Question 1

Which of the following is not a current asset?

Accepted Answer

A) Cash 
B) Building 
C) Prepaid expense 
D) Accounts receivable 
E) None of these 
A) Cash 
B) Building 
C) Prepaid expense 
D) Accounts receivable 
E) None of these

Question 2

In analyzing the income statement of Bob Company, cost of goods sold decreased by 8.2% from 2016 to 2017. If the cost of goods sold was $19,000 in 2016, what was it in 2017? (Rounded to the nearest cent.)

Accepted Answer

A) $17,442 
B) $1,558 
C) $20,697.17 
D) $20,796.71 
E) None of these 
A) $17,442 
B) $1,558 
C) $20,697.17 
D) $20,796.71 
E) None of these

Question 3

Complete:
 $$\begin{array} { | l | l | l | } 
\hline  { \text { Current Assets } } &  { \text { Amount } } & \text { Percent (round to hundredths \%) } \
\hline \text { Cash } & \$ 10,000 & \text { B } \
\hline \text { Accts Receivable } & \$ 7,000 & \text { C } \
\hline \text { Prepaid Rent } & \$ 4,000 & \text { D } \
\hline \text { Merchandise Inventory } & \$ 21,000 & \text { E } \
\hline \text { Total Current Assets } & \text { A } & 100 \% \
\hline
\end{array}$$

Accepted Answer

A. $42,000; B. 23.81

Question 4

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 5

A balance sheet shows the financial condition of a business at a particular date.

Accepted Answer

A) True 
 B)False

Question 6

The computer is the only tool needed in monitoring a business's financial condition.

Accepted Answer

A) True 
 B)False

Question 7

"Could we speed up our collections?" could be one question raised about the average day's collection ratio.

Accepted Answer

A) True 
 B)False

Question 8

Match the following terms with their definitions.
-Acid test

Accepted Answer

A) Uses a base year 
B) Inventory and prepaid expenses are subtracted 
C) A liability 
D) Net sales ÷ total assets 
E) Actual sale after returns on discounts
F)Current assets ÷ current liabilities
G)What we owe creditors
H)Data placed side by side
I)Cash, supplies
J)Obligations due within one year
K)Cost of goods for resale
L)Obligations that are not due for at least one year
M)Total this period is compared by amount of percent to same total last period
N)Part of stockholders' equity
O)What customers owe
P)Dollars not shown
Q)Paid in advance
R)Profit
S)Revenues and expense for a specific period of time
T)Prepared as of a particular date
U)Beginning inventory plus new purchases - ending inventory
V)True cost of purchases
W)Includes no plant and equipment assets
X)Sales - cost of goods sold
Y)Each liability and equity is analyzed as a percent of the total 
A) Uses a base year 
B) Inventory and prepaid expenses are subtracted 
C) A liability 
D) Net sales ÷ total assets 
E) Actual sale after returns on discounts
F)Current assets ÷ current liabilities
G)What we owe creditors
H)Data placed side by side
I)Cash, supplies
J)Obligations due within one year
K)Cost of goods for resale
L)Obligations that are not due for at least one year
M)Total this period is compared by amount of percent to same total last period
N)Part of stockholders' equity
O)What customers owe
P)Dollars not shown
Q)Paid in advance
R)Profit
S)Revenues and expense for a specific period of time
T)Prepared as of a particular date
U)Beginning inventory plus new purchases - ending inventory
V)True cost of purchases
W)Includes no plant and equipment assets
X)Sales - cost of goods sold
Y)Each liability and equity is analyzed as a percent of the total

Question 9

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 10

Complete the horizontal analysis below: (round to the nearest tenth percent if applicable) $$\begin{array} { | c | c | c | c | } 
\hline \text { Year 2 } & \text { Year 1 } & \text { Amount } + & \text { Percent Change } \
\hline \$ 88,338 & \$ 92,147 & ? & ? \
\hline
\end{array}$$

