Which of the following characteristics may result in theclassification of a liability being changed from current tononcurrent:
a) violation of a subjective acceleration clause
b) violation of a objective acceleration clause
c) a demand provision for payment
d) refiancing after the balance sheet date
Pending litigation would generally be considered:
a) nonmonetary liabilty
b) contingent liability
c) estimated liability
d) current liability
Barrons Co. current ratio is 2:1. Which of the followingtransactions would normally increase Barney's current ratio?
a) purchasing inventory on account
b) borring money by signing a long-term note
c) collecting an account receivable
d) purchasing land for cash
On multiple step income statement, gains or losses on sale ofequipment would be shown
a) before gross profit on sales
b) after gross profit on sales but before income from conitnuingoperations
c) after income from continuing operations but before incomefrom extraordinary items
d) after income before extraordinary items but before netincome
A single step income statement is a format that
a) compares the current years income with last year's income
b) recongnizes subtotals at intermediate stages such as grossmargin
c) combines revenues and gains and subtracts from them expensesand losses, resulting in income from operations
d) reports sales revenue, cost of goods sold, gross margin, andall other expenses
In contrast with a multiple-step income statement, a single stepincome statement does NOT show the amount of
a) income taxes on continuing operations
b) cost of goods sold
c) gross profit
d) earnings per share
The amount of income reported for tax purposes
a) is nomally greater than the net income reported tostockholders
b) must be computed according to GAAP
c) is used to compute earnings per share
d) may differ from the amount of income detemined for financialreporting purposes
Under the general rule of revenue recognition, revenue isrecognized when
a) marketability and market price are assured
b) a contractual agreement exists, and cash collection isassured
c) the earnings process is complete, and a valid promise ofpayment has been received
d) all related expenses have been incurred
Seaworth Company's gross sales in 2014 were 3930000. Assumingsales returns and allowances were 74000 sales discounts were 35000and freight-out was 28000 what were Seaworthy's net sales in2014?
a) 3792000
b) 3821000
c)3856000
d) 3930000
On June 30, 2014 Sonata COmpanys operating facilities inNebraska were detroyed by a flood. The loss of $700000 was notcovered by insurance. Sonata's tax rate for 2014 is 40 percent. InSonatas income statement for the year ended sept 30 2014 this eventshould be reported as an extraordinary loss of
a) 0
b) 280000
c) 420000
d) 700000
In a statement of cash flows, payments to acquire debtinstruments of other entities would typically be classified as cashoutflows for
a) financing activities
b) equity activities
c) operating activities
d) investing activities
A gain on the sale of a plan asset in the ordinary course ofbusiness should be presented in a staement of cash flows preparedusing the indirect method as
a) a cash inflow from investing activities
b) a cash inflow from financing activities
c) a deduction from net income
d) a addition to net income
In a statement of cash flows, proceeds from issuing equityinstruments should be classified as cash inflows from
a) brokerage activities
b) financing activities
c) investing activites
d) operating activities
When preparing a statement of cash flows using the indirectmethod, the amortization of trademarks should be reported as a
a) increase in cash flows from investing activities
b) reduction in cash flows from investing activities
c) increase in cash flows from operating activities
d) reduction in cash flows from operating activites
A loss in the sale of machinery in the ordinary course ofbusiness should be presented in a statement of cash flows( indirectmethod) as
a) an addition to net income
b) a deduction from net income
c) an inflow and outflow of cash
d) an outflow of cash
In preparing a statement of cash flows, which of the followingtransactions would be considered an investing activity?
a) sale of a business segment
b) Issuance of bonds payable at a discount
c) purchase of treasury stock
d) sale of capital stock
In a statement of cash flows (indirect method), depreciation istreated as an adjustment to reported net income becausedepreciation
a) is an inflow of cash to reserve account for assetreplacement
b) reduces the reported net income and involves an inflow ofcash
c) reduces the reported net inome but does not involve anoutflow of cash
d) usually represents a significant portion of operatingexpense
Which of the following characteristics may result in theclassification of a liability being changed from current tononcurrent:
a) violation of a subjective acceleration clause
b) violation of a objective acceleration clause
c) a demand provision for payment
d) refiancing after the balance sheet date
Pending litigation would generally be considered:
a) nonmonetary liabilty
b) contingent liability
c) estimated liability
d) current liability
Barrons Co. current ratio is 2:1. Which of the followingtransactions would normally increase Barney's current ratio?
