Question :
114.A change from FIFO to LIFO in a period of : 1244254
114.A change from FIFO to LIFO in a period of rising prices will
a.
increase the current ratio and decrease the inventory turnover ratio.
b.
increase both the current ratio and the inventory turnover ratio.
c.
decrease both the current ratio and the inventory turnover ratio.
d.
decrease the current ratio and increase the inventory turnover ratio.
115.How would the collection of an account receivable affect the current ratio and the quick ratio, respectively?
a.
Increase in current ratio; increase in quick ratio
b.
No effect on current ratio; no effect on quick ratio
c.
No effect on current ratio; increase in quick ratio
d.
Decrease in current ratio; decrease in quick ratio
116.The number of days’ sales uncollected is determined by dividing
a.
the number of days in a year by average accounts receivable.
b.
sales by average accounts receivable.
c.
the number of days in a year by the receivable turnover.
d.
net income by average accounts receivable.
117.A quick ratio that is much smaller than the current ratio indicates that
a.
inventories represent a large portion of current assets.
b.
the company has a low inventory turnover.
c.
the company has a high inventory turnover.
d.
inventories represent a small portion of current assets.
118.What is the effect of the payment of an account payable on the current ratio and the quick ratio, respectively? (Assume the current ratio was 2.3 times and the quick ratio was 2.1 times before this transaction.)
a.
Increase in current ratio; increase in quick ratio
b.
Decrease in current ratio; no effect on quick ratio
c.
Decrease in current ratio; decrease in quick ratio
d.
No effect on current ratio; no effect on quick ratio
119.Assuming that the current ratio was 1.6 times and the quick ratio was 1.4 times before this transaction, the entry to record the payment of a previously declared and recorded cash dividend will
a.
decrease the current ratio and the quick ratio.
b.
have no effect on the current ratio or the quick ratio.
c.
increase the current ratio and the quick ratio.
d.
increase the current ratio but have no effect on the quick ratio.
120.A company with a current ratio of 2.4 times will see that ratio decrease when the company
a.
converts a short-term liability to a long-term liability.
b.
borrows cash by issuing a short-term note payable.
c.
declares a 10 percent stock dividend on its common stock.
d.
pays a large current liability.
121.During the year, Dempsey Corporation’s current ratio increased while its quick ratio decreased. Which of the following could help explain this situation?
a.
The sale of short-term investments during the year
b.
A decrease in accounts receivable during the year
c.
An increase in accounts payable during the year
d.
An increase in inventory levels during the year
122.Following are the financial statements for Starman Corporation for the year ended December 31, 20×7. Assume that all balance sheet amounts represent both average and ending figures.
Starman Corporation
Balance Sheet
December 31, 20×7
Assets
Cash
$ 20,000
Marketable securities
30,000
Accounts receivable
50,000
Inventory
100,000
Long-term receivables
35,000
Property, plant, and equipment
65,000
Total assets
$300,000
Liabilities and Stockholders’ Equity
Current liabilities
$100,000
Long-term liabilities
60,000
Stockholders’ equity
140,000
Total liabilities and stockholders’ equity
$300,000
Starman Corporation
Income Statement
For the Year Ended December 31, 20×7
Net sales
$400,000
Cost of goods sold
240,000
Gross margin
$160,000
Operating expenses
40,000
Income before income taxes
$120,000
Income taxes expense
30,000
Net income
$ 90,000
What is the current ratio for this corporation?
a.
1.70 times
b.
1.54 times
c.
1.00 times
d.
2.00 times
123.Following are the financial statements for Starman Corporation for the year ended December 31, 20×7. Assume that all balance sheet amounts represent both average and ending figures.
Starman Corporation
Balance Sheet
December 31, 20×7
Assets
Cash
$ 20,000
Marketable securities
30,000
Accounts receivable
50,000
Inventory
100,000
Long-term receivables
35,000
Property, plant, and equipment
65,000
Total assets
$300,000
Liabilities and Stockholders’ Equity
Current liabilities
$100,000
Long-term liabilities
60,000
Stockholders’ equity
140,000
Total liabilities and stockholders’ equity
$300,000
Starman Corporation
Income Statement
For the Year Ended December 31, 20×7
Net sales
$400,000
Cost of goods sold
240,000
Gross margin
$160,000
Operating expenses
40,000
Income before income taxes
$120,000
Income taxes expense
30,000
Net income
$ 90,000
What is the receivable turnover for this corporation?
a.
6.0 times
b.
1.8 times
c.
4.8 times
d.
8.0 times
