ACG quiz 2
A corporation reported net income of $28,000; net sales $400,000; beginning common shares outstanding of 12,000 and ending common shares outstanding of 20,000. There were no preferred dividends. What is its earnings per share (rounded to two decimal places)? A: $1.75 B: $0.57 C: $1.88 D: $1.40 E: $0.07
A: $1.75 Earnings per share = (Net income less dividends to preferred shareholders)/Average number of outstanding shares of common stockEarnings per share = ($28,000 - 0)/[(12,000 share + 20,000 share)/2]Earnings per share = $28,000/16,000 share = $1.75 per share
For the current year, a company reported a net cash inflow from operating activities of $220,000. It also reported the following: It issued $20,000 of common stock It paid a $10,000 note payable It paid $55,000 for equipment It paid $15,000 as dividends What is the company's free cash flow? A: $150,000 B: $225,000 C: $300,000 D: $160,000 E: $170,000
A: $150,000 Free cash flow = net cash from operating activities minus capital expenditures minus cash dividends paidFree cash flow = $220,000 - 55,000 - 15,000 = $150,000
For a given company, total assets are $150,000, current liabilities are $10,000, long-term liabilities are $20,000, common stock is $50,000, and retained earnings is $70,000. How much is total stockholders' equity? A: 120000 B: 140000 C: 110000 D: 70000 E: 150000
A: 120000 Stockholders equity = common stock + retained earnings SE = (50000) + (70000) = 120000 or assets = liabilities + equity 150000 = 10000 + 20000 + x
What is measured by current assets minus current liabilities? A: Working capital B: Profitability C:Cash flow D:Current ratio E:Solvency
A: Working capital By definition, working capital is the difference between current assets and current liabilities. It is a measure of liquidity.
The operating cycle of a company is the average time that is required to: A: purchase inventory, sell it on account, and collect the cash from customers. B: purchase raw materials and use it to produce inventory. C: receive financing from owners and pay owners a dividend. D: buy fixed assets and depreciate them. E:sell inventory to customers and replace it with new inventory.
A: purchase inventory, sell it on account, and collect the cash from customers The operating cycle of a company is the average time required to purchase inventory, sell it on account to customers, and collect the cash from customers.
what are generally accepted accounting principles? A: set of accounting rules and practices that have authoritative supports B: usually established by the IRS C: fundamental truths that can be derived from the laws of nature D: rules imposed by the IRS E: guidelines used to resolve ethical dilemmas
A: set of accounting rules and practices that have authoritative supports
A corporation has accounts and balances: Accounts payable$ 40,000 Investments in bonds 20,000 Accounts receivable 50,000 Land 130,000 Accumulated depreciation 50,000 Notes payable 300,000 Buildings 500,000 Patents 20,000 Cash 100,000 Prepaid insurance 30,000 Common stock 690,000 Retained earnings 150,000 Equipment 160,000 Trademarks 40,000 Inventory 200,000 The land is used as a parking lot. The bonds are expected to be held long-term. What are its (i) current assets and (ii) property, plant & equipment? A: (i) $400,000 and (ii) $760,000 B: (i) $380,000 and (ii) $740,000 C: (i) $420,000 and (ii) $790,000 D: None of these E: (i) $440,000 and (ii) $840,000
B: (i) $380,000 and (ii) $740,000 Classified balance sheets partition a company's assets into four categories: (i) current assets (e.g., cash, accounts receivable, inventory), (ii) long-term investments (e.g., investments in securities other companies, such as stocks and bonds, expected to be held more than one year), (iii) property, plant, and equipment (e.g., buildings, land, equipment, delivery vehicles, and furniture minus accumulated depreciation)), and (iv) intangibles (e.g., goodwill, patents, copyrights, trademarks).Rose's current assets include accounts receivable, cash, inventory, and prepaid insurance. Current assets = 50,000 + 100,000 + 200,000 + 30,000 = 380,000 Rose's property, plant, and equipment includes buildings, equipment and land minus accumulated depreciation. Property, plant and equipment = 500,000 + 160,000 + 130,000 - 50,000 = 740,000
A corporation has current assets of $3,150,000, current liabilities of $2,250,000, total assets of $10,000,000 and total liabilities of $6,000,000. If it pays $500,000 of its accounts payable what will its current ratio be? (rounded) A: 1.80 B: 1.51 C: 2.10 D: 1.45 E: 1.40
B: 1.51 Current ratio equals current assets divided by current liabilities. Accounts payable is a current liability. Paying accounts payable reduces cash (i.e., current assets) and reduces accounts payable (i.e., current liabilities). Current ratio = ($3,150,000 − $500,000) ÷ ($2,250,000 − $500,000) Current ratio = 1.514 (i.e., 1.51 to 1 or 1.51:1)
a corporation reports the following balances and amounts accounts payable: 50000 cash: 100000 accounts receivable : 35000 net income: 40000 avg # of common shares : 15000 salaries & wages payable : 40000 avg current liabilities : 225000 stockholders equity: 200000 avg total assets: 600000 current assets: 300000 avg total liabilities: 320000 current liabilities: 250000 dividends to preferred: 5000 determine its earnings per share A: 1.80 B; 2.33 C: 1.30 D; 1.50 E: 4
B: 2.33 net income - dividends divided by avg number shares outstanding (40000 - 5000) / 15000 = 2.33
Which of the following is not an example of an intangible asset? A: Patents B: Accounts receivable C: Trademarks D: Copyrights E: Goodwill
B: Accounts receivable Most assets have physical substance (e.g., cash, inventory, equipment). Others do not, and certain assets that lack physical substance are classified as intangible assets. Be careful because accounts receivable can be described as lacking physical substance but accounts receivable are classified as current assets probably because of their liquidity whereas intangible assets tend to be less liquid and more likely to be held long-term.
