Name:     ID: 
 
    Email: 

ACG2011-Midterm

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

1. 
The difference between sales and cost of merchandise sold for a merchandising business is:
a.
Sales
b.
Net Sales
c.
Gross Sales
d.
Gross Profit
 

2. 
When purchases of merchandise are made for cash, the transaction may be recorded with the following entry:
a.
debit Cash; credit Merchandise Inventory
b.
debit Merchandise Inventory; credit Cash
c.
debit Merchandise Inventory; credit Cash Discounts
d.
debit Merchandise Inventory; credit Purchases
 

3. 
Merchandise is ordered on November 12; the merchandise is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on November 15; the merchandise is received by the buyer on November 17; the entry is made in the buyer's accounts on November 18.  The credit period begins with what date?
a.
November 12
b.
November 15
c.
November 17
d.
November 18
 

4. 
Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a:
a.
debit to Bank Credit Card Sales, debit to Credit Card Expense, and a credit to Sales
b.
debit to Cash and a credit to Sales
c.
debit to Cash, credit to Credit Card Expense, and a credit to Sales
d.
debit to Sales, debit to Credit Card Expense, and a credit to Cash
 

5. 
Under a perpetual inventory system, the costs of all sales of merchandise are credited to the account entitled:
a.
Sales Discounts
b.
Cost of Merchandise Sold
c.
Sales Returns and Allowances
d.
Merchandise Inventory
 

6. 
Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $18,000.  The seller paid transportation costs of $1,000 and issued a credit memorandum for $5,000 prior to payment.  What is the amount of the cash discount allowable?
a.
$190
b.
$180
c.
$170
d.
$130
 

7. 
X sold Y merchandise on account FOB shipping point, 2/10, net 30, for $10,000. X prepaid the $200 shipping charge.  Which of the following entries does X make to record this sale?
a.
Accounts Receivable-Y, debit $10,000; Sales, credit $10,000
b.
Accounts Receivable-Y, debit $10,000; Sales, credit $10,000, and
Accounts Receivable-Y, debit $200; Cash, credit $200
c.
Accounts Receivable-Y, debit $10,400; Sales, credit $10,400
d.
Accounts Receivable-Y, debit $10,000; Sales, credit $10,000, and Transportation Out, debit $200; Cash, credit $200
 

8. 
A chart of accounts for a merchandising business usually:
a.
is the same as the chart of accounts for a service business
b.
requires more accounts than does the chart of accounts for a service business
c.
is standardized by the FASB for all merchandising businesses
d.
does not have a Cost of Goods Sold account if a perpetual inventory system is used
 

9. 
Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as:
a.
selling expenses
b.
general expenses
c.
other expenses
d.
administrative expenses
 

10. 
Which of the following would be reported on the statement of owner's equity for the current year?
a.
sales
b.
withdrawals for the current year
c.
cost of merchandise sold
d.
merchandise inventory
 

11. 
Which of the following is not one of the four basic financial statements?
a.
balance sheet
b.
statement of cash flows
c.
statement of changes in financial position
d.
income statement
 

12. 
The statement of cash flows reports:
a.
cash flows from operating activities
b.
total assets
c.
total changes in stockholders' equity
d.
changes in retained earnings
 

13. 
On the statement of cash flows, the cash flows from operating activities section would include:
a.
receipts from the issuance of capital stock
b.
receipts from the sale of investments
c.
payments for the acquisition of investments
d.
cash receipts from sales activities
 

14. 
Cash flows from operating activities, as reported on the statement of cash flows using the indirect method, would include:
a.
receipts from the sale of investments
b.
payments for dividends
c.
net income
d.
receipts from the issuance of capital stock
 

15. 
A business issues 20-year bonds payable in exchange for preferred stock.  This transaction would be reported on the statement of cash flows in:
a.
the cash flows from investing activities section
b.
the cash flows from operating activities section
c.
a separate schedule
d.
the cash flows from financing activities section
 

16. 
Preferred stock issued in exchange for land would be reported in the statement of cash flows in:
a.
the cash flows from financing activities section
b.
the cash flows from investing activities section
c.
a separate schedule
d.
the cash flows from operating activities section
 

