Questions 1 to 20: Select the best answer to each question. Note that a question and its answers may be split across a page break, so be sure that you have seen the entire question and all the answers before choosing an answer.
1. Casey Company reported net income of $35,000; depreciation expenses of $20,000; an increase in accounts payable of $2,000; and an increase in current notes receivable of $3,000. Net cash flows from operating activities under the indirect method is
A. $56,000.
B. $50,000.
C. $55,000.
D. $54,000
2. What is the rate of return on equity if net income is $22,700; preferred dividends are $3,000; sales are $100,000; and average common stockholders' equity is $86,000?
A. 26.4%
B. 22.7%
C. 86.0%
D. 22.9%
3. Earnings that a stockholder receives from a corporation are an example of which stockholder right?
A. Vote
B. Liquidation
C. Dividends
D. Preemption
4. What is Jane's rate of return on total assets if average total assets are $100,000; net income is $2,000; interest expense if $1,600; and income tax is $2,000?
A. 5.6%
B. 3.6%
C. 4.6%
D. 5.2%
5. Rick Company has declared a $40,000 cash dividend to shareholders. The company has 5,000 shares of $20 par, 6% preferred stock, and 10,000 shares of $15 par common stock. The preferred stock is
cumulative. How much will be distributed to the preferred and common stockholders on the date of
payment if the preferred stock is $12,000 in arrears?
A. $18,000 preferred; $22,000 common
B. $6,000 preferred; $34,000 common
C. $20,000 preferred; $20,000 common
D. $40,000 preferred; $0 common
6. The Isaiah Corporation Stockholders' Equity section includes the following information:
Total par value of the preferred and common stock is
Preferred Stock $22,000
Paid-in Capital in Excess of Par—Preferred 2,980
Common Stock 48,000
Paid-in Capital in Excess of Par—Common 3,400
Retained Earnings 7,350
A. $76,380.
B. $77,350.
C. $70,000.
D. $83,730.
7. What is the rate of return on common stockholders' equity if sales are $100,000, net income is $22,700, and average common stockholders' equity is $86,000?
A. 86.0%
B. 26.4%
C. The rate of return can't be determined from the information given.
D. 22.7%
8. Birch issued 200 shares of $12 par common stock in exchange for a piece of equipment with a current market value of $3,000. Which of the following is not part of the journal entry for this transaction?
A. Crediting common stock for $2,400
B. Debiting equipment for $3,000
C. Crediting common stock for $3,000
D. Crediting paid-in capital in excess of par common for $600
9. A company has $56,000 in cash; $12,000 in accounts receivable; $25,000 in short-term investments; and $100,000 in merchandise inventory. The company also has $60,000 in current liabilities. The company's quick ratio is
A. 1.550.
B. 3.217.
C. 0.933.
D. 1.133.
10. The accuracy of the statement of cash flows can be verified by computing the change in the balance of the:
A. cash and cash equivalent accounts.
B. revenue accounts.
C. equity account.
D. asset and liability accounts.
11. Which section of the income statement does not report net of income taxes or net of income tax
savings?
A. Continuing operations section
B. Discontinued operations section
C. Extraordinary items section
D. Cumulative effect of changes in accounting principles section
12. The Amanda Corporation Stockholders' Equity section includes the following information:
What was the total selling price of the preferred stock?
Preferred Stock $12,000
Paid-in Capital in Excess of Par—Preferred 2,700
Common Stock 15,000
Paid-in Capital in Excess of Par—Common 4,100
Retained Earnings 8,200
A. $16,100
B. $12,000
C. $20,200
D. $14,700
13. Patty's Baker has cost of goods sold for the years 2011, 2010, and 2009, respectively, of $28,600,
$26,900, and $25,600. If 2009 is the base year, the trend percentage for 2011 is
A. 105.08%.
B. 11.72%.
C. 5.08%.
D. 111.72%
14. Tammy Corporation has 350,000 shares of $3 par common stock outstanding. It has declared a 5% stock dividend. The current market price of the common stock is $7.50/share. The amount that will be credited to common stock on the date of declaration is
A. $52,500.
B. $78,750.
C. $131,250.
D. $183,750.
15. Which activities are computed differently using the two methods of formatting a statement of cash flows?
A. Investing activities
B. Financing activities
C Both operating activities and investing activities
D. Operating activities
16. If Rick's net sales increased from $40,000 to $80,000 and its operating expenses increased from
$30,000 to $50,000, then vertical analysis based on net sales would show which of the following for
operating expenses for the two periods (to the nearest tenth of a percent)?
A. 75.0% and 62.5%
B. 133.3% and 160.0%
C. 160.0% and 133.3%
D. 62.5% and 75.0%
17. Rick Company has declared a $40,000 cash dividend to shareholders. The company has 5,000 shares of $20 par, 6% preferred stock, and 10,000 shares of $15 par common stock. The preferred stock is noncumulative. How much will be distributed to the preferred and common stockholders on the date of payment?
A. $40,000 preferred; $0 common
B. $0 preferred; $40,000 common
C. $6,000 preferred; $34,000 common
D. $34,000 preferred; $6,000 common
18. Operating cash flows affect
A. equity accounts.
B. long-term liability accounts.
C. current assets and current liabilities.
D. long-term asset accounts.
19. If total assets are $6,000, what is the common-size figure of cash, assuming that cash has a balance of $2,400?
A. 40.0%
B. 120.0%
C. 100.0%
D. 60.0%
20. To determine why net income and cash on the balance sheet don't equal, an accountant can prepare a/an A. income statement.
