Question 1

Which of the following would not be included within the operating activities section of a cash flow statement?

Accepted Answer

A)  Cash paid for research and development. 
B)  Cash paid for insurance. 
C) Cash paid for interest expense. 
D) Cash paid to legalize a patent. 
A)  Cash paid for research and development. 
B)  Cash paid for insurance. 
C) Cash paid for interest expense. 
D) Cash paid to legalize a patent.

Question 2

The Callie Company has provided the following information: Operating expenses were $231,000;
Cost of goods sold was $376,000;
Net sales were $940,000;
Interest expense was $32,000;
Gain on sale of a building was $76,000;
Income tax expense was $151,000.
What was Callie's income from operations?

Accepted Answer

A)  $333,000. 
B)  $188,000. 
C) $156,000. 
D) $232,000. 
A)  $333,000. 
B)  $188,000. 
C) $156,000. 
D) $232,000.

Question 3

Ridgetop Corporation reported the following amounts on its balance sheet at December 31, 2014: $$\begin{array} { | l | r | } 
\hline \text { Total current assets } & \$ 1,800,000 \
\hline \text { Total long-term assets } & 900,000 \
\hline \text { Total current liabilities } & 1,300,000 \
\hline \text { Total long-term liabilities } & 500,000 \
\hline \text { Total stockholders' equity } & 900,000 \
\hline \text { Net income } & 100,000 \
\hline
\end{array}$$ On January 1, 2014, total assets were $2,000,000, total liabilities were $1,200,000 and total stockholders' equity was $800,000. Calculate Ridgetop's return on assets.

Accepted Answer

$100,000 ÷ ($2,000,0

Question 4

Which of the following would not be reported in the operating activities section of the statement of cash flows, which has been prepared using the indirect method?

Accepted Answer

A)  Sales on account which have not yet been collected. 
B)  Net income. 
C) Cash paid for income taxes. 
D) Depreciation expense. 
A)  Sales on account which have not yet been collected. 
B)  Net income. 
C) Cash paid for income taxes. 
D) Depreciation expense.

Question 5

The Callie Company has provided the following information: Operating expenses were $231,000;
Cost of goods sold was $376,000;
Net sales were $940,000;
Interest expense was $32,000;
Gain on sale of a building was $76,000;
Income tax expense was $151,000.
What was Callie's gross profit?

Accepted Answer

A)  $564,000. 
B)  $188,000. 
C) $333,000. 
D) $232,000. 
A)  $564,000. 
B)  $188,000. 
C) $333,000. 
D) $232,000.

Question 6

Examples of nonoperating items that would appear on an income statement are:

Accepted Answer

A)  Interest income, sales salaries, gain on sale of land. 
B)  Income taxes, interest expense, loss on sale of investments. 
C) Interest expense, gain on sale of equipment, loss on sale of investments. 
D) Depreciation expense, interest income, interest expense. 
A)  Interest income, sales salaries, gain on sale of land. 
B)  Income taxes, interest expense, loss on sale of investments. 
C) Interest expense, gain on sale of equipment, loss on sale of investments. 
D) Depreciation expense, interest income, interest expense.

Question 7

Stockholders' equity, also called shareholders' equity, includes which of the following two accounts?

Accepted Answer

A)  Common stock and Deferred revenue. 
B)  Common stock and Retained earnings. 
C) Liabilities and Retained earnings. 
D) Retained earnings and Cash. 
A)  Common stock and Deferred revenue. 
B)  Common stock and Retained earnings. 
C) Liabilities and Retained earnings. 
D) Retained earnings and Cash.

Question 8

Which of the following is an objective of the external audit of a company's financial statements?

Accepted Answer

A)  To provide a forecast of the company's future earnings. 
B)  To assure no fraud has been committed by the company's management. 
C) To provide credibility that the financial statements are fairly presented. 
D) To detect all accounting errors made by the accounting system and employees. 
A)  To provide a forecast of the company's future earnings. 
B)  To assure no fraud has been committed by the company's management. 
C) To provide credibility that the financial statements are fairly presented. 
D) To detect all accounting errors made by the accounting system and employees.

Question 9

Brimmel Corp. has provided the following information: Sales were $780,000;
Cost of goods sold was $429,000;
Net income was $195,000.
What was Brimmel's gross profit percentage?