17. 
Cash paid to purchase long-term investments would be reported in the statement of cash flows in:
a.
the cash flows from operating activities section
b.
the cash flows from financing activities section
c.
the cash flows from investing activities section
d.
a separate schedule
 

18. 
On the statement of cash flows prepared by the indirect method, the cash flows from operating activities section would include:
a.
receipts from the sale of investments
b.
amortization of premium on bonds payable
c.
payments for cash dividends
d.
receipts from the issuance of capital stock
 

19. 
Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in:
a.
the cash flows from financing activities section
b.
the cash flows from investing activities section
c.
a separate schedule
d.
the cash flows from operating activities section
 

20. 
The net income reported on the income statement for the current year was $125,000.  Depreciation recorded on fixed assets and amortization of bond discount for the year were $15,000 and $7,000, respectively.  What is the amount of cash flows from operating activities that would appear on the statement of cash flows prepared by the indirect method?
a.
$125,000
b.
$128,000
c.
$140,000
d.
$147,000
 

21. 
The net income reported on the income statement for the current year was $250,000.  Depreciation recorded on fixed assets and amortization of bond premium for the year were $20,000 and $8,000, respectively.  What is the amount of cash flows from operating activities that would appear on the statement of cash flows prepared by the indirect method?
a.
$262,000
b.
$278,000
c.
$270,000
d.
$242,000
 

22. 
The net income reported on the income statement for the current year was $300,000.  Depreciation recorded on fixed assets and amortization of patents for the year were $50,000 and $12,000, respectively.  Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:

 
End  
Beginning
Cash
$ 50,000
$ 60,000 
Accounts receivable
112,000
108,000 
Inventories
105,000
93,000 
Prepaid expenses
4,500
6,500 
Accounts payable  (merchandise creditors)
75,000
89,000 

What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?
a.
$200,000
b.
$362,000
c.
$344,000
d.
$334,000
 

23. 
On the statement of cash flows, the cash flows from investing activities section would include:
a.
receipts from the issuance of capital stock
b.
payments for dividends
c.
payments for retirement of bonds payable
d.
receipts from the sale of investments
 

24. 
Which of the following types of transactions would be reported as a cash flow from investing activity on the statement of cash flows?
a.
issuance of bonds payable
b.
issuance of capital stock
c.
purchase of treasury stock
d.
purchase of noncurrent assets
 

25. 
On the statement of cash flows, the cash flows from financing activities section would include all of the following except:
a.
receipts from the issuance of bonds payable
b.
payments for interest on bonds payable
c.
payments for redemption of bonds payable
d.
receipts from the issuance of capital stock
 

26. 
On the statement of cash flows, a $20,000 gain on the sale of fixed assets would be:
a.
added to net income in converting the net income reported on the income statement to cash flows from operating activities
b.
deducted from net income in converting the net income reported on the income statement to cash flows from operating activities
c.
added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends
d.
deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends
 

27. 
Cash dividends of $75,000 were declared during the year.  Cash dividends payable were $10,000 and $20,000 at the beginning and end of the year, respectively.  The amount of cash for the payment of dividends during the year is:
a.
$10,000
b.
$20,000
c.
$65,000
d.
$55,000
 

28. 
If a gain of $100,000 is incurred in selling equipment having a book value of $250,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is:
a.
$100,000
b.
$150,000
c.
$350,000
d.
$250,000
 

29. 
The net income reported on the income statement for the current year was $125,000.  Depreciation recorded on fixed assets and amortization of patents for the year was $40,000 and $10,000, respectively.  Balances of current asset and current liability accounts at the end and at the beginning of the year are listed below.