a) purchasing inventory on account
b) borring money by signing a long-term note
c) collecting an account receivable
d) purchasing land for cash
On multiple step income statement, gains or losses on sale ofequipment would be shown
a) before gross profit on sales
b) after gross profit on sales but before income from conitnuingoperations
c) after income from continuing operations but before incomefrom extraordinary items
d) after income before extraordinary items but before netincome
A single step income statement is a format that
a) compares the current years income with last year's income
b) recongnizes subtotals at intermediate stages such as grossmargin
c) combines revenues and gains and subtracts from them expensesand losses, resulting in income from operations
d) reports sales revenue, cost of goods sold, gross margin, andall other expenses
In contrast with a multiple-step income statement, a single stepincome statement does NOT show the amount of
a) income taxes on continuing operations
b) cost of goods sold
c) gross profit
d) earnings per share
The amount of income reported for tax purposes
a) is nomally greater than the net income reported tostockholders
b) must be computed according to GAAP
c) is used to compute earnings per share
d) may differ from the amount of income detemined for financialreporting purposes
Under the general rule of revenue recognition, revenue isrecognized when
a) marketability and market price are assured
b) a contractual agreement exists, and cash collection isassured
c) the earnings process is complete, and a valid promise ofpayment has been received
d) all related expenses have been incurred
Seaworth Company's gross sales in 2014 were 3930000. Assumingsales returns and allowances were 74000 sales discounts were 35000and freight-out was 28000 what were Seaworthy's net sales in2014?
a) 3792000
b) 3821000
c)3856000
d) 3930000
On June 30, 2014 Sonata COmpanys operating facilities inNebraska were detroyed by a flood. The loss of $700000 was notcovered by insurance. Sonata's tax rate for 2014 is 40 percent. InSonatas income statement for the year ended sept 30 2014 this eventshould be reported as an extraordinary loss of
a) 0
b) 280000
c) 420000
d) 700000
In a statement of cash flows, payments to acquire debtinstruments of other entities would typically be classified as cashoutflows for
a) financing activities
b) equity activities
c) operating activities
d) investing activities
A gain on the sale of a plan asset in the ordinary course ofbusiness should be presented in a staement of cash flows preparedusing the indirect method as
a) a cash inflow from investing activities
b) a cash inflow from financing activities
c) a deduction from net income
d) a addition to net income
In a statement of cash flows, proceeds from issuing equityinstruments should be classified as cash inflows from
a) brokerage activities
b) financing activities
c) investing activites
d) operating activities
When preparing a statement of cash flows using the indirectmethod, the amortization of trademarks should be reported as a
a) increase in cash flows from investing activities
b) reduction in cash flows from investing activities
c) increase in cash flows from operating activities
d) reduction in cash flows from operating activites
A loss in the sale of machinery in the ordinary course ofbusiness should be presented in a statement of cash flows( indirectmethod) as
a) an addition to net income
b) a deduction from net income
c) an inflow and outflow of cash
d) an outflow of cash
In preparing a statement of cash flows, which of the followingtransactions would be considered an investing activity?
a) sale of a business segment
b) Issuance of bonds payable at a discount
c) purchase of treasury stock
d) sale of capital stock
In a statement of cash flows (indirect method), depreciation istreated as an adjustment to reported net income becausedepreciation
a) is an inflow of cash to reserve account for assetreplacement
b) reduces the reported net income and involves an inflow ofcash
c) reduces the reported net inome but does not involve anoutflow of cash
d) usually represents a significant portion of operatingexpense
Related questions
Chapter 12âFinancial Statement Analysis (10points)
