loader  Loading... Please wait...

Question(s) / Instruction(s):

ACCOUNTING   NEW QUESTIONS - 38 and ANSWERS

 

1. The dollar amount of the common stock in the balance sheet of a corporation that has common stock with a par value is the number of shares: A) issued, multiplied by the amount received per share. B) outstanding, multiplied by the amount received per share. C) issued, multiplied by the par value per share. D) outstanding, multiplied by the par value per share.

 

2. Which of the following is not usually a right or attribute of preferred stock? A) Having a claim to dividends in excess of the annual dividend requirement if dividends on common stock exceed dividends on preferred stock. B) Having a priority claim to dividends relative to the common stock's claim to dividends. C) Having a priority claim in liquidation relative to the common stock's claim in liquidation. D) Having a claim to dividends that is cumulative over time if the annual dividend requirement is not satisfied.

 

3. Additional paid-in capital is most likely to appear in the balance sheet of a corporation that: A) has par value stock. B) has no-par value stock. C) has issued stock at different dates. D) has issued stock dividends.

 

4. Retained earnings represents: A) cash that is available for dividends. B) the total net income of the firm since its beginning. C) net income that has been reinvested in the company. D) net income plus gains (or minus losses) on treasury stock transactions.

 

5. Preferred stock is used much less than long-term debt in the capital structure of most industrial and merchandising companies principally because: A) the preferred stock dividend requirement is a fixed claim against income, but interest on long-term debt is not a fixed amount. B) preferred stock has a fixed liquidation or redemption value, but long-term debt does not have a fixed maturity value. C) preferred stock may be convertible to common stock, but long-term debt cannot be convertible. D) for income tax purposes, dividends paid on preferred stock are not deductible, but interest on long-term debt is deductible.

 

6. The declaration of a cash dividend by the directors results in: A) a decrease in cash and a decrease in retained earnings. B) a decrease in retained earnings and an increase in current liabilities. C) a decrease in net income and a decrease in cash. D) a decrease in net income and an increase in current liabilities.

 

7. In most states, par value of issued shares represents: A) Legal capital B) No par capital C) Minority capital D) Corporate capital.

 

8. The term preemptive right pertains to which of the following? A) The Board of Directors rights in liquidation. B) Present shareholders right to purchase shares from any additional share issuances. C) Present shareholders right to purchase treasury shares when reissued. D) Preferred stockholders right to dividends.

 

9. Balance sheet disclosures for preferred stock include all of the following except: A) The number of shares issued. B) The number of shares outstanding. C) The liquidating or redemption value. D) The credit or market value. E) The number of shares authorized.

 

10. Under most circumstances, in order to recognize revenue: A) cash must have been received. B) the entity must expect to receive cash in the future. C) the entity must have paid for all expenses incurred in generating the revenue. D) the revenue must be realized or realizable, and earned.

 

11. The concept of matching revenue and expense refers to the fact that: A) expenses for a period equal the revenues for the period. B) all costs incurred in the process of earning revenue during a period are recorded as an expense in that period. C) all cash disbursements during a period are subtracted from all cash receipts during the period. D) costs incurred in the process of earning revenue during a period are deferred and expensed in a future period.

 

12. Most entities satisfy the accounting criteria for recognizing revenue when: A) an order is received from a customer. B) cash is received from a customer. C) an unearned revenue account is credited. D) a product is delivered or a service is provided.

 

13. Most entities satisfy the accounting criteria for recognizing an expense when: A) a commitment is made to purchase a product or service. B) cash is paid to a supplier. C) a cost is incurred in the revenue generating process. D) a dividend is paid to stockholders.

 

14. When the periodic inventory system is used: A) operating profit from the sale of an item from inventory is known when the item is sold. B) gross profit from the sale of an item from inventory is known when the item is sold. C) cost of goods sold can be calculated by subtracting the ending inventory amount from the sum of beginning inventory and purchases. D) a physical inventory must be taken in order to estimate the cost of goods sold.

 

15. Income from operations is: A) sometimes called the "bottom line". B) sometimes used in the ROI calculation. C) usually used in the ROE calculation. D) usually calculated after income tax expense.

 

!16. The earnings per share of common stock calculation: A) is made by dividing net income by the number of shares of common stock outstanding at the end of the year. B) is complicated by the declaration of cash dividends during the year. C) includes gains or losses from treasury stock transactions. D) is complicated by the presence of preferred stock in the capital structure.

 

17. An item that cost $90 is sold for $120. The gross profit ratio for this item is: A) 20% B) 25% C) 33.3% D) 60%

 

18. An item that cost $240 is to be sold for a price that will yield a gross profit ratio of 20%. The selling price should be: A) $192 B) 288 C) 300 D) 1200

 

!19. Recognition of revenue in accrual accounting requires: A) that cash be received. B) only that the amount of cash to be received from the sale of a product or service be known. C) only that a product be delivered or a service be performed. D) that the revenue be realized or realizable, and earned.

 

20. In the statement of cash flows, the amount of depreciation and amortization expense is added back to net income because: A) these expenses do not affect cash, but were subtracted in the determination of net income. B) these expenses affect investing activities, not operating activities. C) the cash disbursements for these accrued expenses will be made in a future period. D) these expenses are recognized for accounting purposes, but they do not represent economic costs.

