1. Uncertainties such as natural disasters:

       Are not contingent liabilities because they are future events not arising out of past transactions or events

       Are contingent liabilities because they are future events arising from past transactions or events

       Should be disclosed because of their usefulness to financial statements

       Are estimated liabilities because the amounts are uncertain

       Arise out of transactions such as debt guarantees

 

2. A promissory note received from a customer in exchange for an account receivable: 

       Is a cash equivalent for the recipient

       Is an account receivable for the recipient

       Is a note receivable for the recipient

       Is a short-term investment for the recipient

       Is a note payable for the recipient

    

3. Amounts received in advance from customers for future products or services: 

       Are revenues

       Increase income

       Are liabilities

       Are not allowed under GAAP

       Require an outlay of cash in the future

 

4. Advance ticket sales totaling $6,000,000 cash would be recognized as follows: 

       Debit Sales, credit Unearned Revenue

       Debit Unearned Revenue, credit Sales

       Debit Cash, credit Unearned Revenue

       Debit Unearned Revenue, credit Cash  

    

5. The matching principle requires: 

       That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user

       The use of the direct write-off method for bad debts

       The use of the allowance method of accounting for bad debts

       That bad debts be disclosed in the financial statements

       That bad debts not be written off  

    

6. If a company had net income of $2,379,600, interest expense of 234,000, a tax rate of 40%, and operating income of 4,200,000, what would the times interest earned ratio be for the company?

       10.17

       17.95     

       7.78

       7.18

       4.07  

    

7. A company has net sales of $870,000 and average accounts receivable of $174,000. What is its accounts receivable turnover for the period? 

       0.20

       5.00     

       20.0

       73.0

       1,825  

    

8. A company had average total assets of $897,000. Its gross sales were $1,090,000 and its net sales were $1,000,000. The company’s total asset turnover is equal to: 

       0.82

       0.90

       1.09

       1.11    

       1.26  

    

9. Sales taxes payable: 

       Is an estimated liability

       Is a contingent liability

       Is a current liability for retailers

       Is a business expense

       Is a long-term liability  

    

10. A machine originally had an estimated useful life of 5 years, but after 3 complete years, it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining: 

       2 years

       5 years

       7 years     

       8 years

       10 years 

    

11. On October 10, 2010, Printfast Company sells a commercial printer for $2,350 with a one year warranty that covers parts. Warranty expense is project to be 4% of sales. On February 28, 2011, the printer requires repairs. The cost of the parts for the repair is $80 and Printfast pays their technician $150 to perform the repair. What is the warranty liability at the end of 2010? 

       $49.00

       $84.80

       $94.00       

       $0, there is no liability at the end of 2010

       $230.00  

    

12. Most employees and employers are required to pay: 

       Local payroll taxes

       State payroll taxes

       Federal payroll taxes

       Both B and C only

       Local, state and federal payroll taxes  

    

13. Liabilities: 

       Must be certain

       Must sometimes be estimated

       Must be for a specific amount

       Must always have a definite date for payment

       Must involve an outflow of cash  

    

14. An employee earned $4,300 working for an employer. The current rate for FICA social security is 6.2% and the FICA Medicare rate is 1.45%. The employer’s total FICA payroll tax for this employee is: 

       $62.35

       $266.60

       $328.95     

       $657.90  

    

15. A special bank account used solely for the purpose of paying employees, is created by depositing the amount of each employees’ net pay into the account every pay period. This account is referred to as a(n): 

       Federal depository bank account

       Employee’s Individual Earnings account

       Employees’ bank account

       Payroll register account

       Payroll bank account  

    

16. A premium on common stock:

       Is the amount paid in excess of par by purchasers of newly issued stock

       Is the difference between par value and issue price when the amount paid is below par

       Represents profit from issuing stock

       Represents capital gain on sale of stock

       Is prohibited in most states  

    

17. The amount of income earned per share of a company’s common stock is known as: 

       Restricted retained earnings per share

       Earnings per share

       Continuing operations per share

       Dividends per share

       Book value per share  

    

18. A company has net income of $850,000. It also has 125,000 weighted-average common shares outstanding and a market value per share of $115. The company’s price-earnings ratio is equal to: 

       16.9    

       14.7

       92.0

       13.5

       8.0  

    

19. A company issues at par 7% bonds with a par value of $500,000 on June 1, which is 5 months after the most recent interest date. How much total cash interest is received on May 1 by the bond issuer? 

