1. On which financial statement is the accounts payable balance reported? Select one.
A. Statement of cash flows
B. Statement of owner's equity
C. Income statement
D. Balance sheet
2. The adjustments for the month caused the revenue account to increase by $5,000 and the salaries expense account to increase by $3,000. How will the $5,000 net income based on the trial balance be affected? Select one.
A. It will increase by $2,000.
B. It will increase by $3,000.
C. It will decrease by $5,000.
D. It will decrease by $0.
3. Net income was incorrectly understated by $6,000 on the year-end income statement.
How will the statement of cash flows reflect correction of this error? Select one.
A. Decrease of $6,000 in operating activities
B. Increase of $6,000 in operating activities
C. Increase of $6,000 in investing activities
D. Decrease of $6,000 in investing activities
4. A company shows common size comparisons for two years on balance sheets. There is almost a two-fold increase in cash and equivalents, a 3% decrease in inventories, a small decrease in net property and equipment, and a large increase in retained earnings.
What does this data indicate about the company? Select one.
A. Its financial strength has deteriorated.
B. Its financial strength has improved.
C. It is failing to maintain its financial strength and should have serious concerns about its net income.
D. It is a stable company but it should be concerned about the performance of its assets in relation to income.
Income Taxes Payable
The statement of cash flows has been prepared using the indirect method.
What is the effect on net cash provided by operating activities for the year?
A. $8,000 increase
B. $6,000 increase
C. $6,000 decrease
D. $8,000 decrease
Overhead (50% fixed)
Sales Salaries Expense
What is the contribution margin? Select one.
7. The following information is taken from a company's operating activities on the statement of cash flows prepared using the indirect method.
Net Cash Provided by Operating Activites
What is the change in current assets based on the data shown above? Select one.
A. $1,000 decrease
B. $1,000 increase
C. $5,000 decrease
D. $5,000 increase
8. Selected Financial Data:
Which statement is correct, based on a horizontal analysis of the given data?
A. Sales to inventory is weak and cash to sales is strong.
B. Sales to inventory is weak and cash to sales is weak.
C. Sales to inventory is strong and cash to sales is strong.
D. Sales to inventory is strong and cash to sales is weak.
9. Partial Balance Sheet Data:
Property, Plant, and Equipment (net)
Assuming a vertical analysis of balance sheets, which statement is correct? Select one.
A. Total liabilities percentage was lower this year.
B. Accounts receivable percentage was higher this year.
C. Total current liabilities percentage was lower this year.
D. Cash account percentage was lower this year.
10. Income Statement Data:
Cost of Goods Sold
Income Tax Expense
Based on a horizontal analysis of the data, which statement correctly identifies the company's performance this year? Select one.
A. Cost of goods sold shows improvement related to revenue.
B. Income tax expense has a lower percentage increase than revenue.
C. Revenue improved by 20%.
D. Operating income improved at a greater percentage than revenue.
11. Partial Income Statement Data:
Cost of Goods Sold
Income Tax Expense
What does a vertical analysis of income statements show regarding this year's activity compared to last year's activity? Select one.
A. A favorable change in operating income this year
B. A favorable change in labor expense this year
C. A 20% increase in revenue this year
D. A favorable change in cost of goods sold this year
12. Which statement is true regarding accounting and time frames? Select one.
A. Manufacturers are required to use the calendar year as their fiscal year.
B. Time frames do not matter when performing reversing entries.
C. Time frames are significant when performing adjusting entries.
D. Companies with inventory must adopt the calendar year as a fiscal year.
13. A company purchased $150,000 worth of production equipment on April 1. Management decided to depreciate the equipment over four years using straight line depreciation. The salvage value is $30,000. The company uses a calendar year as its fiscal year.
What is the impact on the financial statements for fiscal year 2 from this purchase?
A. Depreciation expense will be $30,000.
B. Accumulated depreciation will be recorded as $75,000.
C. Accumulated depreciation will be recorded as $60,000.
D. Depreciation expense will be $37,500.
Budgeted sales for July (units)
Ratio of inventory to sales
Budgeted ending inventory (units), June 30
Budgeted sales (units) for June
Required units of inventory
Beginning inventory (units), June 1
Units to be purchased
Budgeted cost per unit
Budgeted cost of purchases
Why will 2,460 units need to be purchased in June? Select one.
A. To eliminate the possibility of a stock-out for June sales
B. To satisfy the ratio of inventory to budgeted cost of purchases
C. To meet the sales and ending inventory demands at the end of June
D. To eliminate the possibility of a stock-out for July sales
15. Cash Budget for April:
Beginning Cash Balance $18,000
Cash Receipts from Customers $76,000
Payments for Inventory
Supplies and Utilities
If a minimum cash balance of $20,000 is required, how much cash must be borrowed from the bank during April? Select one.
16. Which type of ratio is return on total assets an example of? Select one.
B. Market prospects
17. Which ratio is used to measure solvency? Select one.
A. Current ratio
B. Total asset turnover
C. Inventory turnover
D. Equity ratio
18. What is an example of a market prospects ratio? Select one.
A. Gross margin ratio
B. Price earnings ratio
C. Profit margin ratio
D. Return on total assets ratio
Here is the SOLUTION