A company purchased bonds issued by another corporation. The company expects to hold the bonds for more than one year. On its classified balance sheet, the company should report the bonds as A: a current asset. B: a long-term investment. C: property, plant, and equipment. D: stockholders' equity. E: an intangible asset.
B: a long-term investment Classified balance sheets partition a company's assets into four categories: (i) current assets (e.g., cash, accounts receivable, inventory), (ii) long-term investments (e.g., investments in other companies' stocks and bonds expected to be held more than one year and assets [such as land and buildings] not currently being used in its operating activities), (iii) property, plant, and equipment (e.g., buildings, land, equipment, accumulated depreciation)), and (iv) intangibles (e.g., goodwill, patents, copyrights, trademarks)
The following ratios are available for Alpha Inc. and Omega Inc. Alpha Inc - 1.8 current ratio - 1.5 earnings per share Omega Inc - 1.6 current ratio - 1 earnings per share Compared to Alpha Inc, Omega Inc has A; higher solvency B: lower liquidity C: lower solvency D: lower profitability E: higher liquidity
B: lower liquidity current assets dividend by current liabilities current ratio measures liquidity. higher current ratio means the company is more liquid which is good Dont compare EPS of one company to another bc its misleading
Earnings per share is a A: liquidity ratio. B: profitability ratio. C: solvency ratio. D: trending ratio. E: current ratio.
B: profitability ratio. Financial accounting ratios are commonly categorized into three categories, including profitability ratios, liquidity ratios, and solvency ratios. Profitability ratios measure the income or operating success of a company for a given period of time. An example of a profitability ratio is earnings per share.
which of the following is a financial ration classification that measures the ability of the company to survive over a long period of time? A: analysis ratios B: solvency ratios C: liquidity ratios D: financial ratios E: profitability ratios
B: solvency ratios profitability = operating success for given period of time liquidity: short term ability to pay debts solvency: ability to survive over a long period of time
what is measured by current assets minus current liabilities A: solvency B: working capital C: cash flow D: current ratio E: profitability
B: working capital working capital = current assets - current liabilities
A corporation reports the following balances and amounts: Accounts payable, $60,000 Cash provided by operations, $150,000 Accounts receivable, $25,000 Net income, $50,000 Average number of common shares, 12,000 Salaries and wages payable, $45,000 Average current liabilities, $220,000 Stockholders' equity, $200,000 Average total assets, $500,000 Current assets, $200,000 Average total liabilities, $320,000 Current liabilities, $150,000 Dividends paid to preferred shareholders, $2,000 Determine its earnings per share? A: $2.33 B: $1.80 C: $4.00 D: $1.50 E: $1.20
C: $4.00 Earnings per share equals net income earned on each share of common stock. Earnings per share equals net income minus preferred dividends divided by the average number of shares outstanding. This company has no preferred dividends.Earnings per share = ($50,000 - 2,000)/12,000 shares = $4.00/share.