 
End  
Beginning
Cash
$ 50,000
$ 65,000
Accounts receivable
125,000
110,000
Inventories
95,000
115,000
Prepaid expenses
4,000
3,000
Accounts payable (merchandise creditors)
75,000
60,000

What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?
a.
$144,000
b.
$156,000
c.
$194,000
d.
$206,000
 

30. 
Cash dividends of $100,000 were declared during the year, and the balance in the cash dividends payable account at the beginning and at the end of the year was $20,000 and $35,000, respectively.  What amount would be reported as payment of dividends in the cash flows from financing activities section of the statement of cash flows?
a.
$85,000
b.
$35,000
c.
$100,000
d.
$115,000
 

31. 
Land costing $75,000 was sold for $60,000 cash.  The loss on the sale was reported on the income statement as other expense.  On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?
a.
$60,000
b.
$20,000
c.
$100,000
d.
$180,000
 

32. 
The cost of merchandise sold during the year was $60,000.  Merchandise inventories were $14,500 and $12,500 at the beginning and end of the year, respectively.  Accounts payable were $8,000 and $7,000 at the beginning and end of the year, respectively.  Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total:
a.
$59,000
b.
$57,000
c.
$61,000
d.
$63,000
 

33. 
Operating expenses other than depreciation for the year were $500,000.  Prepaid expenses increased by $17,000 and accrued expenses decreased by $30,000 during the year.  Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:
a.
$453,000
b.
$513,000
c.
$547,000
d.
$483,000
 

34. 
Free cash flow is:
a.
all cash in the bank
b.
cash from operations
c.
cash from financing, less cash used to purchase fixed assets to maintain productive capacity and cash used for dividends
d.
cash flow from operations, less cash used to purchase fixed assets to maintain productive capacity and cash used for dividends
 

35. 
Free cash flow is cash from operations, less cash for:
a.
dividends and cash for fixed assets needed to maintain productivity
b.
dividends and cash to redeem bonds payable
c.
fixed assets needed to maintain productivity
d.
dividends, cash for fixed assets needed to maintain productivity, and cash to redeem bonds payable
 

36. 
The percentage analysis of increases and decreases in individual items in comparative financial statements is called:
a.
vertical analysis
b.
solvency analysis
c.
profitability analysis
d.
horizontal analysis
 

37. 
The percent of fixed assets to total assets is an example of:
a.
vertical analysis
b.
solvency analysis
c.
profitability analysis
d.
horizontal analysis
 

38. 
The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as:
a.
solvency and leverage
b.
solvency and profitability
c.
solvency and liquidity
d.
solvency and equity
 

39. 
The ability of a business to earn a reasonable amount of income is referred to as the factor of:
a.
leverage
b.
profitability
c.
wealth
d.
solvency
 

40. 
Which of the following is not an analysis used in assessing solvency?
a.
number of times interest charges are earned
b.
current position analysis
c.
ratio of net sales to assets
d.
inventory analysis
 

41. 
Which of the following is included in the computation of the acid-test ratio?
a.
prepaid rent
b.
accounts receivable
c.
inventory
d.
supplies
 

42. 
Based on the following data for the current year, what is the accounts receivable turnover?

Net sales on account during year
$ 500,000
Cost of merchandise sold during year
300,000
Accounts receivable, beginning of year
45,000
Accounts receivable, end of year
35,000
Inventory, beginning of year
90,000
Inventory, end of year
110,000
a.
12.5
b.
14.3
c.
11.1
d.
5.0
 

43. 
Based on the following data for the current year, what is the number of days' sales in accounts receivable?

Net sales on account during year
$ 730,000
Cost of merchandise sold during year
300,000
Accounts receivable, beginning of year
45,000
Accounts receivable, end of year
35,000
Inventory, beginning of year
90,000
Inventory, end of year
110,000
a.
7.5
b.
18.25
c.
17.5
d.
12.5
 

44. 
Based on the following data for the current year, what is the inventory turnover?

Net sales on account during year
$ 500,000
Cost of merchandise sold during year
300,000
Accounts receivable, beginning of year
45,000
Accounts receivable, end of year
35,000
Inventory, beginning of year
90,000
Inventory, end of year
110,000
a.
3.0
b.
8.0
c.
4.0
d.
3.8
 

