Question 1

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

Accepted Answer

A)  240%
B)  12%
C)  5%
D)  42% B

Question 2

The balance sheet for Glenwood Corporation at December 31, 2016 showed the following subtotals:  Required: Based on the above data, calculate the following amounts:
A)Total assets _______
B)Long-term liabilities _______
C)Common stock and Additional paid-in capital _______
D)Total liabilities and stockholders' equity

Accepted Answer

A. $140,000 + $420,000 + $70,000 = $630,000.
B. $210,000 - $80,000 = $130,000.
C. $420,000 - $120,000 = $300,000.
D. $210,000 + $420,000 = $630,000.

Question 3

Complete the following balance sheet by entering the appropriate amounts in the blanks provided.

Accepted Answer

A. $40,000. ($90,000 Total Assets (F) - $35,000 Book Value of Building - $15,000 Cash)
B. $25,000. ($60,000 Building - $35,000 Book Value)
C. $90,000. (Must equal to F.)
D. $2,000. ($25,000 Current liabilities - $11,000 Accounts Payable - $12,000 Notes payable)
E. $40,000. ($25,000 Common stock + $15,000 Retained earnings)
F. $90,000. ($50,000 Total Liabilities + $40,000 Total Stockholders' Equity)

Question 4

Which one of the following statements is true when a company sells inventory costing $800 for $1,400 cash, and operating expenses are $500?

Accepted Answer

A)  There is no change in current assets.
B)  Gross profit increases $100.
C)  Stockholders' equity increases $100.
D)  Net sales increases $2,200.

Question 5

Which of the following would most likely increase the net profit margin ratio?

Accepted Answer

A)  An increase in the unit selling price.
B)  A decrease in the overall sales volume.
C)  An increase in operating expenses.
D)  An increase in cost of goods solD.An increase in the unit selling price will increase net income by a greater amount proportionately relative to the increase in net sales.

Question 6

Which of the following statements is false when a company sells inventory costing $700 for $1,200 cash and operating expenses are $200?

Accepted Answer

A)  Cost of goods sold is $700.
B)  Gross profit is $500.
C)  Stockholders' equity increases by net income of $300.
D)  Net sales increase $500.

Question 7

The fraud triangle conditions necessary for financial statement fraud to occur are the existence of a system of internal control, the ability to invade the system, and rationalization to commit the fraud.

Accepted Answer

A) True 
 B)False

Question 8

Intangible assets are reported on the balance sheet as a current asset.

Accepted Answer

A) True 
 B)False

Question 9

The essence of reporting the gains on sales of investments separately on an income statement is that they are do not to primary operations of the reporting company.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following would not be used to calculate income from operations?

Accepted Answer

A)  Gross profit.
B)  Selling and administrative expenses.
C)  Interest income.
D)  Research and development expense.

Question 11

Comparative financial statements are those of a company in one industry presented with another company in the same industry.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following items is not part of disclosure notes to the financial statements?

Accepted Answer

A)  Descriptions of the significant accounting methods applied in the company's financial statements.
B)  Additional detail of income taxes payable reported in the balance sheet.
C)  Names of executive officers and the salaries for each officer listed.
D)  Commitments under long-term supply agreements to buy inventory and equipment.

Question 13

Financial analysts utilize a company's financial reports to assist them in making earnings forecasts and earnings per share projections.

Accepted Answer

A) True 
 B)False

Question 14

The Statement of Comprehensive Income includes items in which order?

Accepted Answer

A)  Net income, Other items of net income, Comprehensive income.
B)  Comprehensive income, Net income, Other items of Comprehensive income.
C)  Net income, Other Fair value items, Comprehensive income.
D)  Net income, Other comprehensive income items, Comprehensive income.

Question 15

Gains and losses on sales of investments are reported on the income statement as a component of income from operations.

Accepted Answer

A) True 
 B)False

Question 16

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
Retained earnings, 15,500
Trademarks, $12,600
Accounts payable, $8,000
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.

Question 17

Which of the following results in an increase in the return on assets ratio?

Accepted Answer

A)  A decrease in the total asset turnover ratio.
B)  An increase in the net profit margin ratio.
C)  Purchasing a building by signing a long-term mortgage payable.
D)  Using cash to purchase lanD.Return on assets is net income divided by average total assets or net profit margin ratio times total asset turnover ratio.An increase in the net profit margin ratio therefore increases return on assets.

Question 18

A company has paid cash to repurchase its common stock that was previously issued. Where will this cash flow be reported on the statement of cash flows?

Accepted Answer

A)  Operating activities.
B)  Financing activities.
C)  Investing activities.
D)  Stockholder activities.

Question 19

Panmar Inc. is preparing a statement of stockholders' equity for 2016. On January 1, 2016, Panmar started the year with a $200,000 credit balance in its retained earnings account. During 2016, the company earned net income of $140,000. Panmar declared dividends of $80,000 and paid $50,000 of those dividends. Also, the company received cash of $100,000 for additional shares of common stock issued and then paid $30,000 to repurchase shares of common stock. What is the balance in retained earnings on December 31, 2016?

Accepted Answer

A)  $260,000.
B)  $290,000.
C)  $330,000.
D)  $390,000.

Question 20

Corporate governance refers to the procedures designed to ensure that the company is managed in the interest of the board of directors who oversee management.

Accepted Answer

A) True 
 B)False

Exam 5: Communicating and Interpreting Accounting Information

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

Complete the following balance sheet by entering the appropriate amounts in the blanks provided.

Which one of the following statements is true when a company sells inventory costing $800 for $1,400 cash, and operating expenses are $500?

Which of the following would most likely increase the net profit margin ratio?

Which of the following statements is false when a company sells inventory costing $700 for $1,200 cash and operating expenses are $200?

The fraud triangle conditions necessary for financial statement fraud to occur are the existence of a system of internal control, the ability to invade the system, and rationalization to commit the fraud.

Intangible assets are reported on the balance sheet as a current asset.

The essence of reporting the gains on sales of investments separately on an income statement is that they are do not to primary operations of the reporting company.

Which of the following would not be used to calculate income from operations?

Comparative financial statements are those of a company in one industry presented with another company in the same industry.

Which of the following items is not part of disclosure notes to the financial statements?

Financial analysts utilize a company's financial reports to assist them in making earnings forecasts and earnings per share projections.

The Statement of Comprehensive Income includes items in which order?

Gains and losses on sales of investments are reported on the income statement as a component of income from operations.

Which of the following results in an increase in the return on assets ratio?

A company has paid cash to repurchase its common stock that was previously issued. Where will this cash flow be reported on the statement of cash flows?

Corporate governance refers to the procedures designed to ensure that the company is managed in the interest of the board of directors who oversee management.