Question 1
Blaney Clothing Store had a balance in the Accounts Receivable account of $437,500 at the beginning of the year and a balance of $500,000 at the end of the year. Net credit sales during the year amounted to $3,000,000. The average collection period of the receivables in terms of days was
53.2 days.
365 days.
60.1 days.
57 days.
Question 2
Which one of the following is primarily interested in the liquidity of a company?
Federal government
Stockholders
Long-term creditors
Short-term creditors
Quedtion 3
The order of presentation of nontypical items that may appear on the income statement is
Extraordinary items, Discontinued operations, Other revenues and expenses.
Discontinued operations, Extraordinary items, Other revenues and expenses.
Other revenues and expenses, Discontinued operations, Extraordinary items.
Other revenues and expenses, Extraordinary items, Discontinued operations
Question 4
Vertical analysis is a technique which expresses each item within a financial statement
in dollars and cents.
in terms of a percentage of the item in the previous year.
in terms of a percent of a base amount.
starting with the highest value down to the lowest value.
Question 5
Saira, Inc. has the following income statement (in millions):
SAIRA, INC.
Income Statement
For the Year Ended December 31, 2014
Net Sales $300
Cost of Goods Sold 180
Gross Profit 120
Operating Expenses 45
Net Income $75
Using vertical analysis, what percentage is assigned to Cost of Goods Sold?
40%
60%
100%
None of these answer choices are correct
Question 6
Lake Company reported the following on its income statement:
Income before income taxes $600,000
Income tax expense 150,000
Net income $450,000
An analysis of the income statement revealed that interest expense was $60,000. Lake Company's times interest earned was
11 times.
10 times.
8.5 times.
7.5 times
Question 7
The following information is available for Oakland Company:
2015 2014
Accounts receivable $ 430,000 $ 460,000
Inventory 280,000 320,000
Net credit sales 2,670,000 1,600,000
Cost of goods sold 1,860,000 1,060,000
Net income 300,000 170,000
The accounts receivable turnover ratio for 2015 is
1.4 times.
6.2 times.
6.0 times.
5.8 times
Question 8
Which one of the following is not a tool in financial statement analysis?
Horizontal analysis
Circular analysis
Vertical analysis
Ratio analysis
Question 9
Short-term creditors are usually most interested in evaluating
solvency.
liquidity.
marketability.
profitability.
Question 10
Blaine Company had these transactions pertaining to stock investments:
Feb. 1 Purchased 2,000 shares of Norton Company (10%) for $51,000.
June 1 Received cash dividends of $2 per share on Horton stock.
Oct. 1 Sold 1,200 shares of Horton stock for $32,400.
The entry to record the sale of the stock would include a
debit to Cash for $30,600.
credit to Gain on Sale of Stock Investments for $1,200.
debit to Stock Investments for $30,600.
credit to Gain on Sale of Stock Investments for $1,800
Quedtion 11
On January 1, 2014, Brenner Company purchased at face value, a $1,000, 10% bond that pays interest on January 1 and July 1. Brenner Company has a calendar year end.
The entry for the receipt of interest on January 1, 2015 is
Cash........................................................................................ 110
Interest Revenue............................................................. 110
Cash........................................................................................ 100
Interest Receivable.......................................................... 100
Cash........................................................................................ 40
Interest Revenue............................................................. 40
Cash........................................................................................ 50
Interest Receivable.......................................................... 50
Question 12
Ban Co. purchased 50, 5% Waylan Company bonds for $50,000 cash plus brokerage fees of $500. Interest is payable semiannually on July 1 and January 1. The entry to record the December 31 interest accrual would include a
debit to Interest Receivable for $1,250.
debit to Interest Revenue for $1,250.
credit to Interest Revenue for $1,262.50.
debit to Debt Investments for $1,262.50.
Question 13
At the time of acquisition of a debt investment,
no journal entry is required.
the historical cost principle applies.
the Stock Investments account is debited when bonds are purchased.
the Investment account is credited for its cost plus brokerage fees.
Question 14
For accounting purposes, the method used to account for long-term investments in common stock is determined by
the amount paid for the stock by the investor.
the extent of an investor’s influence on the operating and financial affairs of the investee.
whether the stock has paid dividends in past years.
whether the acquisition of the stock by the investor was “friendly” or “hostile.”
Question 15
Pension funds and mutual funds regularly invest in debt and stock securities to
generate earnings.
house excess cash until needed.
meet strategic goals.
control the company in which they invest
Question 16
On January 1, 2014, Lark Corporation purchased 35% of the common stock outstanding of Dinc Corporation for $700,000. During 2014, Dinc Corporation reported net income of $200,000 and paid cash dividends of $100,000. The balance of the Stock Investments—Dinc account on the books of Lark Corporation at December 31, 2014 is
$700,000.
$735,000.
$770,000.
$665,000
Question 17
The cost method of accounting for long-term investments in stock should be employed when the
investor owns more than 50% of the investee’s stock.
investor has significant influence on the investee and the stock held by the investor are marketable equity securities.
market value of the shares held is greater than their historical cost.
investor’s influence on the investee is insignificant
Question 18
In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as a(n)
subtraction from net income.
addition to net income.
addition to cash flow from investing activities.
subtraction from cash flow from investing activities
Question 19
Under IFRS, the cash flow statement can be prepared using
the direct method only.
the indirect method only.
either the direct or indirect method.
the T-account method only
Question 20
The statement of cash flows should help investors and creditors assess each of the following except the
entity's ability to generate future income.
entity's ability to pay dividends.
reasons for the difference between net income and net cash provided by operating activities.
cash investing and financing transactions during the period
Question 21
Lending money and collecting the loans are
operating activities.
investing activities.
financing activities.
Non-cash investing and financing activities.
Question 22
If $250,000 of bonds are issued during the year but $130,000 of old bonds are retired during the year, the statement of cash flows will show a(n)
net increase in cash of $120,000.
net decrease in cash of $120,000.
increase in cash of $250,000 and a decrease in cash of $130,000.
net gain on retirement of bonds of $120,000.
Question 23
A company had net income of $210,000. Depreciation expense is $27,000. During the year, Accounts Receivable and Inventory increased $17,000 and $42,000, respectively. Prepaid Expenses and Accounts Payable decreased $5,000 and $6,000, respectively. There was also a loss on the sale of equipment of $2,000. How much cash was provided by operating activities?
$175,000
$179,000
$241,000
$271,000
Question 24
Generally, the most important category on the statement of cash flows is cash flows from
operating activities.
investing activities.
financing activities.
significant noncash activities
Question 25
Jean’s Vegetable Market had the following transactions during 2014:
1. Issued $50,000 of par value common stock for cash.
2. Repaid a 6 year note payable in the amount of $22,000.
3. Acquired land by issuing common stock of par value $100,000.
4. Declared and paid a cash dividend of $2,000.
5. Sold a long-term investment (cost $3,000) for cash of $8,000.
6. Acquired an investment in IBM stock for cash of $15,000.
What is the net cash provided (used) by investing activities?
$15,000
$33,000
($7,000)
$8,000
