2024 – 1 Current liabilities are obligations due within one year or within the company s normal operating cycle

1. Current liabilities are obligations due within:
           
one year or within the company’s normal operating cycle if it is longer than one year.     
         
one year or within the company’s normal operating cycle if it is shorter than one year.     
         
one month or within the company’s normal operating cycle if it is longer than one month    
         
one month or within the company’s normal operating cycle if it is shorter than one month    
 
2. Warranty expense should be recorded in the period:
         
that the product sold is repaired or replaced   
         
the product is sold     
         
immediately following the period in which the product is sold    
         
that the product is paid for by the customer    
3. Short-term notes payable:
           
are generally due within three months, with a maximum time period of six months.     
         
are shown as a reduction to notes receivable on the balance sheet, with an appropriate footnote disclosure    
         
are shown on the balance sheet with current liabilities     
         
are shown on the balance sheet after bonds payable   
 
4. Which is the preferred method to use when amortizing a bond discount or premium?
         
straight-line method of amortization     
         
market-interest rate method of amortization     
         
effective-interest method of amortization      
         
both s A and B     
  
5. All of the following are advantages of issuing stock except:
          
less risky to the issuing corporation    
         
creates no liabilities for the corporation    
         
creates no interest expense which must be paid   
         
generally results in a higher earnings per share     
  
6. All of the following are advantages of issuing bonds except:
         
interest expense is tax deductible    
         
does not dilute control of the corporation    
         
less risky to the issuing corporation     
         
generally results in higher earnings per share    
 
7. Corporations are separate taxable entities. The earnings of a corporation are subject to:
           
federal unemployment taxes    
         
taxation by the SEC    
         
double taxation    
         
the same method of taxation as partnership earnings    
  
8. The number of stocks currently in the hands of stockholders is the same as the number of stocks:
           
issued.    
         
authorized.    
         
Outstanding    
         
proposed by the board of directors    
 
9. Which of the following types of business organizations terminates when its ownership structure changes?
           
partnerships and proprietorships      
         
partnerships and corporations     
         
proprietorships and corporations     
         
only corporations     
 
10. The ultimate control of the corporation rests with the:
           
SEC and congress    
         
chief executive officer    
         
stockholders.    
         
employees    
 
11. All of the following are basic rights of a stockholder except:
           
the right to vote    
         
the right to receive a proportionate share of any assets remaining before the corporation pays its liabilities in the event of liquidation    
         
the right to maintain one’s proportionate ownership in the corporation    
         
the right to receive a proportionate part of any dividend    

12. In a corporation, the two basic sources of stockholders’ equity are:
           
paid-in capital and operating capital    
         
paid-in capital and retained earnings    
         
donated capital and paid-in capital    
         
donated capital and retained earnings    
 
13. Stock that a corporation has issued and later reacquired is called:
           
issued stock    
         
outstanding stock    
         
treasury stock    
         
authorized stock    
 
14. A dividend becomes a legal liability of the corporation on the:
           
date of payment    
         
date of declaration    
         
date of record    
         
date of distribution    
 

15. Which of the following shows the relationship between net income and average common stockholders’ equity?
           
current ratio     
         
acid-test ratio     
         
return on equity     
         
return on assets     

1. A statement of cash flows:
           
is prepared at the option of management    
         
may be combined with the balance sheet    
         
is a basic financial statement required for publicly held companies    
         
may be combined with the statement of retained earnings at the option of management    
 
2. Cash means more than just cash on hand and cash in the bank.  Highly liquid, short-term investments that are easily convertible into cash are called:
           
common stock    
         
cash equivalents    
         
promissory notes    
         
accounts receivable    
 
3. The statement of cash flows is designed to fulfill all of the following purposes except:
           
to determine the company’s ability to pay dividends to stockholders    
         
to assess the collectibility of accounts receivable     
         
to predict future cash flows    
           
to show the relationship of net income to changes in the company’s cash    
  
4. The most important section of a statement of cash flows is the:
           
operating activities    
         
investing activities    
         
financing activities    
         
All of the sections are equally important    
 
5. Investors analyze the statement of cash flows to determine:
           
the debt-to-equity ratio    
         
which businesses are expanding and which are shrinking    
         
which companies are reporting unearned revenues    
         
total interest earned during the period    
 

6. Cash received from customers would be reported on the statement of cash flows under:
           
investing activities    
         
operating activities    
         
financing activities    
         
in the schedule of noncash investing and financing activities    
 
7. The issuance of bonds for cash would be reported on a statement of cash flows under the:
           
operating activities    
         
investing activities    
         
financing activities    
         
no activities because issuing bonds for cash would not be reported on a statement of cash flows    

8. The issuance of common stock for cash would be reported on a statement of cash flow under:
           
the operating activities    
         
the investing activities    
         
the financing activities    
         
either investing activities or operating activities    
 
9. Cash collected from customers can be computed by the following formula:
           
ending accounts receivable plus beginning accounts receivable minus sales    
         
ending accounts receivable minus beginning accounts receivable plus sales    
         
beginning accounts receivable minus ending accounts receivable plus sales    
         
beginning accounts receivable minus ending accounts receivable minus sales    
 
10. The amount of cash paid for dividends for the current year can be calculated by the following formula:
           
beginning dividends payable minus ending dividends payable plus dividends declared    
         
beginning dividends payable plus ending dividends payable plus dividends declared    
         
beginning dividends payable minus ending dividends payable minus dividends declared    
         
beginning dividends payable plus ending dividends payable minus dividends declared    

