial statement items expressed as a percentage of a base (which represents 100%).

D) individual financial statement items expressed as a percentage of a base (which represents 100%).

Receiving a stock dividend from an available-for-sale investment requires the following journal entry: A) a debit to Cash and a credit to Dividend Revenue. B) a debit to Cash and a credit to Unrealized Gain on Investments. C) a debit to Unrealized Gain on Investment and a credit to Dividend Revenue. D) no journal entry. Investor makes a memorandum entry in the accounting records

D) no journal entry. Investor makes a memorandum entry in the accounting records

Hergert Company declared a 2-for-1 stock split on its 200,000 shares of $10 par value common stock. As a result of this transaction: A) Paid-in Capital increases by $2,000. B) Common Stock increases to $4,000,000. C) both A and B are correct. D) none of these answers is correct.

D) none of these answers is correct.

To compute operating income (profit) percentage, divide: A) sales by cost of goods sold. B) gross profit by net sales. C) net income by stockholders' equity. D) operating income by net sales.

D) operating income by net sales

The ratio that measures a company's success in using its assets to earn income for the entities that finance the business is the: A) debt ratio. B) leverage. C) times-interest-earned ratio. D) rate of return on total assets.

D) rate of return on total assets.

The amount of stockholders' equity that the corporation has earned through profitable operation of the business and has not given back to stockholders is: A) outstanding stock. B) legal capital. C) treasury stock. D) retained earnings.

D) retained earnings.

Paid-in capital is the amount of stockholders' equity that the: A) corporation has earned through profitable operations. B) stockholders have contributed to the corporation, less the preferred stock. C) stockholders have contributed to the corporation, less the amount of stockholders' equity that the corporation has given back to the stockholders. D) stockholders have contributed to the corporation.

D) stockholders have contributed to the corporation.

On the balance sheet, Available-for-sale investments in stock are reported at: A) their cost. B) the lower-of-cost-or-market. C) their amortized cost. D) their current market value.

D) their current market value.

Expressing cash and cash equivalents as a percentage of total assets is an example of: A) horizontal analysis. B) economic value added. C) ratio analysis. D) vertical analysis.

D) vertical analysis.