MUMULTIPLECHOICE
1. 1. The relationship of $325,000to $125,000, expressed as a ratio, is
a. | 2.0 to 1 |
b. | 2.6 to 1 |
c. | 2.5 to 1 |
d. | 0.45 to 1 |
2. In a common size income statement,the 100% figure is:
a. | net cost of goods sold. |
b. | net income. |
c. | gross profit. |
d. | net sales. |
3. Based on the following data for thecurrent year, what is the number of days' sales in accountsreceivable?
Net sales on account during year | $584,000 |
Cost of merchandise sold during year | 300,000 |
Accounts receivable, beginning of year | 45,000 |
Accounts receivable, end of year | 35,000 |
Inventory, beginning of year | 90,000 |
Inventory, end of year | 110,000 |
a. | 7.3 |
b. | 2.5 |
c. | 14.6 |
d. | 25 |
4. Based on the following data for thecurrent year, what is the number of days' sales in inventory?
Net sales on account during year | $1,204,500 |
Cost of merchandise sold during year | 657,000 |
Accounts receivable, beginning of year | 75,000 |
Accounts receivable, end of year | 85,000 |
Inventory, beginning of year | 85,600 |
Inventory, end of year | 98,600 |
a. | 51.2 |
b. | 44.4 |
c. | 6.5 |
d. | 7.5 |
5. The number of times interest expenseis earned is computed as
a. | net income plus interest expense, divided by interestexpense |
b. | income before income tax plus interest expense, divided byinterest expense |
c. | net income divided by interest expense |
d. | income before income tax divided by interest expense |
6. The current ratio is
a. | used to evaluate a company's liquidity and short-term debtpaying ability. |
b. | is a solvency measure that indicated the margin of safety of anoteholder or bondholder. |
c. | calculated by dividing current liabilities by currentassets. |
d. | calculated by subtracting current liabilities from currentassets. |
7. A company with $70,000 in current assets and $50,000 incurrent liabilities pays a $1,000 current liability. As a result ofthis transaction, the current ratio and working capital will
a. | both decrease. |
b. | both increase. |
c. | increase and remain the same,respectively. |
d. | remain the same and decrease,respectively. |
8. Hsu Company reported the following onits income statement:
Income before income taxes | $420,000 | |
Income tax expense | 120,000 | |
Net income | $300,000 |
An analysis of the income statement revealed that interestexpense was $80,000. Hsu Company's times interest earned was
a. | 8 times. |
b. | 6.25 times. |
c. | 5.25 times. |
| d. e. | 5 times. None of the above |
9. The following information pertains toBrock Company. Assume that all balance sheet amounts represent bothaverage and ending balance figures. Assume that all sales were oncredit.
Assets
Cash and short-term investments | $ 40,000 | ||
Accounts receivable (net) | 30,000 | ||
Inventory | 25,000 | ||
Property, plant and equipment | 215,000 | ||
Total Assets | $310,000 | ||
Liabilities and Stockholdersâ Equity
Current liabilities | $ 60,000 | ||
Long-term liabilities | 95,000 | ||
Stockholdersâ equity-common | 155,000 | ||
Total Liabilities and stockholdersâ equity | $310,000 | ||
Income Statement
Sales | $ 90,000 | ||
Cost of goods sold | 45,000 | ||
Gross margin | 45,000 | ||
Operating expenses | 20,000 | ||
Net income | $ 25,000 | ||
Number of shares of common stock | 6,000 |
Market price of common stock | $20 |
What is the current ratio for thiscompany?
a. | 1.42 |
b. | 0.78 |
c. | 1.58 |
| d. e | 0.67 None of the above |
11. Basedon the above data, what is the amount of quick assets?
a. | $168,000 |
b. | $96,000 |
c. | $60,000 |
| d. e | $61,000 None of the above |
12. Basedon the above data, what is the amount of working capital?
a. | $213,000 |
b. | $113,000 |
c. | $153,000 |
| d. e | $39,000 None of the above |
13. Thetendency of the rate earned on stockholders' equity to varydisproportionately from the rate earned on total assets issometimes referred to as
a. | leverage |
b. | solvency |
c. | yield |
d. | quick assets |
The balance sheets at the end of each of the first two years ofoperations indicate the following:
2012 | 2011 | |
Total current assets | $600,000 | $560,000 |
Total investments | 60,000 | 40,000 |
Total property, plant, and equipment | 900,000 | 700,000 |
Total current liabilities | 125,000 | 65,000 |
Total long-term liabilities | 350,000 | 250,000 |
Preferred 9% stock, $100 par | 100,000 | 100,000 |
Common stock, $10 par | 600,000 | 600,000 |
Paid-in capital in excess of par-common stock | 75,000 | 75,000 |
Retained earnings | 310,000 | 210,000 |
14. Ifnet income is $115,000 and interest expense is $30,000 for 2012what is the rate earned on total assets for 2012 (round percent toone decimal point)?
a. | 9.3% |
b. | 10.1% |
c. | 8.0% |
| d. e. | 7.4% None of the above |
15. Ifnet income is $115,000 and interest expense is $30,000 for 2012,what is the rate earned on stockholders' equity for 2012 (roundpercent to one decimal point)?
a. | 10.6% |
b. | 11.1% |
c. | 12.4% |
| d. e. | 14.0% None of the above |
16. Ifnet income is $115,000 and interest expense is $30,000 for 2012,what are the earnings per share on common stock for 2012, (round totwo decimal places)?
a. | $2.07 |
b. | $1.92 |
c. | $1.77 |
| d. e. | $1.64 None of the above |
17. Theparticular analytical measures chosen to analyze a company may beinfluenced by all of the following except:
a. | industry type |
b. | capital structure |
c. | diversity of business operations |
d. | product quality or service effectiveness |
18. In2012 Robert Corporation had net income of $250,000 and paiddividends to common stockholders of $50,000. They had 50,000 sharesof common stock outstanding during the entire year. RobertCorporation's common stock is selling for $50 per share on the NewYork Stock Exchange.
Robert Corporation's price-earnings ratio is
a. | 10 times. |
b. | 5 times. |
c. | 2 times. |
| d. e. | 8 times. None of the above |
19. Leveraging implies that a company
a. | contains debt financing. |
b. | contains equity financing. |
c. | has a high current ratio. |
d. | has a high earnings per share. |
20. Percentage analyses, ratios, turnovers, and other measures offinancial position and operating results are
a. | a substitute for sound judgment. |
b. | useful analytical measures. |
c. | enough information for analysis, industry information is notneeded. |
d. | unnecessary for analysis, but reaction is better. |