B. balance sheet.
C. statement of cash flows.
D. statement of retained earnings.
1. Casey Company reported net income of $35,000; depreciation expenses of $20,000; an increase in accounts payable of $2,000; and an increase in current notes receivable of $3,000. Net cash flows from operating activities under the indirect method is
A. $56,000.
B. $50,000.
C. $55,000.
D. $54,000
2. What is the rate of return on equity if net income is $22,700; preferred dividends are $3,000; sales are $100,000; and average common stockholders' equity is $86,000?
A. 26.4%
B. 22.7%
C. 86.0%
D. 22.9%
3. Earnings that a stockholder receives from a corporation are an example of which stockholder right?
A. Vote
B. Liquidation
C. Dividends
D. Preemption
4. What is Jane's rate of return on total assets if average total assets are $100,000; net income is $2,000; interest expense if $1,600; and income tax is $2,000?
A. 5.6%
B. 3.6%
C. 4.6%
D. 5.2%
5. Rick Company has declared a $40,000 cash dividend to shareholders. The company has 5,000 shares of $20 par, 6% preferred stock, and 10,000 shares of $15 par common stock. The preferred stock is
cumulative. How much will be distributed to the preferred and common stockholders on the date of
payment if the preferred stock is $12,000 in arrears?
A. $18,000 preferred; $22,000 common
B. $6,000 preferred; $34,000 common
C. $20,000 preferred; $20,000 common
D. $40,000 preferred; $0 common
6. The Isaiah Corporation Stockholders' Equity section includes the following information:
Total par value of the preferred and common stock is
Preferred Stock $22,000
Paid-in Capital in Excess of Par—Preferred 2,980
Common Stock 48,000
Paid-in Capital in Excess of Par—Common 3,400
Retained Earnings 7,350
A. $76,380.
B. $77,350.
C. $70,000.
D. $83,730.
7. What is the rate of return on common stockholders' equity if sales are $100,000, net income is $22,700, and average common stockholders' equity is $86,000?
A. 86.0%
B. 26.4%
C. The rate of return can't be determined from the information given.
D. 22.7%
8. Birch issued 200 shares of $12 par common stock in exchange for a piece of equipment with a current market value of $3,000. Which of the following is not part of the journal entry for this transaction?
A. Crediting common stock for $2,400
B. Debiting equipment for $3,000
C. Crediting common stock for $3,000
D. Crediting paid-in capital in excess of par common for $600
9. A company has $56,000 in cash; $12,000 in accounts receivable; $25,000 in short-term investments; and $100,000 in merchandise inventory. The company also has $60,000 in current liabilities. The company's quick ratio is
A. 1.550.
B. 3.217.
C. 0.933.
D. 1.133.
10. The accuracy of the statement of cash flows can be verified by computing the change in the balance of the:
A. cash and cash equivalent accounts.
B. revenue accounts.
C. equity account.
D. asset and liability accounts.
11. Which section of the income statement does not report net of income taxes or net of income tax
savings?
A. Continuing operations section
B. Discontinued operations section
C. Extraordinary items section
D. Cumulative effect of changes in accounting principles section
12. The Amanda Corporation Stockholders' Equity section includes the following information:
What was the total selling price of the preferred stock?
Preferred Stock $12,000
Paid-in Capital in Excess of Par—Preferred 2,700
Common Stock 15,000
Paid-in Capital in Excess of Par—Common 4,100
Retained Earnings 8,200
A. $16,100
B. $12,000
C. $20,200
D. $14,700
13. Patty's Baker has cost of goods sold for the years 2011, 2010, and 2009, respectively, of $28,600,
$26,900, and $25,600. If 2009 is the base year, the trend percentage for 2011 is
A. 105.08%.
B. 11.72%.
C. 5.08%.
D. 111.72%
14. Tammy Corporation has 350,000 shares of $3 par common stock outstanding. It has declared a 5% stock dividend. The current market price of the common stock is $7.50/share. The amount that will be credited to common stock on the date of declaration is
A. $52,500.
B. $78,750.
C. $131,250.
D. $183,750.
15. Which activities are computed differently using the two methods of formatting a statement of cash flows?
A. Investing activities
B. Financing activities
C Both operating activities and investing activities
D. Operating activities
16. If Rick's net sales increased from $40,000 to $80,000 and its operating expenses increased from
$30,000 to $50,000, then vertical analysis based on net sales would show which of the following for
operating expenses for the two periods (to the nearest tenth of a percent)?
A. 75.0% and 62.5%
B. 133.3% and 160.0%
C. 160.0% and 133.3%
D. 62.5% and 75.0%
17. Rick Company has declared a $40,000 cash dividend to shareholders. The company has 5,000 shares of $20 par, 6% preferred stock, and 10,000 shares of $15 par common stock. The preferred stock is noncumulative. How much will be distributed to the preferred and common stockholders on the date of payment?
A. $40,000 preferred; $0 common
B. $0 preferred; $40,000 common
C. $6,000 preferred; $34,000 common
D. $34,000 preferred; $6,000 common
18. Operating cash flows affect
A. equity accounts.
B. long-term liability accounts.
C. current assets and current liabilities.
D. long-term asset accounts.
19. If total assets are $6,000, what is the common-size figure of cash, assuming that cash has a balance of $2,400?
A. 40.0%
B. 120.0%
C. 100.0%
D. 60.0%
20. To determine why net income and cash on the balance sheet don't equal, an accountant can prepare a/an A. income statement.
B. balance sheet.
C. statement of cash flows.
D. statement of retained earnings.
