Question : 128.Happiness Catering has total assets of $385 million. Its total : 1258611

 

 

128.Happiness Catering has total assets of $385 million. Its total liabilities are $100 million and its equity is $285 million. Calculate its debt ratio.   

A. 35.1%.

 

B. 26.0%.

 

C. 38.5%.

 

D. 28.5%.

 

E. 58.8%.

Debt Ratio = Total Liabilities/Total AssetsDebt Ratio = $100 million/$385 million; Debt Ratio = 0.2597 = 26.0%

 

 

 

129.All of the following statements accurately describe the debt ratio except.    

A. It is use to both internal and external users of accounting information.

 

B. A relatively high ratio is always desirable.

 

C. The dividing line for a high and low ratio varies from industry to industry.

 

D. Many factors such as a company’s age, stability, profitability and cash flow influence the determination of what would be interpreted as a high versus a low ratio.

 

E. The ratio might be used to help determine if a company is capable of increasing its income by obtaining further debt.

 

 

 

 

130.At the end of the current year, Leer Company reported total liabilities of $300,000 and total equity of $100,000. The company’s debt ratio on the last year-end was:    

A. 300%.

 

B. 33.3%.

 

C. 75.0%.

 

D. 66.67%.

 

E. $400,000.

Debt Ratio = Total Liabilities/Total AssetsDebt Ratio = $300,000/$400,000*; Debt Ratio = 0.75 = 75%*Total Assets = Total Liabilities + Total EquityTotal Assets = $300,000 + $100,000; Total Assets = $400,000

 

 

 

131.At the beginning of the current year, Trenton Company Inc.’s total assets were $248,000 and its total liabilities were $175,000. During the year, the company reported total revenues of $93,000, total expenses of $76,000 and dividends of $5,000. There were no other changes in stockholders’ equity during the year and total assets at the end of the year were $260,000. Trenton Company’s debt ratio at the end of the current year is:   

A. 70.6%.

 

B. 67.3%.

 

C. 32.7%.

 

D. 48.6%.

 

E. 1.42%.

Debt Ratio = Total Liabilities/Total AssetsDebt Ratio = $175,000**/$260,000; Debt Ratio = 0.6730 = 67.3%*Beginning Total Assets = Beginning Total Liabilities + Beginning Total Equity$248,000 = $175,000 + Beginning Total Equity; Beginning Total Equity = $73,000**Ending Total Assets = Ending Total Liabilities + Ending Total Equity$260,000 = Ending Total Liabilities + (Beginning Equity + Revenues – Expenses – Dividends)$260,000 = Ending Total Liabilities + ($73,000 + $93,000 – $76,000 – $5,000)$260,000 = Ending Total Liabilities + $85,000; Ending Total Liabilities = $175,000

 

 

 

132.The process of transferring general journal entry information to the ledger is called:   

A. Double-entry accounting.

 

B. Posting.

 

C. Balancing an account.

 

D. Journalizing.

 

E. Not required unless debits do not equal credits.

 

 

 

 

133.A column in journals and ledger accounts that is used to cross reference journal and ledger entries is the:   

A. Account balance column.

 

B. Debit column.

 

C. Posting reference column.

 

D. Credit column.

 

E. Description column.

 

 

 

 

134.The chronological record of each complete transaction that has occurred is called the:   

A. Account balance.

 

B. Ledger.

 

C. Journal.

 

D. Trial balance.

 

E. Cash account.

 

 

 

 

135.A business’s general journal provides a place for recording all of the following except:   

A. The transaction date.

 

B. The names of the accounts involved.

 

C. The amount of each debit and credit.

 

D. An explanation of the transaction.

 

E. The balance in each account.

 

 

 

 

136.The balance column in a ledger account is:   

A. An account entered on the balance sheet.

 

B. A column for showing the balance of the account after each entry is posted.

 

C. Another name for the dividends account.

 

D. An account used to record the transfers of assets from a business to its stockholders.

 

E. A simple form of account that is widely used in accounting to illustrate the debits and credits required in recording a transaction.

 

 

 

 

137.A general journal is:   

A. A ledger in which amounts are posted from a balance column account.

 

B. Not required if T-accounts are used.

 

C. A complete record of all transactions in chronological order from which transaction amounts are posted to the ledger accounts.

 

D. Not necessary in electronic accounting systems.

 

E. A book of final entry because financial statements are prepared from it.