45. 
Balance sheet and income statement data indicate the following:

Bonds payable, 10% (issued 1988 due 2012)
$1,000,000
Preferred 5% stock, $100 par (no change during year)
300,000
Common stock, $50 par (no change during year)
2,000,000
Income before income tax for year
300,000
Income tax for year
80,000
Common dividends paid
50,000
Preferred dividends paid
15,000

Based on the data presented above, what is the number of times bond interest charges were earned (round to one decimal point)?
a.
3.3
b.
2.2
c.
4.0
d.
2.6
 

46. 
Based on the following data for the current year, what is the number of days' sales in inventory?

Net sales on account during year
$1,204,500
Cost of merchandise sold during year
620,500
Accounts receivable, beginning of year
75,000
Accounts receivable, end of year
85,000
Inventory, beginning of year
81,600
Inventory, end of year
98,600
a.
58
b.
48
c.
25
d.
30
 

47. 
Based on the following data, what is the amount of quick assets?

Accounts payable
$ 32,000
Accounts receivable
64,000
Accrued liabilities
7,000
Cash
20,000
Intangible assets
40,000
Inventory
72,000
Long-term investments
100,000
Long-term liabilities
75,000
Marketable securities
35,000
Notes payable (short-term)
20,000
Property, plant, and equipment
625,000
Prepaid expenses
2,000
a.
$161,000
b.
$193,000
c.
$119,000
d.
$55,000
 

48. 
Based on the following data, what is the amount of working capital?

Accounts payable
$ 32,000
Accounts receivable
64,000
Accrued liabilities
7,000
Cash
20,000
Intangible assets
40,000
Inventory
72,000
Long-term investments
100,000
Long-term liabilities
75,000
Marketable securities
35,000
Notes payable (short-term)
20,000
Property, plant, and equipment
625,000
Prepaid expenses
2,000
a.
$162,000
b.
$134,000
c.
$193,000
d.
$62,000
 

49. 
Based on the following data, what is the acid-test ratio, rounded to one decimal point?

Accounts payable
$ 32,000
Accounts receivable
64,000
Accrued liabilities
7,000
Cash
20,000
Intangible assets
40,000
Inventory
72,000
Long-term investments
100,000
Long-term liabilities
75,000
Marketable securities
35,000
Notes payable (short-term)
20,000
Property, plant, and equipment
625,000
Prepaid expenses
2,000
a.
3.2
b.
3.3
c.
2.0
d.
1.4
 

50. 
Which of the following ratios provides a solvency measure that shows the margin of safety of noteholders or bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?
a.
ratio of fixed assets to long-term liabilities
b.
ratio of net sales to assets
c.
number of days' sales in receivables
d.
rate earned on stockholders' equity
 

51. 
The balance sheets at the end of each of the first two years of operations indicate the following:

 
2004  
2003  
Total current assets
$600,000
$560,000
Total investments
60,000
40,000
Total property, plant,  and equipment
900,000
700,000
Total current liabilities
150,000
80,000
Total long-term liabilities
350,000
250,000
Preferred 9% stock, $100 par
100,000
100,000
Common stock, $10 par
600,000
600,000
Paid-in capital in excess of par-common stock
60,000
60,000
Retained earnings
325,000
210,000

If net income is $130,000 and interest expense is $40,000 for 2004 what is the rate earned on total assets for 2004 (round percent to one decimal point)?
a.
10.9%
b.
11.9%
c.
9.1%
d.
8.3%
 

52. 
The balance sheets at the end of each of the first two years of operations indicate the following:

 
2004  
2003  
Total current assets
$600,000
$560,000
Total investments
60,000
40,000
Total property, plant,  and equipment
900,000
700,000
Total current liabilities
150,000
80,000
Total long-term liabilities
350,000
250,000
Preferred 9% stock, $100 par
100,000
100,000
Common stock, $10 par
600,000
600,000
Paid-in capital in excess of par-common stock
60,000
60,000
Retained earnings
325,000
210,000

If net income is $130,000 and interest expense is $40,000 for 2004, what is the rate earned on stockholders' equity for 2004 (round percent to one decimal point)?
a.
12.0%
b.
12.7%
c.
14.0%
d.
17.1%
 