11. The sale of treasury stock is a(n) __________ on a statement of cash flows
           
operating activity     
         
investing activity     
         
financing activity     
         
financing activity or an investing activity     
 12. On December 31, 2004, the Bison Bit Company’s Retained Earnings account had a balance of $420,000. During 2004, the company incurred a net loss of $85,000, declared stock dividends of $15,000, and paid cash dividends of $10,000. If the Dividends Payable account increased $4,000 during 2004, the January 1, 2004, balance in the Retained Earnings account was:
           
$534,000     
         
$476,000    
         
$526,000    
           
$306,000    
  
13. King Edward Company reported plant assets, net of accumulated depreciation, on January 1, 2004, at $427,500 and $579,300 on December 31, 2004. The income statement showed depreciation of $38,700. King Edward Company acquired $275,000 of plant assets during the year and reported proceeds from the sale of plant assets of $89,200 for the year. The gain or loss resulting from the sale of plant assets was:
           
$3,400 loss    
         
$2,390 loss    
         
$4,700 gain    
         
$5,050 gain    
  
14. On January 1, 2004, Prepaid Insurance had a balance of $6,700 and on December 31, 2004, a balance of $8,320. The income statement for the year reported Insurance Expense of $49,310. Payments for insurance during the year amounted to:
             
$49,310    
         
$47,690    
         
$50,930     
         
$57,630    
 
15. The amount founds in the Salaries Payable account for NovaLights Company were $14,500 and $16,000 on December 31, 2003, and December 31, 2004, respectively. Cash paid to employees for the years ended December 31, 2003, and December 31, 2004, were $255,000 and $280,000, respectively. NovaLights Company’s Salary Expense for the year ended December 31, 2004, was:
           
$253,500    
           
$281,500     
           
$278,500  
         
$256,500    

1.  Horizontal analysis involves the study of:
           
percentage changes in comparative financial statements    
         
percentage and/or dollar amount changes in various financial statement amounts from year to year    
         
the change in key financial statement ratios over a certain time frame or horizon    
         
the changes in individual financial statement amounts as a percentage of some related total    

2. A company reported $75,000 of income for 2003, $80,000 for 2004, and $90,000 for 2005. The percentage change in net income from 2004 to 2005 was:
           
9.1%.     
         
11.1%.     
         
12.5%.     
         
16.7%.     
 
3. Assuming the Accounts Receivable balance at the end of 2003 is $80,000, and it has decreased by 15% per year since the end of 2001, the balance at the end of 2001 (rounded to the nearest whole dollar) was:
           
$110,727     
         
$99,188    
           
$94,188    
         
$53,333    
 
4. Which of the following would be most likely to reveal that cost of goods sold is 125% of the amount shown for a base year?
           
trend analysis     
         
ratio analysis     
         
vertical analysis     
         
horizontal analysis     
 
5. When performing vertical analysis of an income statement, which of the following is usually used as the base?
           
Operating income     
         
net sales      
         
net income     
           
gross profit     
 
6. Vertical analysis looks at:
           
percentage changes in the balances shown in comparative financial statements.     
         
the change in key financial statement ratios over a specified period of time    
         
the dollar amount of the change in various financial statement amounts from year to year    
         
individual financial statement items expressed as a percentage of a base (which represents 100%).     

7. Common-size financial statements represent a form of:
           
ratio analysis    
         
vertical analysis    
         
trend analysis    
         
horizontal analysis    

8. Of the items listed below, the one most helpful in the comparison of different size companies is:
           
horizontal analysis    
         
comparison of their net incomes    
         
preparation of common-size financial statements    
         
comparison of their working capital balances    
 
9. Analyzing the statement of cash flows may help analysts determine the financial health of a company.  Which of the following signs below is not an indicator of a financially healthy company?
           
The company’s operations are a major source (not a use) of cash.     
         
The company’s operations are a major use (not a source) of cash    
         
The company’s investing activities include more purchases than sales of long-term assets.     
         
The company’s financing activities are not dominated by borrowing    

10. The current ratio is calculated as:
           
total assets / total liabilities    
         
current assets / total liabilities    
         
current assets x current liabilities    
         
current assets / current liabilities    
 
11. Working capital is defined as:
           
current liabilities – current assets    
         
current assets – current liabilities    
         
total assets – total liabilities    
         
current assets + current liabilities    
 

12. Inventory turnover is calculated as:
         
average inventory for the period / cost of goods sold    
         
cost of goods sold / average inventory for the period    
         
gross profit for the period / average inventory for the period    
         
average inventory for the period / gross profit for the period    

13. Accounts receivable turnover is calculated as:
           
total cost of goods sold / 365 days    
         
total net credit sales / average net accounts receivable    
         
average net accounts receivable / 365 days    
         
total net credit sales / cost of goods sold    
 
14. The times-interest-earned ratio is calculated as:
           
income from operations / interest expense     
         
net income / interest expense    
           
net income after taxes + interest expense/interest expense   
         
income from operations ‘2D interest expense/interest expense    
 
15. The dividend yield is calculated as:
           
dividends per share / market price per share of common stock    
         
dividends per share / earnings per share of common stock    
         
dividends per share / book value per share of common stock    
         
dividends per share / number of shares of common stock