Question : PART I — MULTIPLE CHOICE (28 points) Instructions:  Designate the best : 1311550

PART I — MULTIPLE CHOICE (28 points)

Instructions:  Designate the best answer for each of the following questions.

 

____              1.Mason Mowers had inventory of $420,000 and $444,000 on December 31, 2013, and December 31, 2014, respectively. Cost of goods sold for 2014 was $2,613,600. For what time period does Mason Mowers hold its inventory, on average before selling it? a.              6.1 days

b.              60.3 days

c.              5.8 days

d.              62 days

 

____              2.Which of the following statements is true?

a.              The price-earnings ratio is a long-term solvency ratio.

b.              High asset turnover is a sign of efficient use of assets.

c.              The payout ratio measures the profitability of the owners’ investment.

d.              The acid-test ratio applies to manufacturing companies, but not to service or retailing businesses.

 

____              3.Fane Consulting sold office equipment which resulted in a loss on the sale. Which activities are affected by this transaction?

a.              Operating and investing activities

b.              Operating and financing activities

c.              Financing and investing activities

d.              Operating, financing, and investing activities

 

____              4.One major purpose of the statement of cash flows is to provide information about

a.              the firm’s profitability.

b.              the firm’s cash receipts and payments during a period.

c.              the firm’s resources and claims against those resources.

d.              changes in retained earnings.

 

____              5.Cash provided by operating activities

a.              may be larger than net income.

b.              equals the change in cash for the year.

c.              summarizes cash flows relating to the purchase and sale of long-lived assets.

d.              decreases when long-term debt is repaid.

____              6.Traynham Produce reported equipment at $120,000, and $25,700 accumulated depreciation on its December 31, 2013, balance sheet. During 2014, the company purchased equipment costing $32,000 and sold equipment costing $15,000 (book value $11,300) for $2,000. On December 31, 2014, net equipment was $104,800. Using the indirect method, how much depreciation expense will be added in the operating activities sections of Trayhnam’s statement of cash flows for 2014?

a.              $32,200

b.              $14,400

c.              $17,800

d.              $10,200

 

____              7.Which one of the following is a short-term liquidity ratio?

a.              Profit margin ratio

b.              Payout ratio

c.              Debt to total assets ratio

d.              Acid-test ratio

 

____              8.Team Gear reported sales of $854,000, total assets of $420,000, total stockholders’ equity of $220,000, current assets of $125,000, current liabilities of $43,000, and cash of $50,400. In a common size balance sheet, at what amount would Cash be shown?

a.              50.4%

b.              12.0%

c.              5.9%

d.              40.3%

 

____              9.The use of common size financial statements is an example of

a.              ratio analysis.

b.              vertical analysis.

c.              liquidity analysis.

d.              horizontal analysis.

 

____              10.How should the purchase of an office building by issuing long-term notes payable be reported?

a.              Cash outflow in the financing section of the statement of cash flows

b.              Cash outflow in the investing section of the statement of cash flows

c.              Cash outflow in the operating section of the statement of cash flows

d.              Noncash investing and financing activity

 

____              11.For which of the following is a low ratio an indicator of good financial health?

a.              Asset turnover ratio

b.              Return on assets ratio

c.              Acid-test ratio

d.              Debt to total assets ratio

 

____              12*.When using the direct method to compute cash provided by operations,

a.              income taxes paid may be ignored.

b.              depreciation expense is added to net income.

c.              decreases in inventory are added to total operating expenses to compute cash payments for operating expenses.

d.              increases in accounts receivable are subtracted from total sales to compute cash receipts from customers.

 

____              13.Which item is not reported on the income statement?

a.              Unrealized gain on available-for-sale securities

b.              Extraordinary loss due to volcano eruption damage

c.              Gain from the disposal of a division

d.              Interest expense

 

____              14.Which cash flow activities result in the same reported amounts if the statement of cash flows is prepared using the indirect method compared to the direct method?

a.              Investing and financing activities

b.              Operating and financing activities

c.              Financing and operating activities

d.              Operating, investing, and financing activities