Test your accounting knowledge and check your result with the below
given answers. We would like to hear your score in comment.
(1) __________ is concerned with the maximization of a firm's
earnings after taxes.
(a) Shareholder wealth
maximization
(b) Profit
maximization
(c) Stakeholder
maximization
(d) EPS maximization
(2) Which of the
following would generally have unlimited liability?
(a) A limited partner
in a partnership.
(b) A shareholder in a
corporation.
(c) The owner of a
sole proprietorship.
(d) A member in a
limited liability company (LLC).
(3) Which of the following examples would be deductible as an
expense on the corporation's income statement?
(a) Interest paid on
outstanding bonds.
(b) Cash dividends
paid on outstanding common stock.
(c) Cash dividends
paid on outstanding preferred stock.
(d) All of the above.
(4) In finance we refer to the market where new securities are
bought and sold for the first time as the __________ market.
(a) money
(b) capital
(c) primary
(d) secondary
(5) Which of the following would not improve the current ratio?
(a) Borrow short term
to finance additional fixed assets.
(b) Issue long-term
debt to buy inventory.
(c) Sell common stock
to reduce current liabilities.
(d) Sell fixed assets
to reduce accounts payable.
(6) Krisle and Kringle's debt-to-total assets ratio is.4. What
is its debt-to-equity ratio?
(a) .2
(b)
.77
(c) .667
(d) .333
(7) Which group of
ratios measures a firm's ability to meet short-term obligations?
(a) Liquidity ratios.
(b) Debt ratios.
(c) Coverage ratios.
(d) Profitability
ratios.
(8) According to the
accounting profession, which of the following would be considered a cash-flow
item from a "financing" activity?
(a) A cash outflow to
the government for taxes.
(b) A cash outflow to
repurchase the firm's own common stock.
(c) A cash outflow to
lenders as interest.
(d) A cash outflow to
purchase bonds issued by another company.
(9) Cash budgets are prepared from past:
(a) balance sheets.
(b) income statements.
(c) income tax and
depreciation data.
(d) None of the above
answers are
(10) The accounting statement of cash flows reports a firm's
cash flows segregated into what categorical order?
(a) Operating,
investing, and financing.
(b) Investing,
operating, and financing.
(c) Financing, operating
and investing.
(d) Financing,
investing, and operating.
(11) The firm had a net increase of $800,000 in net fixed assets
over the last period. The beginning and ending net fixed asset account balances
were $9,100,000 and $9,900,000 respectively. If the firm purchased $2,000,000
in additional fixed assets and sold $100,000 of fixed assets at book value,
what was the firm's depreciation expense over the period?
(a) $800,000
(b) $1,100,000
(c) $1,900,000
(d) $2,700,000
(12) If EOQ = 40 units,
order costs are $2 per order, and carrying costs are $.20 per unit, what is the
usage in units?
(a) 10 units.
(b) 16 units.
(c) 40 units.
(d) 80 units.
(13) What is the book value of common equity per share of common
equity outstanding for the following firm? The firm has 20,000 common shares
authorized of which 15,000 are outstanding at a par value of $1. Additional
paid-in-capital represents $300,000 and retained earnings are an additional
$300,000.
(a) $1
(b) $20
(c) $21
(d) $41
(14) Upon close
examination of the income statement, which of the following mathematical
expressions would be true?
(a) Net Sales - Gross
Profit = Income from Operations
(b) Gross Profit +
Selling, General and Administrative Expenses = Net Sales
(c) Income from
Operations - Interest Expense - Income Tax Expense = Net Income
(d) None of the above
are true.
(15) Which of the
following is not a correct
expression of the accounting equation?
(a) Assets -
Liabilities = Owners' Equity
(b) Net Assets =
Equities
(c) Assets = Equities
(d) Assets =
Liabilities + Owners' Equity
(16) The owners' equity section of a balance sheet contains two
major components:
(a) Common Stock and
Additional Paid-in Capital
(b) Paid-in Capital
and Retained Earnings
(c) Common Stock and
Retained Earnings
(d) Net Income and
Dividends
(17) Which of the
following would not be included on a balance sheet?
(a) Accounts
receivable.
( b) Accounts payable.
( c) Sales.
( d) Cash.
(18) If total assets were
$21,000 and total liabilities were $12,000 at the beginning of the year, and if
net income for the year was $5,000, what is total owners' equity at the end of
the year?
(a) $
4,000 (b)
5,000
(c)
9,000
(d) 14,000
(19) Treasury stock involves shares which are:
(a) issued and
outstanding.
(b) authorized but not
yet issued.
(c) subscribed but not
yet authorized.
(d) issued but not
currently outstanding.
(20) If a transaction
during the year caused one asset to increase by $40,000 and another asset to
decrease by $30,000, which of the following events may have caused these
effects?
(a) Merchandise
inventory was purchased and paid for entirely with cash.
(b) Cash was received
in exchange for the issuance of common stock.
(c) Equipment was
purchased and paid for partly with cash and with an account payable for the
difference.
(d) None of the above
could have caused these effects.
(21) Net assets were $9,500 at the beginning of the year and
$12,000 at the end of the year. Merchandise Inventory went up by $1,000 during
the year, Accounts Payable went down by $500, and Accounts Receivable went down
by $2,000. If the Cash account was the only other asset and there were
no other liabilities, what happened to cash during the year?
(a) Cash increased by
$2,000.
(b) Cash increased by
$3,000.
(c) Cash decreased by
$2,000.
(d) None of the above.
(22) The term 'current assets' does not include-
a) Payments in
advance.
b) Bills receivable.
c) Long-term deferred
charges.
d) Cash at bank
(23) The retained earnings balance for Matt & Anne's
Food Center at December 31, 2003 was $33,000. The balance at December 31,
2004 was $47,000. During 2004, dividends in the amount of $6,000 were
declared and paid to stockholders. The only other change in retained
earnings was due to net income. The net income for 2004 was?
(a)
$8,000
(b) 14,000
(c)
20,000
(d) 26,000
(24) The principle stating that all expenses incurred while
earning revenues should be identified with the revenues when they are earned,
and reported for the same time period is the:
(a) cost principle.
(b) revenue principle.
(c) expense principle.
(d) matching
principle.
(25) "The firm must
be treated as financially separate and distinct form its' owner(s)". This
rule is known as:
(a) Matching ( b ) Business Entity
(c) Going Concern ( d ) Double Aspect
Answer: B
1)B 2)C 3)A
4)C 5)A 6)C 7)A 8)B 9)D 10)A 11)B
12)D 13)D 14)C
15)B
16)B 17)C 18)D 19)D
20)C 21)B 22)C 23)C
24)D 25) B
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