Accepted Answer

A) ($3,809), ?4.1% 
B) $3,809, 4.1% 
C) $180,485, 51.1% 
D) $8,300, 15% 
E) None of these 
A) ($3,809), ?4.1% 
B) $3,809, 4.1% 
C) $180,485, 51.1% 
D) $8,300, 15% 
E) None of these

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

From the following information, could you help Bill calculate his cost of merchandise sold?
 $$\begin{array} { | l | l | } 
\hline \text { Beginning Inventory } & \$ 2,500 \
\hline \text { Purchases } & \$ 3,000 \
\hline \text { Purchase Returns } & \$ 400 \
\hline \text { Purchase Discounts } & \$ 100 \
\hline \text { Ending Inventory } & \$ 2,100 \
\hline
\end{array}$$

Accepted Answer

The answer of From the following information, could you help...

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

The asset turnover of Jerry's Sleepshop is 3.2. The total assets of Jerry's are $32,000. What were Jerry's net sales?

Accepted Answer

$32,000 ×

Question 15

Complete
 $$\begin{array} { | c | c | c | c | c | } 
\hline & 2017 & 2016 & \text { Decrease Amount } & \text { Decrease } \% \
\hline \text { Cash } & \$ 10,000 & \$ 18,000 & \text { A } & \text { B } \
\hline
\end{array}$$

Accepted Answer

A. $8,000;

Question 16

A return on equity of 17% implies which of the following?

Accepted Answer

A) For every 17 cents invested, a return of $1.00 results 
B) For every $1.00 invested, a return of 17 cents results 
C) For every $1.17 invested, a return of 17 cents results 
D) For every $10.00 invested, a return of $1.17 results 
E) None of the above 
A) For every 17 cents invested, a return of $1.00 results 
B) For every $1.00 invested, a return of 17 cents results 
C) For every $1.17 invested, a return of 17 cents results 
D) For every $10.00 invested, a return of $1.17 results 
E) None of the above

Question 17

Match the following terms with their definitions.
-Net income

Accepted Answer

A) Uses a base year 
B) Inventory and prepaid expenses are subtracted 
C) A liability 
D) Net sales ÷ total assets 
E) Actual sale after returns on discounts
F)Current assets ÷ current liabilities
G)What we owe creditors
H)Data placed side by side
I)Cash, supplies
J)Obligations due within one year
K)Cost of goods for resale
L)Obligations that are not due for at least one year
M)Total this period is compared by amount of percent to same total last period
N)Part of stockholders' equity
O)What customers owe
P)Dollars not shown
Q)Paid in advance
R)Profit
S)Revenues and expense for a specific period of time
T)Prepared as of a particular date
U)Beginning inventory plus new purchases - ending inventory
V)True cost of purchases
W)Includes no plant and equipment assets
X)Sales - cost of goods sold
Y)Each liability and equity is analyzed as a percent of the total 
A) Uses a base year 
B) Inventory and prepaid expenses are subtracted 
C) A liability 
D) Net sales ÷ total assets 
E) Actual sale after returns on discounts
F)Current assets ÷ current liabilities
G)What we owe creditors
H)Data placed side by side
I)Cash, supplies
J)Obligations due within one year
K)Cost of goods for resale
L)Obligations that are not due for at least one year
M)Total this period is compared by amount of percent to same total last period
N)Part of stockholders' equity
O)What customers owe
P)Dollars not shown
Q)Paid in advance
R)Profit
S)Revenues and expense for a specific period of time
T)Prepared as of a particular date
U)Beginning inventory plus new purchases - ending inventory
V)True cost of purchases
W)Includes no plant and equipment assets
X)Sales - cost of goods sold
Y)Each liability and equity is analyzed as a percent of the total