 

21. In the statement of cash flows, an increase in the accounts receivable balance from the beginning of the period to the end of the period would: A) be added to net income because this represents earned revenues that have not been collected. B) be subtracted from net income because this represents earned revenue provided by operating earnings. C) be added to net income because this means that revenues were less than cash collected. D) be subtracted from net income because this means that revenues were more than cash collected.

 

22. The explanatory notes to the financial statements: A) should be referred to if more than a cursory, and perhaps misleading impression of a firm's financial position and its results of operations is to be achieved. B) are not an integral part of the financial statements. C) include a great deal of detailed information that is potentially useful only to a financial analyst making a detailed appraisal of the future prospects of the entity. D) are used by many entities to hide information from the reader of the financial statements by including in the explanatory notes information that should be shown in detail on the financial statements themselves.

 

23. The nature and content of disclosures relate to all of the following except: A) accounting changes. B) segment information. C) fair market value. D) contingencies and commitments. E) events subsequent to the balance sheet date.

 

24. Which of the following is not a topic that is likely to be discussed as a significant accounting policy?

A) Depreciation method.

B) Earnings per share of common stock calculation details.

C) Inventory valuation method.

D) Method of estimating uncollectible accounts receivable.

 

!25. Firms that issue registered securities are required to file, with the SEC on an annual basis, which of the following? A) An annual report. B) A prospectus. C) A form 10-K. D) A set of financial statements. E) All of the above.

 

26. A firm's cash dividends were $3.96 per share of common stock for calendar 2006. In 2007 the stock was split 3 for 1, and in 2008 a 10% stock dividend was issued. Dividends per share for 2006, to be reported in the firm's annual report for 2008, are: A) $3.96 B) $1.45 C) $1.32 D) $1.20

 

27. For 2006, Skresso Co. reported $3.64 of earnings per share of common stock. During 2007 the firm had a 4% common stock dividend. 2006 earnings per share to be reported in the annual report for 2007 are: A) $3.79 B) $3.64 C) $3.50 D) $3.49

 

28. Management's use of resources can best be evaluated by focusing on measures of: A) liquidity. B) activity. C) leverage. !D) book value.

 

29. An individual interested in making a judgment about the profitability of a company should: A) review the trend of working capital for several years. B) calculate the company's ROI for the most recent year. C) review the trend of the company's ROI for several years. D) compare the company's ROI for the most recent year with the industry average ROI for the most recent year.

 

30. An entity's current ratio will be influenced by: A) the inventory cost flow assumption used. B) writing off an overdue account receivable against the allowance for uncollectible accounts. C) the depreciation method used. D) issuance of a stock dividend.

 

31. The inventory turnover calculation: A) is wrong unless cost of goods sold is used in the numerator. B) is wrong unless sales is used in the numerator. C) is an alternative way of expressing the number of days' sales in inventory. D) requires knowledge of the inventory cost flow assumption being used.

 

32. If a firm's payment terms for sales made on account to its customers were 2/10, n30, the number of days' sales in accounts receivable would be expected to be: A) less than 10. B) between 10 and 25. C) between 25 and 40. D) over 40.

 

33. If the P/E ratio of a company's common stock were 12, and its earnings were $ 2.50 per common share: A) the market value of the common stock would be $20.83 per share. B) the market value of the common stock would be $25.00 per share. C) an increase in earnings of $0.20 per share, with no change in the multiple, would result in a market price increase of $2.40 per share. D) an increase in earnings of $0.20 per share, with no change in the multiple, would result in a market price increase of $1.67 per share.

 

34. When a corporation has both common stock and preferred stock outstanding: A) dividends on preferred stock are paid only if the company has current earnings. B) dividends on preferred stock must be paid before dividends on common stock can be paid. C) preferred stockholders receive the same dividend per share as common stockholders. D) dividends on preferred stock are paid only if dividends are to be paid on the common stock.

 

35. A management that wanted to increase the financial leverage of its firm would: A) raise additional capital by selling common stock. B) use excess cash to purchase preferred stock for the treasury. C) raise additional capital by selling fixed interest rate long-term bonds. D) try to increase its ROI by increasing asset turnover.

 

36. If a firm's debt ratio were 25%, its debt/equity ratio would be: A) 25%. B) 50%. C) 33.33%. D) 75%.

 

37. A leverage buyout refers to: A) one firm issues stock to take over another firm. B) one firm trades its stock for the stock of another firm. C) a firm goes heavily into debt in order to obtain the funds to purchase the shares of the public stockholders. D) one firm pays cash for the shares of a takeover firm's shares.

 

38. For the fiscal year ended March 31, 2007, a company reported earnings per share of $3.25 and cash dividends per share of $0.50. During fiscal 2008, the company had a 3 for 2 stock split. In the annual report for the fiscal year ended March 31, 2008, earnings per share and cash dividends for fiscal 2007 would be reported, respectively, as:

A) $3.25 and $0.50

B) $4.85 and $0.75

C) $2.17 and $0.33

D) $1.09 and $0.17

Find Similar Answers by Subject


Student Reviews

Rate and review your solution! (Please rate on a Scale of 1 - 5. Top Rating is 5.)


Expert's Answer
Download Solution:
$4.00

This solution includes:

  • Plain text
  • Cited sources when necessary
  • Attached file(s)
  • Solution Document(s)



Reach Us

408-538-8534

20-3582-4059

39-008-4233

+1-408-904-6494