       $0

       $2,916.66

       $100,000.00

       $14,583.33

       $35,000.00  

    

20. A company’s board of directors’ votes to declare a cash dividend of $0.75 per share. The company has 15,000 shares authorized, 10,000 issued and 9,500 shares outstanding. The total amount of the cash dividend is: 

       $375

       $4,125

       $7,125    

       $7,500

       $11,250  

    

21. Bonds owned by investors whose names and addresses are recorded by the issuing company and for which interest payments are made with checks to the bondholders, are called: 

       Callable bonds

       Serial bonds

       Registered bonds

       Coupon bonds  

    

22. A company issues 9%, 20-year bonds with a par value of $750,000. The current market rate is 9%. The amount of interest owed to the bondholders for each semiannual interest payment is. 

       $0

       $33,750      

       $67,500

       $750,000

       $1,550,000  

    

23. A company borrowed $50,000 cash from the bank and signed a 6-year note at 7%. The present value factor for an annuity for 6 years at 7% is 4.7665. The annual annuity payments equal $10,490. The present value of the loan is: 

       $10,490

       $11,004

       $50,000       

       $52,450  

    

24. Sinking fund bonds: 

       Require the issuer to set aside assets in order retire the bonds at maturity

       Require equal payments of both principal and interest over the life of the bond issue

       Decline in value over time

       Are registered bonds  

    

25. A dividend preference for preferred stock means that: 

       Preferred stockholders receive their dividends before common shareholders

       Preferred shareholders are guaranteed dividends

       Dividends are paid quarterly

       Preferred stockholders prefer dividends more than common stockholders

       Dividends must be declared on preferred stock  

    

26. Bonds that have interest coupons attached to their certificates, which the bondholders detach during each interest period and present to a bank for collection, are called: 

       Coupon bonds

       Callable bonds

       Serial bonds

       Convertible bonds  

    

27. The Discount on Bonds Payable account is: 

       A liability

       A contra liability

       An expense

       A contra expense

       A contra equity  

    

28. Shamrock Company had net income of $30,000. On January 1, there were 8,000 shares of common stock outstanding. On April 1, the company issued an additional 2,000 shares of common stock. There were no other stock transactions. The company has an earnings per share of: 

       $3.75

       $3.00

       $3.33

       $15.00

       $3.16       

    

29. What is the debt to equity ratio for a company who has $700,000 in total liabilities and $3,500,000 in total equity? 

       20%    

       5

       $2,100,000

       2%

       .5

 

30. A bond sells at a discount when the: 

       Contract rate is above the market rate

       Contract rate is equal to the market rate

       Contract rate is below the market rate

       Bond has a short-term life

       Bond pays interest only once a year  

    

31. A company had a market price of $83.12 per share, earnings per share of $4.87 and dividends per share of $5.40. Its price-earnings ratio is equal to: 

       .056

       .065

       8.09

       15.39

       17.07      

    

32. The measurement of key relations among financial statement items is known as: 

       Financial reporting

       Horizontal analysis

       Investment analysis

       Ratio analysis

       Risk analysis  

    

33. One of several ratios that reflects solvency includes the:       

       Acid-test ratio

       Current ratio

       Times interest earned ratio

       Total asset turnover

       Days’ sales in inventory  

    