Accepted Answer

A)  55% 
B)  45% 
C) 62% 
D) 222% 
A)  55% 
B)  45% 
C) 62% 
D) 222%

Question 10

Huron has provided the following year-end balances: Cash, $25,000
Patents, $7,900
Accounts receivable, $9,300
Property, plant, and equipment, $98,700
Prepaid insurance, $3,600
Accumulated depreciation, $10,000
Inventory, $37,000
Trademarks, $12,600
Goodwill, $11,000
How much are Huron's net noncurrent assets?

Accepted Answer

A)  $122,300. 
B)  $120,200. 
C) $123,800. 
D) $112,300. 
A)  $122,300. 
B)  $120,200. 
C) $123,800. 
D) $112,300.

Question 11

The Willie Company has provided the following information: Operating expenses were $345,000;
Income from operations was $215,000;
Net sales were $1,100,000;
Interest expense was $71,000;
Discontinued operations loss was $87,000;
Income tax expense was $58,000.
What was Willie's gross profit?

Accepted Answer

A)  $540,000. 
B)  $469,000. 
C) $618,000. 
D) $560,000. 
A)  $540,000. 
B)  $469,000. 
C) $618,000. 
D) $560,000.

Question 12

Which of the following transactions will decrease both the return on assets ratio and the asset turnover ratio?

Accepted Answer

A)  Purchasing land by signing a note payable. 
B)  Accruing interest expense at year-end. 
C) Accruing interest revenue at year-end. 
D) Collecting cash from an account receivable. 
A)  Purchasing land by signing a note payable. 
B)  Accruing interest expense at year-end. 
C) Accruing interest revenue at year-end. 
D) Collecting cash from an account receivable.

Question 13

Which of the following tasks does the Financial Accounting Standards Board (FASB) perform?

Accepted Answer

A)  Overseeing the work of the Securities & Exchange Commission (SE
C) . 
B)  Overseeing the work of the Public Company Accounting Oversight Board (PCAO
B) . 
C) The responsibility for protecting investors and maintaining the integrity of the securities markets. 
D) The development of generally accepted accounting principles. 
A)  Overseeing the work of the Securities & Exchange Commission (SE
C) . 
B)  Overseeing the work of the Public Company Accounting Oversight Board (PCAO
B) . 
C) The responsibility for protecting investors and maintaining the integrity of the securities markets. 
D) The development of generally accepted accounting principles.

Question 14

Determine the effect of the following transactions on the identified financial statement components and ratios. Code your answers as follows:
A: If the transaction results in an increase in the financial statement component or ratio.
B: If the transaction results in a decrease in the financial statement component or ratio.
C. If the transaction does not affect the financial statement component or ratio.
Transaction 1: A company paid for research and development costs incurred to develop a patent.
Net income_____
Property, plant, and equipment_____
Stockholders' equity_____
Net profit margin ratio_____
Transaction 2: Inventory was purchased on account.
Net income_____
Current assets_____
Current liabilities_____
Return on assets ratio_____

Accepted Answer

Transaction 1: A company paid for resear

Question 15

The return on assets ratio is affected by both the net profit margin ratio and the asset turnover ratio.

Accepted Answer

A) True 
 B)False

Question 16

The Financial Accounting Standards Board (FASB) oversees the work of the Public Company Accounting Oversight Board (PCAOB).

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is true about gross profit (gross margin)?

Accepted Answer

A)  It is net sales minus operating expenses. 
B)  It is net sales minus cost of goods sold. 
C) It is the same as income from continuing operations. 
D) It is net sales minus cost of goods sold and operating expenses. 
A)  It is net sales minus operating expenses. 
B)  It is net sales minus cost of goods sold. 
C) It is the same as income from continuing operations. 
D) It is net sales minus cost of goods sold and operating expenses.

Question 18

At the beginning of 2014, Jeffrey Company disposed of a segment of its business and incurred a pre-tax loss of $40,000 on the disposal, which resulted in an after-tax loss on disposal of $32,000. In the same year, a flood caused $15,000 of damages to the building. The flood damage qualified as an extraordinary item. The resulting extraordinary loss net of tax was $12,000. Income from continuing operations before taxes was $100,000 for 2014 and a 20% tax rate applied to all of the items above. Prepare a partial income statement starting with income from continuing operations before taxes for the year ending 2014 and concluding with net income.

Accepted Answer

The answer of At the beginning of 2014, Jeffrey Company...

Question 19

Marino Company has provided the following information: Net sales, $480,000
Net income, $24,000
Average total assets, $200,000
What is Marino's net profit margin ratio?

