Practice Accounting Chapter 5 &6

If a company reported the following items on its income statement (cost of goods sold $6,000, income tax expense $2,000, interest expense $500, operating expenses $3,500, sales revenue $14,000), what amount would be reported for the subtotal "income from operations"? $8,000 $2,000 $4,500 $4,000

$4,500

Net income was $850,000. Beginning and ending assets were $8,500,000 and $9,600,000, respectively. What was the return on assets (ROA)? 9.39% 10.59% 9.94% 10.41%

9.39%

If a company plans to differentiate its products by offering low prices and discounts for items packaged in bulk (like a discount retailer that requires memberships for its customers), which component in the ROA profit driver analysis is the company attempting to boost? Net profit margin. Asset turnover. Financial leverage. All of the above

Asset turnover.

If average total assets increase, but net income, net sales, and average stockholders' equity remain the same, what is the impact on the return on assets ratio? Increases. Decreases. Remains the same. Cannot be determined without additional information.

Decreases

Which of the following reports is filed annually with the SEC? Form 10-Q Form 10-K Form 8-K Press release

Form 10-K

Which of the following is not one of the possible nonrecurring items that must be shown in a separate line item below the Income from Continuing Operations subtotal in the income statement? a. Gains and losses from the sale of fixed assets. b. Discontinued operations. c. Extraordinary items. d. Both a and b

a. Gains and losses from the sale of fixed assets.

Sales discounts with terms 2/10, n/30 mean: a. 10 percent discount for payment within 30 days. b. 2 percent discount for payment within 10 days, or the full amount (less returns) due within 30 days. c. Two-tenths of a percent discount for payment within 30 days. d. None of the above.

b. 2 percent discount for payment within 10 days, or the full amount (less returns) due within 30 days.

Which of the following is not a normal function of a financial analyst? a. Issue earnings forecasts. b. Examine the records underlying the financial statements to certify their conformance with GAAP. c. Make buy, hold, and sell recommendations on companies' stock. d. Advise institutional investors on their securities holdings.

b. Examine the records underlying the financial statements to certify their conformance with GAAP.

A company has been successful in reducing the amount of sales returns and allowances. At the same time, a credit card company reduced the credit card discount from 3% to 2%. What effect will these changes have on the company's net sales, all other things equal? a. Net sales will not change. b. Net sales will increase. c. Net sales will decrease. d. Either (b) or (c).

b. Net sales will increase.

When using the allowance method, as bad debt expense is recorded, a. Total assets remain the same and stockholders' equity remains the same. b. Total assets decrease and stockholders' equity decreases. c. Total assets increase and stockholders' equity decreases. d. Total liabilities increase and stockholders' equity decreases.

b. Total assets decrease and stockholders' equity decreases

You have determined that Company X estimates bad debt expense with an aging of accounts receivable schedule. Company X's estimate of uncollectible receivables resulting from the aging analysis equals $250. The beginning balance in the allowance for doubtful accounts was $220. Write-offs of bad debts during the period were $180. What amount would be recorded as bad debt expense for the current period? a. $180 b. $250 c. $210 d. $220

c. $210

Gross sales total $300,000, one-half of which were credit sales. Sales returns and allowances of $15,000 apply to the credit sales, sales discounts of 2% were taken on all of the net credit sales, and credit card sales of $100,000 were subject to a credit card discount of 3%. What is the dollar amount of net sales? a. $227,000 b. $229,800 c. $279,300 d. $240,000

c. $279,300

When a company issues stock with a par value, what columns are typically presented in the statement of stockholders' equity? a. Common Stock; Additional Paid-In Capital; and Property, Plant, and Equipment, Net. b. Cash; and Property, Plant, and Equipment, Net. c. Common Stock; Additional Paid-In Capital; and Retained Earnings. d. Common Stock; Additional Paid-In Capital; and Cash

c. Common Stock; Additional Paid-In Capital; and Retained Earnings.

Which of the following is not a component of net sales? a. Sales returns and allowances b. Sales discounts c. Cost of goods sold d. Credit card discounts

c. Cost of goods sold

The classified balance sheet format allows one to ascertain quickly which of the following? a. The most valuable asset of the company. b. The specific due date for all liabilities of the company. c. What liabilities must be paid within the upcoming year. d. None of the above

c. What liabilities must be paid within the upcoming year.

When a company using the allowance method writes off a specific customer's $100,000 account receivable from the accounting system, which of the following statements are true? 1. Total stockholders' equity remains the same. 2. Total assets remain the same. 3. Total expenses remain the same. a. 2 b. 1 and 3 c. 1 and 2 d. 1, 2, and 3

d. 1, 2, and 3

Which of the following is not a step toward effective internal control over cash? a. Require signatures from a manager and one financial officer on all checks. b. Require that cash be deposited daily at the bank. c. Require that the person responsible for removing the cash from the register have no access to the accounting records. d. All of the above are steps toward effective internal control

d. All of the above are steps toward effective internal control

Which of the following would normally not be found in the notes to the financial statements? a. Accounting rules applied in the company's financial statements. b. Additional detail supporting numbers reported in the company's financial statements. c. Relevant financial information not presented in the company's financial statements. d. All of the above would be found in the notes to the financial statements

d. All of the above would be found in the notes to the financial statements

Which of the following best describes the proper presentation of accounts receivable in the financial statements? a. Gross accounts receivable plus the allowance for doubtful accounts in the asset section of the balance sheet. b. Gross accounts receivable in the asset section of the balance sheet and the allowance for doubtful accounts in the expense section of the income statement. c. Gross accounts receivable less bad debt expense in the asset section of the balance sheet. d. Gross accounts receivable less the allowance for doubtful accounts in the asset section of the balance sheet.

d. Gross accounts receivable less the allowance for doubtful accounts in the asset section of the balance sheet.