Question : Multiple Choice Questions 1.The recognition of a deferred tax liability that : 1241692

 

 

Multiple Choice Questions

 

1.The recognition of a deferred tax liability that results from the use of straight-line depreciation on financial statements and double-declining balance on tax returns will

a.increase the current ratio.

b.increase the debt/equity ratio.

c. increase the quick ratio.

d. decrease the debt/asset ratio.

 

 

 

2.Net worth is

a.assets plus liabilities.

b.total income since the company began operations.

c.total shareholders’ equity.

d.another name for net income.

 

 

 

3.Which one of the following events increases working capital?

a. Purchase of inventory on credit

b. Payment of an installment of notes payable

c. Payment of sales taxes for the state

d.Selling merchandise on credit at a profit

 

 

 

4.An employee of Susann Inc. failed two drug tests. The employee has sued and Susann Inc.’s. lawyers appropriately believe that, at best, it is only reasonably probable that Susann Inc. will lose the court case. The proper accounting treatment of the lawsuit will

a. increase earnings per share.

b. increase the debt/asset ratio.

c. decrease the current ratio.

d.not affect the debt/equity ratio.

 

 

 

5.Which one of the following events does not have any impact on total working capital?

a.The board of directors declares a cash dividend to be paid next month.

b.Warranty expense is accrued.

c.Payment of salaries previously accrued.

d.Debt which was previously long-term matures next year.

 

 

 

6.If the current ratio is currently greater than 1.0, which one of the following events would increase the current ratio?

a.Purchase of inventory on account

b.Receipt of money from a customer prior to the performance of service

c.Warranty expense is accrued

d.Sale of plant asset at a gain

 

 

 

7.If the quick ratio is currently greater than 1.0, which one of the following events would increase the quick ratio?

a.Warranty expense is accrued.

b.A cash dividend previously declared is paid.

c.Long-term debt is paid off.

d.Inventory is purchased on account.

 

 

 

8.Which one of the following events decreases the debt/asset ratio?

a.Bonds are retired with a gain.

b.Warranty expense is accrued.

c.Some of the long-term debt matures next year.

d.The board of directors declares a cash dividend to be paid next month.

 

 

 

9.Which one of the following transactions decreases a company’s quick assets?

a. The board of directors declares a cash dividend to be paid next month.

b. Salary expense is accrued.

c. Depreciation expense is recorded.

d.A prepaid account is created due to the payment of insurance in advance.

 

 

10.Which one of the following is the result of the amortization of a discount on a short-term note payable?

a. Increases assets and decreases liabilities

b. Decreases assets and increases liabilities

c. Increases liabilities and decreases shareholders’ equity

d. Decreases liabilities and owners’ equity