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

1. The matching principle requires: (Points : 2)

       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

Question 2. 2. Many companies use accelerated depreciation in computing taxable income because: (Points : 2)

       It is required by the tax rules It is required by financial reporting rules It postpones tax payments until later years and the company can use the resources now to earn additional income before payment is due Using it causes a company to use higher income in the early years of the asset's useful life The results are identical to straight-line depreciation

Question 3. 3. A contingent liability: (Points : 2)

       Is always of a specific amount Is a potential obligation that depends on a future event arising out of a past transaction or event Is an obligation not requiring future payment Is an obligation arising from the purchase of goods or services on credit Is an obligation arising from a future event

Question 4. 4. Advance ticket sales totaling $6,000,000 cash would be recognized as follows: (Points : 2)

       Debit Sales, credit Unearned Revenue Debit Unearned Revenue, credit Sales Debit Cash, credit Unearned Revenue Debit Unearned Revenue, credit Cash

Question 5. 5. Revenue expenditures: (Points : 2)

       Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities Are known as balance sheet expenditures Extend the asset's useful life Substantially benefit future periods Are debited to asset accounts

Question 6. 6. A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. The depletion expense per ton of ore is: (Points : 2)

       $0.75 $0.625 $0.875 $6.00 $8.00

Question 7. 7. Obligations due to be paid within one year or within the company's operating cycle, whichever is longer, are: (Points : 2)

       Current assets Current liabilities Earned revenues Operating cycle liabilities Bills

Question 8. 8. The interest accrued on $3,600 at 7% for 60 days is: (Points : 2)

       $36 $42 $252 $180 $420

Question 9. 9. A company had a fixed interest expense of $6,000, its income before interest expense and any income taxes was $18,000 and its net income was $8,400. The company's times interest earned ratio is equals to (Points : 2)

       0.33 0.71 1.40 3.00 12,000

Question 10. 10. In the accounting records of a defendant, lawsuits: (Points : 2)

       Are estimated liabilities Should always be recorded Should always be disclosed Should be recorded if payment for damages is probable and the amount can be reasonably estimated

Question 11. 11. Depletion: (Points : 2)

       Is the process of allocating the cost of natural resources to periods in which they are consumed Is also called depreciation Is also called amortization Is an unrealized expense reported in equity Is the process of allocating the cost of intangibles to periods in which they are used

Question 12. 12. A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the: (Points : 2)

       Direct write-off method Aging of accounts receivable method Percentage of sales method Aging of investments method Percent of accounts receivable method

Question 13. 13. Pepsi's accounts receivable turnover was 9.9 for this year and 11.0 for last year. Coke's turnover was 9.3 for this year and 9.3 for last year. These results imply that: (Points : 2)

       Coke has the better turnover for both years Pepsi has the better turnover for both years Coke's turnover is improving Coke's credit policies are too loose Coke is collecting its receivables more quickly than Pepsi in both years

Question 14. 14. 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: (Points : 2)

       2 years 5 years 7 years 8 years 10 years

Question 15. 15. FICA taxes include: (Points : 2)

       Social Security taxes Charitable giving Employee income taxes Unemployment taxes

Question 16. 16. Which of the following statements is true? (Points : 2)

       Interest on bonds is tax deductible Interest on bonds is not tax deductible Dividends to stockholders are tax deductible Bonds do not have to be repaid

Question 17. 17. The right of common shareholders to protect their proportionate interest in a corporation by having the first opportunity to buy additional proportionate shares of common stock issued by the corporation is called a: (Points : 2)

       Preemptive right Proxy right Right to call Financial leverage

Question 18. 18. A corporation's distribution of additional shares of its own stock to its stockholders without the receipt of any payment in return is called a: (Points : 2)

       Stock dividend Stock subscription Premium on stock Discount on stock Treasury stock

Question 19. 19. A bond sells at a discount when the: (Points : 2)

       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

Question 20. 20. When a bond sells at a premium: (Points : 2)

       The contract rate is above the market rate The contract rate is equal to the market rate The contract rate is below the market rate It means that the bond is a zero coupon bond The bond pays no interest

Question 21. 21. Secured bonds: (Points : 2)

       Are also referred to as debentures Have specific assets of the issuing company pledged as collateral Are backed by the issuer's bank Are subordinated to those of other unsecured liabilities Are the same as sinking fund bonds

Question 22. 22. To provide security to creditors and to reduce interest costs, bonds and notes payable can be secured by: (Points : 2)

       Safe deposit boxes Mortgages Equity The FASB Debentures

Question 23. 23. What is the debt to equity ratio for a company who has $700,000 in total liabilities and $3,500,000 in total equity? (Points : 2)

       20% 5 $2,100,000 2% .5

Question 24. 24. Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are: (Points : 2)

       Debentures Discounted notes Installment notes Indentures Investment notes

Question 25. 25. A company purchased equipment and signed a 7-year installment loan at 9% annual interest. The annual payments equal $9,000. The present value factor for an annuity for 7 years at 9% is 5.0330. The present value of the loan is: (Points : 2)