34. Dividing ending inventory by cost of goods sold and multiplying the result by 365 is equal to the: 

       Inventory turnover ratio

       Profit margin

       Days’ sales in inventory

       Current ratio

       Total asset turnover

 

35. A company’s transactions with its creditors to borrow money and/or to repay the principal amounts of loans are reported as cash flows from: 

       Operating activities

       Investing activities

       Financing activities

       Direct activities

       Indirect activities  

    

36. A company had net cash flows from operations of $120,000, total cash flows of $500,000 and average total assets of $2,500,000. The cash flow on total assets ratio equals: 

       4.8%     

       5.0%

       20.0%

       20.8%

       24.0%  

    

37. An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes is a(n):             

       Short-term marketable equity security

       Operating activity

       Common stock

       Cash equivalent

       Financing activity  

    

38. The average number of times a company’s inventory is sold during an accounting period, calculated by dividing cost of goods sold by the average inventory balance is equal to the: 

       Accounts receivable turnover

       Inventory turnover

       Days’ sales uncollected

       Current ratio  

    

39. The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts, such as receipts from customers and subtracts the major items of operating cash disbursements, such as cash paid for merchandise is referred to as the: 

       Direct method of reporting net cash provided or used by operating activities

       Cash basis of accounting

       Classified statement of cash flows

       Indirect method of reporting net cash provided or used by operating activities

       Net method of reporting cash flows from operating activities  

    

40. External users of financial information: 

       Are those individuals involved in managing and operating the company

       Include internal auditors and consultants

       Are not directly involved in operating the company

       Make strategic decisions for a company

       Make operating decisions for a company  

    

41. Comparative financial statements in which each amount is expressed as a percentage of a base amount and in which the base amount is expressed as 100%, are called:  

       Comparative statements

       Common-size comparative statements

       General-purpose financial statements

       Base line statements

       Index statements  

    

42. The ability to provide financial rewards sufficient to attract and retain financing is called: 

       Liquidity and efficiency

       Solvency

       Profitability

       Market prospects

       Creditworthiness  

    

43. A company has a profit margin of 8%. If net income is equal to $40,000 and average total assets is equal to $332,500, how much are net sales? 

       $3,200

       $500,000     

       $26,600

       $4,156,250

       $372,500  

    

44. Internal users of financial information: 

       Are not directly involved in operating a company

       Are those individuals involved in managing and operating the company

       Include shareholders and lenders

       Include directors and customers

       Include suppliers, regulators and the press

      

45. A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is: 

       $50,000

       $5,000

       $45,000

       Zero. This is an operating activity

       Zero. This is a financing activity  

    

46. Accounting standards: 

       Allow companies to omit the statement of cash flows from a complete set of financial statements if cash is an insignificant asset

       Require that companies omit the statement of cash flows from a complete set of financial statements if the company has no investing activities

       Require that companies include a statement of cash flows in a complete set of financial statements

       Allow companies to include the statement of cash flows in a complete set of financial statements if the cash balance makes up more than 50% of the current assets

       Allow companies to omit the statement of cash flows from a complete set of financial statements if the company has no financing activities  

    

47. A component of operating efficiency and profitability, calculated by expressing net income as a percent of net sales is equal to the: 

       Acid-test ratio

       Merchandise turnover

       Price earnings ratio

       Accounts receivable turnover

       Profit margin ratio  

    

48. The statement of cash flows reports: 

       Assets, liabilities and equity

       Revenues, gains, expenses and losses

       Cash inflows and outflows for an accounting period

       Equity, net income and dividends

       Changes in equity  

    

49. A company has a profit margin of 12%. If net income is equal to $450,000 and average total asset is equal to $600,500, how much are sales? 

       $1,050,500

       $126,060

       $72,060

       $54,000

       $3,750,000      

      

50. Current assets divided by current liabilities is equal to the 

       Current ratio

       Quick ratio

       Debt ratio

       Liquidity ratio

       Solvency ratio