Question 18

Match the following terms with their definitions.
-Net purchases

Accepted Answer

A) Uses a base year 
B) Inventory and prepaid expenses are subtracted 
C) A liability 
D) Net sales ÷ total assets 
E) Actual sale after returns on discounts
F)Current assets ÷ current liabilities
G)What we owe creditors
H)Data placed side by side
I)Cash, supplies
J)Obligations due within one year
K)Cost of goods for resale
L)Obligations that are not due for at least one year
M)Total this period is compared by amount of percent to same total last period
N)Part of stockholders' equity
O)What customers owe
P)Dollars not shown
Q)Paid in advance
R)Profit
S)Revenues and expense for a specific period of time
T)Prepared as of a particular date
U)Beginning inventory plus new purchases - ending inventory
V)True cost of purchases
W)Includes no plant and equipment assets
X)Sales - cost of goods sold
Y)Each liability and equity is analyzed as a percent of the total 
A) Uses a base year 
B) Inventory and prepaid expenses are subtracted 
C) A liability 
D) Net sales ÷ total assets 
E) Actual sale after returns on discounts
F)Current assets ÷ current liabilities
G)What we owe creditors
H)Data placed side by side
I)Cash, supplies
J)Obligations due within one year
K)Cost of goods for resale
L)Obligations that are not due for at least one year
M)Total this period is compared by amount of percent to same total last period
N)Part of stockholders' equity
O)What customers owe
P)Dollars not shown
Q)Paid in advance
R)Profit
S)Revenues and expense for a specific period of time
T)Prepared as of a particular date
U)Beginning inventory plus new purchases - ending inventory
V)True cost of purchases
W)Includes no plant and equipment assets
X)Sales - cost of goods sold
Y)Each liability and equity is analyzed as a percent of the total

Question 19

Horizontal analysis can analyze balance sheets for two or more periods.

Accepted Answer

A) True 
 B)False

Question 20

From 2016 to 2017, accounts receivable increased from $4,000 to $4,800. The percent increase is:

Accepted Answer

A) 120% 
B) 162/3% 
C) 20% 
D) 55% 
E) None of these 
A) 120% 
B) 162/3% 
C) 20% 
D) 55% 
E) None of these

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

Which of the following is not a current asset?

In analyzing the income statement of Bob Company, cost of goods sold decreased by 8.2% from 2016 to 2017. If the cost of goods sold was $19,000 in 2016, what was it in 2017? (Rounded to the nearest cent.)

Complete: Current Assets Amount Percent (round to hundredths \%) Cash \ 10,000 B Accts Receivable \ 7,000 C Prepaid Rent \ 4,000 D Merchandise Inventory \ 21,000 E Total Current Assets A 100\%

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

A balance sheet shows the financial condition of a business at a particular date.

The computer is the only tool needed in monitoring a business's financial condition.

"Could we speed up our collections?" could be one question raised about the average day's collection ratio.

Match the following terms with their definitions. -Acid test

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):

Complete the horizontal analysis below: (round to the nearest tenth percent if applicable) Year 2 Year 1 Amount + Percent Change \ 88,338 \ 92,147 ? ?

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

From the following information, could you help Bill calculate his cost of merchandise sold? Beginning Inventory \ 2,500 Purchases \ 3,000 Purchase Returns \ 400 Purchase Discounts \ 100 Ending Inventory \ 2,100

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

The asset turnover of Jerry's Sleepshop is 3.2. The total assets of Jerry's are $32,000. What were Jerry's net sales?

Complete 2017 2016 Decrease Amount Decrease \% Cash \ 10,000 \ 18,000 A B

A return on equity of 17% implies which of the following?

Match the following terms with their definitions. -Net income

Match the following terms with their definitions. -Net purchases

Horizontal analysis can analyze balance sheets for two or more periods.

From 2016 to 2017, accounts receivable increased from $4,000 to $4,800. The percent increase is:

Whole Numbers: How to Dissect and Solve Word Problems

Fractions

Decimals

Banking

Solving for the Unknown: a How-To Approach for Solving Equations

Percents and Their Applications

Discounts: Trade and Cash

Markups and Markdowns: Perishables and Breakeven Analysis

Payroll

Simple Interest

Promissory Notes, Simple Discount Notes, and the Discount Process

Compound Interest and Present Value

Annuities and Sinking Funds

Installment Buying

The Cost of Home Ownership

Depreciation

Inventory and Overhead

Sales, Excise, and Property Taxes

Life, Fire, and Auto Insurance

Stocks, Bonds, and Mutual Funds

Business Statistics

Filters