       $9,000 $5,033 $63,000 $57,330 $45,297

Question 26. 26. 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. (Points : 2)

       $0 $33,750 $67,500 $750,000 $1,550,000

Question 27. 27. 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: (Points : 2)

       Coupon bonds Callable bonds Serial bonds Convertible bonds

Question 28. 28. A company borrowed $300,000 cash from the bank by signing a 5-year, 8% installment note. The present value factor for an annuity at 8% for 5 years is 3.9927. Each annuity payment equals $75,137. The present value of the note is: (Points : 2)

       $75,137 $94,013 $300,000 $375,685

Question 29. 29. A bondholder that owns a $1,000, 10%, 10-year bond has: (Points : 2)

       Ownership rights The right to receive $10 per year until maturity The right to receive $1,000 at maturity The right to receive $10,000 at maturity

Question 30. 30. Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is called: (Points : 2)

       Noncumulative preferred stock Participating preferred stock Callable preferred stock Cumulative preferred stock Convertible preferred stock

Question 31. 31. 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? (Points : 2)

       $1,050,500 $126,060 $72,060 $54,000 $3,750,000

Question 32. 32. 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): (Points : 2)

       Short-term marketable equity security Operating activity Common stock Cash equivalent Financing activity

Question 33. 33. The statement of cash flows reports: (Points : 2)

       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

Question 34. 34. 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: (Points : 2)

       Accounts receivable turnover Inventory turnover Days' sales uncollected Current ratio

Question 35. 35. Wessen Company reports net income of $180,000 for the year ended December 31, 2010. It also reports $45,800 depreciation expense, $21,410 amortization expense and a $15,000 gain on the sale of machinery. Its comparative balance sheets reveal a $28,300 increase in accounts receivable, $20,400 decrease in accounts payable, $10,470 increase in prepaid expenses, and $33,140 decrease in wages payable. What is the net cash flows provided (used) by operating activities using the indirect method? (Points : 2)

       ($140,200) $133,490 $139,900 ($133,490) $78,300

Question 36. 36. 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: (Points : 2)

       Operating activities Investing activities Financing activities Direct activities Indirect activities

Question 37. 37. One of several ratios that reflects solvency includes the: (Points : 2)

       Acid-test ratio Current ratio Times interest earned ratio Total asset turnover Days' sales in inventory

Question 38. 38. The ability to provide financial rewards sufficient to attract and retain financing is called: (Points : 2)

       Liquidity and efficiency Solvency Profitability Market prospects Creditworthiness

Question 39. 39. A component of operating efficiency and profitability, calculated by expressing net income as a percent of net sales is equal to the: (Points : 2)

       Acid-test ratio Merchandise turnover Price earnings ratio Accounts receivable turnover Profit margin ratio

Question 40. 40. Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as: (Points : 2)

       Financing activities Investing activities Operating activities Direct activities Indirect activities

Question 41. 41. Net sales divided by average accounts receivable is equal to the: (Points : 2)

       Days' sales uncollected Average accounts receivable ratio Current ratio Profit margin Accounts receivable turnover ratio

Question 42. 42. Net income divided by net sales is equal to the: (Points : 2)

       Return on total assets Profit margin Current ratio Total asset turnover Days' sales in inventory

Question 43. 43. 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: (Points : 2)

       .056 .065 8.09 15.39 17.07

Question 44. 44. Financial reporting refers to: (Points : 2)

       The application of analytical tools to general-purpose financial statements The communication of relevant financial information to decision makers Financial statements only Ratio analysis Profitability

Question 45. 45. Dividing ending inventory by cost of goods sold and multiplying the result by 365 is equal to the: (Points : 2)

       Inventory turnover ratio Profit margin Days' sales in inventory Current ratio Total asset turnover

Question 46. 46. Selected information from Doodle Company's for 2010 is below (in millions): Inventory decreased $6.0 Accounts Payable increased by $7.0 Cost of goods sold $36.50 Salaries Expense $24.0 Salaries Payable decreased $6.0 Accounts Receivable increased by $10.0 Sales $56.4 What is the amount of cash paid for salaries by Doodle during 2010? (Points : 2)

       $4.0 $6.0 $24.0 $30.0 $18.0

Question 47. 47. Financial statements with data for two or more successive accounting periods placed in columns side by side, sometimes with changes shown in dollar amounts and percents, are referred to as: (Points : 2)

       Period-to-period statements Controlling statements Successive statements Comparative statements Serial statements

Question 48. 48. External users of financial information: (Points : 2)

       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

Question 49. 49. Trend analysis is also called: (Points : 2)

       Financial analysis Ratio analysis Index number trend analysis Industry analysis

Question 50. 50. Which of the following items is not likely to be considered an extraordinary item? (Points : 2)

       Loss from an unexpected union strike Condemnation of property by the city government Loss of use of property due to a new and unexpected environmental regulation Loss due to an earthquake in Florida Expropriation of property by a foreign government

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