53. 
The balance sheets at the end of each of the first two years of operations indicate the following:

 
2004  
2003  
Total current assets
$600,000
$560,000
Total investments
60,000
40,000
Total property, plant,  and equipment
900,000
700,000
Total current liabilities
150,000
80,000
Total long-term liabilities
350,000
250,000
Preferred 9% stock, $100 par
100,000
100,000
Common stock, $10 par
600,000
600,000
Paid-in capital in excess of par-common stock
60,000
60,000
Retained earnings
325,000
210,000

If net income is $130,000 and interest expense is $40,000 for 2004, what is the rate earned on common stockholders' equity for 2004 (round percent to one decimal point)?
a.
12.3%
b.
15.9%
c.
13.0%
d.
14.5%
 

54. 
The balance sheets at the end of each of the first two years of operations indicate the following:

 
2004  
2003  
Total current assets
$600,000
$560,000
Total investments
60,000
40,000
Total property, plant,  and equipment
900,000
700,000
Total current liabilities
150,000
80,000
Total long-term liabilities
350,000
250,000
Preferred 9% stock, $100 par
100,000
100,000
Common stock, $10 par
600,000
600,000
Paid-in capital in excess of par-common stock
60,000
60,000
Retained earnings
325,000
210,000

If net income is $130,000 and interest expense is $40,000 for 2004, what are the earnings per share on common stock for 2004, (round to two decimal places)?
a.
$2.17
b.
$2.83
c.
$2.02
d.
$1.50
 

55. 
The balance sheets at the end of each of the first two years of operations indicate the following:

 
2004  
2003  
Total current assets
$600,000
$560,000
Total investments
60,000
40,000
Total property, plant,  and equipment
900,000
700,000
Total current liabilities
150,000
80,000
Total long-term liabilities
350,000
250,000
Preferred 9% stock, $100 par
100,000
100,000
Common stock, $10 par
600,000
600,000
Paid-in capital in excess of par-common stock
60,000
60,000
Retained earnings
325,000
210,000

If net income is $130,000 and interest expense is $40,000 for 2004, and the market price is $30, What is the price-earnings ratio on common stock (round to one decimal point)?
a.
14.9
b.
13.8
c.
10.6
d.
20.0
 

56. 
For most profitable companies, the rate earned on stockholders' equity will be less than:
a.
the rate earned on total assets
b.
the rate earned on total liabilities and stockholders' equity
c.
the rate earned on sales
d.
the rate earned on common stockholders' equity
 

57. 
The following information is available for Willing Corp.:

 
2003
Market price per share of common stock
$25.00
Earnings per share on common stock
  1.25

Which of the following statements is correct?
a.
The price-earnings ratio is 20 and a share of common stock was selling for 20 times the amount of earnings per share at the end of 2003.
b.
The price-earnings ratio is 5.0% and a share of common stock was selling for 5.0% more than the amount of earnings per share at the end of 2003.
c.
The price-earnings ratio is 10 and a share of common stock was selling for 125 times the amount of earnings per share at the end of 2003.
d.
The market price per share and the earnings per share are not statistically related to each other.
 

58. 
The following information is available for Dirks Co.:

 
2000
Dividends per share of common stock
$ 1.40
Market price per share of common stock
17.50

Which of the following statements is correct?
a.
The dividend yield is 8.0%, which is of interest to investors seeking an increase in market price of their stocks.
b.
The dividend yield is 8.0%, which is of special interest to investors seeking current returns on their investments.
c.
The dividend yield is 12.5%, which is of interest to bondholders.
d.
The dividend yield is 8.0 times the market price, which is important in solvency analysis.
 

59. 
The particular analytical measures chosen to analyze a company may be influenced by all but one of the following.  Which one?
a.
industry type
b.
capital structure
c.
diversity of business operations
d.
product quality or service effectiveness
 

60. 
Corporate annual reports typically do not contain which of the following?
a.
financial highlights
b.
SEC statement expressing an opinion
c.
management report
d.
historical summary
 



 
Submit          Reset Help