Question 1

Complete using trend analyses for sales. (Round to nearest percent and use 2010 as the base year.)

Accepted Answer

A. 73%; B. 91%; C. 55%; D. 100%

Question 2

Vertical analysis need not be done only on comparative reports since calculations were within each period of time.

Accepted Answer

A) True 
 B)False  True

Question 3

Assets that last longer than one year are called plant and equipment.

Accepted Answer

A) True 
 B)False  True

Question 4

When each asset is analyzed as a percent of total assets for a single period, this is known as:

Accepted Answer

A) Horizontal analysis 
B) Comparative analysis 
C) Ratio analysis 
D) Vertical analysis 
E) None of these 
A) Horizontal analysis 
B) Comparative analysis 
C) Ratio analysis 
D) Vertical analysis 
E) None of these

Question 5

The asset turnover of Ryan Company is 7.2. The total assets of Ryan are $88,000. Ryan's net sales were:

Accepted Answer

A) $6,336 
B) $63,360 
C) $633,000 
D) $633,600 
E) None of these 
A) $6,336 
B) $63,360 
C) $633,000 
D) $633,600 
E) None of these

Question 6

Debt management ratios show a company how well its assets are managed.

Accepted Answer

A) True 
 B)False

Question 7

Assets represent things of value owed by the business.

Accepted Answer

A) True 
 B)False

Question 8

Lee Company has a current ratio of 2.65. The acid test ratio is 2.01. The current liabilities of Lee are $45,000. The dollar amount of merchandise inventory is (assume no prepaid expenses):

Accepted Answer

A) $28,008 
B) $28,800 
C) $90,450 
D) $90,540 
E) None of these 
A) $28,008 
B) $28,800 
C) $90,450 
D) $90,540 
E) None of these

Question 9

Horizontal analysis need not be done using comparative reports.

Accepted Answer

A) True 
 B)False

Question 10

The company's gross profit based on the following is sales $48,000, sales returns and allowances $6,000, operating expenses $6,200, beginning inventory $900, net purchases $9,100, ending inventory $2,300.

Accepted Answer

A) $34,000 
B) $43,000 
C) $34,003 
D) $34,300 
E) None of these 
A) $34,000 
B) $43,000 
C) $34,003 
D) $34,300 
E) None of these

Question 11

Which one is not used to calculate net sales?

Accepted Answer

A) Purchases 
B) Sales discount 
C) Sales returns and allowance 
D) Gross sales 
E) None of these 
A) Purchases 
B) Sales discount 
C) Sales returns and allowance 
D) Gross sales 
E) None of these

Question 12

In using horizontal analysis, comparative reports are:

Accepted Answer

A) Always used 
B) Never used 
C) Infrequently used 
D) Often used 
E) None of these 
A) Always used 
B) Never used 
C) Infrequently used 
D) Often used 
E) None of these

Question 13

In the acid test ratio, inventory and prepaid expenses are not excluded.

Accepted Answer

A) True 
 B)False

Question 14

Cash is a liability.

Accepted Answer

A) True 
 B)False

Question 15

Calculate the amount of increase or decrease and the percent change of each title (round to nearest hundredth percent):

Accepted Answer

A. $9,000 ($15,000 - $6,000);

Question 16

As the accountant of Roe Hairdresser, you have been asked to prepare an income statement from the following data for the month ended June 2014:

Accepted Answer

The answer of As the accountant of Roe Hairdresser, you...

Question 17

Al Flynn has gathered the following information. Could you help Al calculate his gross profit?

Accepted Answer

The answer of Al Flynn has gathered the following information....

Question 18

From the following, prepare a balance sheet for Roe Co. as of December 31, 2015.

Accepted Answer

The answer of From the following, prepare a balance sheet...

Question 19

A ratio of 2:2:1 means:

Accepted Answer

A) There are six parts 
B) 2/4, 2/4, 1/4 
C) 2/5, 2/5, 1/5 
D) 2/4, 2/5, 1/4 
E) None of these 
A) There are six parts 
B) 2/4, 2/4, 1/4 
C) 2/5, 2/5, 1/5 
D) 2/4, 2/5, 1/4 
E) None of these

Question 20

The return on equity ratio looks at how effectively assets are being utilized.

Accepted Answer

A) True 
 B)False

Exam 16: How to Read, Analyze, and Interpret Financial Reports

Complete using trend analyses for sales. (Round to nearest percent and use 2010 as the base year.)

Vertical analysis need not be done only on comparative reports since calculations were within each period of time.

Assets that last longer than one year are called plant and equipment.

When each asset is analyzed as a percent of total assets for a single period, this is known as:

The asset turnover of Ryan Company is 7.2. The total assets of Ryan are $88,000. Ryan's net sales were:

Debt management ratios show a company how well its assets are managed.

Assets represent things of value owed by the business.

Lee Company has a current ratio of 2.65. The acid test ratio is 2.01. The current liabilities of Lee are $45,000. The dollar amount of merchandise inventory is (assume no prepaid expenses):

Horizontal analysis need not be done using comparative reports.

The company's gross profit based on the following is sales $48,000, sales returns and allowances $6,000, operating expenses $6,200, beginning inventory $900, net purchases $9,100, ending inventory $2,300.

Which one is not used to calculate net sales?

In using horizontal analysis, comparative reports are:

In the acid test ratio, inventory and prepaid expenses are not excluded.

Cash is a liability.

Calculate the amount of increase or decrease and the percent change of each title (round to nearest hundredth percent):

As the accountant of Roe Hairdresser, you have been asked to prepare an income statement from the following data for the month ended June 2014:

Al Flynn has gathered the following information. Could you help Al calculate his gross profit?

From the following, prepare a balance sheet for Roe Co. as of December 31, 2015.

A ratio of 2:2:1 means:

The return on equity ratio looks at how effectively assets are being utilized.

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