Accepted Answer

A)  75% 
B)  12% 
C) 42% 
D) 5% 
A)  75% 
B)  12% 
C) 42% 
D) 5%

Question 20

Denmark Inc. is preparing a statement of stockholders' equity for 2014. On January 1, 2014, Denmark started the year with a $100,000 credit balance in its retained earnings account. During 2014, the company earned net income of $70,000 and declared dividends of $10,000. Also, the company received cash of $15,000 as an additional investment by its owners. What is the balance in retained earnings on December 31, 2014?

Accepted Answer

A)  $100,000. 
B)  $170,000. 
C) $175,000. 
D) $160,000. 
A)  $100,000. 
B)  $170,000. 
C) $175,000. 
D) $160,000.

Which of the following would not be included within the operating activities section of a cash flow statement?

The Callie Company has provided the following information: Operating expenses were $231,000; Cost of goods sold was $376,000; Net sales were $940,000; Interest expense was $32,000; Gain on sale of a building was $76,000; Income tax expense was $151,000. What was Callie's income from operations?

Which of the following would not be reported in the operating activities section of the statement of cash flows, which has been prepared using the indirect method?

The Callie Company has provided the following information: Operating expenses were $231,000; Cost of goods sold was $376,000; Net sales were $940,000; Interest expense was $32,000; Gain on sale of a building was $76,000; Income tax expense was $151,000. What was Callie's gross profit?

Examples of nonoperating items that would appear on an income statement are:

Stockholders' equity, also called shareholders' equity, includes which of the following two accounts?

Which of the following is an objective of the external audit of a company's financial statements?

Brimmel Corp. has provided the following information: Sales were $780,000; Cost of goods sold was $429,000; Net income was $195,000. What was Brimmel's gross profit percentage?

The Willie Company has provided the following information: Operating expenses were $345,000; Income from operations was $215,000; Net sales were $1,100,000; Interest expense was $71,000; Discontinued operations loss was $87,000; Income tax expense was $58,000. What was Willie's gross profit?

Which of the following transactions will decrease both the return on assets ratio and the asset turnover ratio?

Which of the following tasks does the Financial Accounting Standards Board (FASB) perform?

The return on assets ratio is affected by both the net profit margin ratio and the asset turnover ratio.

The Financial Accounting Standards Board (FASB) oversees the work of the Public Company Accounting Oversight Board (PCAOB).

Which of the following is true about gross profit (gross margin)?

Marino Company has provided the following information: Net sales, $480,000 Net income, $24,000 Average total assets, $200,000 What is Marino's net profit margin ratio?

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

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Exam 5: Communicating and Interpreting Accounting Information

Which of the following would not be included within the operating activities section of a cash flow statement?

The Callie Company has provided the following information: Operating expenses were $231,000; Cost of goods sold was $376,000; Net sales were $940,000; Interest expense was $32,000; Gain on sale of a building was $76,000; Income tax expense was $151,000. What was Callie's income from operations?

Which of the following would not be reported in the operating activities section of the statement of cash flows, which has been prepared using the indirect method?

The Callie Company has provided the following information: Operating expenses were $231,000; Cost of goods sold was $376,000; Net sales were $940,000; Interest expense was $32,000; Gain on sale of a building was $76,000; Income tax expense was $151,000. What was Callie's gross profit?

Examples of nonoperating items that would appear on an income statement are:

Stockholders' equity, also called shareholders' equity, includes which of the following two accounts?

Which of the following is an objective of the external audit of a company's financial statements?

Brimmel Corp. has provided the following information: Sales were $780,000; Cost of goods sold was $429,000; Net income was $195,000. What was Brimmel's gross profit percentage?

The Willie Company has provided the following information: Operating expenses were $345,000; Income from operations was $215,000; Net sales were $1,100,000; Interest expense was $71,000; Discontinued operations loss was $87,000; Income tax expense was $58,000. What was Willie's gross profit?

Which of the following transactions will decrease both the return on assets ratio and the asset turnover ratio?

Which of the following tasks does the Financial Accounting Standards Board (FASB) perform?

The return on assets ratio is affected by both the net profit margin ratio and the asset turnover ratio.

The Financial Accounting Standards Board (FASB) oversees the work of the Public Company Accounting Oversight Board (PCAOB).

Which of the following is true about gross profit (gross margin)?

Marino Company has provided the following information: Net sales, $480,000 Net income, $24,000 Average total assets, $200,000 What is Marino's net profit margin ratio?

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

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