a corporation has current assets of 3010000, current liabilities of 2150000, total assets of 10000000 and total liabilities of 6000000. it if pays 200000 of its accounts payable what will its current ratio be (rounded) A: 1.51 B: 1.40 C: 1.44 D: 2.27 E: 1.54
C: 1.44 current ratio = current assets divided by current liabilities (3010000 -200000)/ (2150000 - 200000) = 1.44
a certain corporation reports the following balances and amounts. accounts payable: 125000 accounts receivable: 140000 investments in bonds: 80000 notes payable due 5 yrs: 200000 accumulated depreciation: 60000 notes payable due 8 months: 56000 buildings: 400000 prepaid insurance: 82000 cash: 100000 salaries and wages payable: 8000 common stock: 300000 retained earnings: 193000 inventory: 200000 trademarks: 20000 how much is its working capital? A: 341000 B: 322000 C: 333000 D: 389000 E: 331000
C: 333000 working capital = current assets - current liabilities current assets = 140000 + 100000 + 200000 + 2000 + 80000 = 522000 current liabilities: 125000 + 56000 + 8000 = 189000 working capital = 522000 - 189000 = 333000
-Faithful representation means that information accurately depicts what really happened. Which of the following is a quality associated with faithful representation? A: Comparability B: Consistency C: Complete D: Materiality E: All of these
C: Complete To be useful for decision-making, accounting information needs to possess certain fundamental qualities: (i) relevance and (ii) faithful representation. Information is considered to be relevant if it provides information that has predictive value, that is, it helps provide accurate expectations about he future, and has confirmatory value (i.e., it confirms or corrects prior expectations). Materiality is another aspect of relevance. An item of information is material if its size makes it likely to influence decision-making. Faithful representation means information accurately depicts what actually happened. To provide a faithful representation, information must be complete (i.e., nothing important omitted), neutral (i.e., the information s not biased toward one position of another), and free from error. In addition to qualities of useful information, there are several enhancing qualities of useful information. These include comparability, consistency, verifiability, timeliness, and understandability.
it is assumed that the activities of a company can be distinguished from the activities of its owners. this assumption is known as the A: hazard assumption B: periodicity assumption C: economic entity assumption D: monetary unit assumption E: going concern assumption
C: economic entity assumption means every economic entity can be separately identified and accounted for
issuing new shares of common stock will A: decrease retained earnings B: decrease common stock C: increase common stock D: increase retained earnings E: increase liabilities
C: increase common stock issuing common stock increases common stock account, it doesnt affect the retained earnings
Issuing new shares of common stock will A: increase liabilities. B: increase retained earnings. C: increase common stock. D: decrease common stock. E: decrease retained earnings.
C: increase common stock. The issuance of common stock increases the common stock account; it does not affect retained earnings.
Working capital is a measure of A: solvency. B: profitability. C: liquidity. D: consistency. E: equity.
C: liquidity. Liquidity refers to a company's short-term ability to pay its maturing obligations and to meet unexpected needs for cash. Examples of measures of liquidity include the current ratio and working capital.
which of the following does not affect the companys current ratio? A: issue a short term note in exchange for cash B: pay a dividend to shareholders C: paying the next months rent one month in advance D; sell services to customers in exchange for cash E: use excess cash to buy long term investments
C: paying the next months rent one month in advance current ratio = current assets divided by current liabilities paying next months rent in advance decreases cash and increase prepaid rent. they are both current assets to increasing one and decreasing the other doesnt affect the total current assets or ratio
Based on the following data (in dollars), what is the working capital? Accounts payable$ 64,000 Notes payable (due in 6 months) 56,000 Accounts receivable 114,000 Notes payable (due in 2 years) 200,000 Cash 60,000 Patents 100,000 Equipment 300,000 Prepaid insurance 2,000 Inventory 138,000 Short-term investments 80,000 Investments in bonds 160,000 A; $322,000 B: $316,000 C: $348,000 D: $274,000 E: $360,000
D: $274,000 Working capital = current assets - current liabilities Current assets = cash and assets expected to be converted into cash or consumed in one year or operating cycle, whichever is longer. Current assets = Cash + Accounts receivable + inventory + short-term investments + prepaid insurance Current assets = 60,000 + 114,000 + 138,000 + 80,000 + 2,000 = 394,000 Current liabilities = liabilities to be paid in one year or operating cycle, whichever is longer. Current liabilities = Accounts payable + Notes payable (short-term) Current liabilities = 64,000 + 56,000 = 120,000 Working capital = 394,000 - 120,000 = 274,000
A company has liabilities of $2,400,000, common stock of $620,000, and retained earnings of $380,000. It has assets of A: $2,640,000. B: $1,000,000. C: $2,160,000. D: $3,400,000. E: $1,400,000.
D: $3,400,000. The basic accounting equation is: Assets = Liabilities + EquityThis equation must always balance, meaning total assets must equal total liabilities plus total stockholders' equity.Equity equals paid-in capital (i.e., common stock) plus retained earnings.Equity = 620,000 + 380,000 = 1,000,000Fill-in assets and equity into the accounting equation and solve for liabilities.Assets = Liabilities + Equity = 2,400,000 + 1,000,000Assets = 3,400,000
based on the following accounts and year end account balances for a certain corporation, determine the amount of current assets to be reported on its classified balance sheet. Accounts payable : 160000 inventory : 110000 accounts receivable : 100000 land: 180000 accumulated dep : 40000 prepaid insurance; 60000 buildings : 210000 retained earnings: 130000 cash: 130000 trademarks: 140000 common stock: 600000 the land is used as a parking lot A: 290000 B: 560000 C: 540000 D: 400000 E: 340000
D: 400000 100000 +130000 +110000 + 60000 =400000
Which of the following would not be reported among property, plant, and equipment on a classified balance sheet? A; Delivery vehicles B: Land C: Equipment D: Cash E : Accumulated depreciation
D: Cash Classified balance sheets partition a company's assets into four categories: (i) current assets (e.g., inventory), (ii) long-term investments, (iii) property, plant, and equipment (e.g., buildings, land, equipment, and accumulated depreciation which is the total amount of depreciation that the company has expensed so far on its property, plant and equipment), and (iv) intangibles. If land or other real estate is held for investment or sits idle, the account name should reflect it (e.g., Land held for investment, Investment in real estate).
which of the following would not be reported among property, plant, and equipment on a classified balance sheet? A: delivery vehicles B: land C: equipment D: cash E: accumulated depreciation
D: cash assets are in 4 categories : current, long term investments, PPE, and accumulated depreciation
accounting information should be neutral in order to enhance a; consistency b: comparability C: timely D: faithful representation E: relevance
D: faithful representation accounting info needs to be relevant and faithful representation
a company purchased a plot of land on which it expects to build a factory in approximately five years. during the five years before construction, the land will be idle. in what classification should the land be reported? A: Property plant and equipment B: land expense C; an intangible asset D a long term investment
D: long term investment land or buildings not being currently used are a long term investment. if it were in use it would be PPE
Net income is $200,000, preferred dividends are $20,000, and total assets are 1,000,000. Average common shares outstanding are 50,000. How much is earnings per share? A: 4 B: .25 C: 4.40 D: .28 E: 3.60
E: 3.60 net income - dividends divided by avg number of common shares 200000-20000 ---------------- 50000 = 3.60
for the current year a company reported a net cash inflow from operating activities of 170000. it also reported the following issued 40000 of common stock paid 60000 for equipment paid 40000 as dividends paid 15000 note payable what is companys free cash flow A: 110000 B: 105000 C: 170000 D: 55000 E: 70000
E: 70000 free cash flow = net cash from operating activties - capital expenditures - cash dividends paid free cash flow = 170000 - 60000 - 40000 = 70000
What are generally accepted accounting principles? A: Rules imposed by the Internal Revenue Service (IRS) B: Fundamental truths that can be derived from the laws of nature C: The guidelines used to resolve ethical dilemmas D: Usually established by the Internal Revenue Service E: A set of accounting rules and practices that have authoritative support
E: A set of accounting rules and practices that have authoritative support 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 account and its balance is not reported on the balance sheet or income statement? A: Service Revenue B: Notes Payable C: Cash D: Accumulated Depreciation E: Dividends
E: Dividends The balance sheet reports asset, liability, and equity accounts. The income statement reports revenues and expenses. Neither the balance sheet nor the income statement report dividends.
Which of the following requires that only those things that can be expressed in money are included in the accounting records? A: The full disclosure principle B: The cost-benefit principle C: The historical cost principle D: The periodicity assumption E: The monetary unit assumption
E: The monetary unit assumption The monetary unit assumption requires that only those things that can be expressed in money are included in the accounting records. This means that certain important information needed by investors, creditors, and managers, such as customer satisfaction, is not reported in the financial statements.
Which of the following would decrease the company's current ratio? A: Selling services to customers on account. B: Buying supplies, such as office supplies, in exchange for cash C: Issue common stock in exchange for cash. D: Selling machinery previously used in operating the business in exchange for cash. E: Using excess cash to buy long-term investments.
E: Using excess cash to buy long-term investments. Current ratio = current assets divided by current liabilitiesBuying a long-term investment in exchange for cash decreases cash and increases long-term investments. The decrease in cash lowers total current assets and lowers the current ratio. An increase in long-term investments does not affect current assets of current liabilities.
at the end of the year a company had retained earnings of 2640000. during the year the company reported the following issued common stock : 120000 paid dividends: 25000 net income : 412000 how much was retained earnings balance at the beginning of the same year? A: 2228000 B: 2376000 C: 2253000 D: 2481000 E: 2133000
c: 2253000 end retained earnings = beginning retained earnings + net income (revenues - expenses ) - dividends 2640000 = X + 412000 - 25000 solve for X = 2253000