1.The useful life of a plant asset is:

The length of time it is used productively in a company’s operations

Never related to its physical life

Its productive life, but not to exceed one year

Determined by the FASB

Determined by law

2. Depreciation:

Measures the decline in market value of an asset

Measures physical deterioration of an asset

Is the process of allocating to expense the cost of a plant asset

Is an outflow of cash from the use of a plant asset

Is applied to land

3. Plant assets are

Tangible assets used in the operation of a business that have a useful life of more than one accounting period

Current assets

Held for sale

Intangible assets used in the operations of a business that have a useful life of more than one accounting period

Tangible assets used in the operation of business that have a useful life of less than one accounting period

4. A company has net sales of $870,000 and average accounts receivable of $174,000. What is its accounts receivable turnover for the period

0.20

5.00

20.0

73.0

1,825

5. FICA taxes include:

Social Security taxes

Charitable giving

Employee income taxes

Unemployment taxes

6. Times interest earned is calculated by:

Multiplying interest expense times income

Dividing interest expense by income before interest expense

Dividing income before interest expense and any income tax by interest expense

Dividing interest and income tax expense by income before interest and income tax expense

7. Amortization:

Is the systematic allocation of the cost of an intangible asset to expense over its estimated useful life

Is the process of allocating to expense the cost of a plant asset to the accounting periods benefiting from its use

Is the process of allocating the cost of natural resources to periods when they are consumed

Is an accelerated form of expensing an asset’s cost

Is the same as depletion

8. A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the:

Direct write-off method

Aging of accounts receivable method

Percentage of sales method

Aging of investments method

Percent of accounts receivable method

9. A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. The depletion expense per ton of ore is:

$0.75

$0.625

$0.875

$6.00

$8.00

10. The matching principle requires:

That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user

The use of the direct write-off method for bad debts

The use of the allowance method of accounting for bad debts

That bad debts be disclosed in the financial statements

That bad debts not be written off

11. Liabilities:

Must be certain

Must sometimes be estimated

Must be for a specific amount

Must always have a definite date for payment

Must involve an outflow of cash

12. In the accounting records of a defendant, lawsuits:

Are estimated liabilities

Should always be recorded

Should always be disclosed

Should be recorded if payment for damages is probable and the amount can be reasonably estimated

13. A contingent liability:

Is always of a specific amount

Is a potential obligation that depends on a future event arising out of a past transaction or event

Is an obligation not requiring future payment

Is an obligation arising from the purchase of goods or services on credit

Is an obligation arising from a future event

14. Total asset turnover is calculated by dividing:

Gross profit by average total assets

Average total assets by gross profit

Net sales by average total assets

Average total assets by net sales

Net assets by total assets

15. If the times interest ratio:

Increases, then risk increases

Increases, then risk decreases

Is greater than 1.5, then the company is in default

Is less than 1.5, the company is carrying too little debt

16. Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are:

Debentures

Discounted notes

Installment notes

Indentures

Investment notes

17. A company borrowed $300,000 cash from the bank by signing a 5-year, 8% installment note. The present value factor for an annuity at 8% for 5 years is 3.9927. Each annuity payment equals $75,137. The present value of the note is:

$75,137

$94,013

$300,000

$375,685

18. A bond traded at 102 means that:

The bond pays 2.5% interest

The bond traded at $1,025 per $1,000 bond

The market rate of interest is 2.5%

The bonds were retired at $1,025 each

19. Dividend yield is the percent of cash dividends paid to common shareholders relative to the:

Common stock’s market value

Earnings per share

Investors’ purchase price of the stock

Amount of retained earnings

Amount of cash

20. A bondholder that owns a $1,000, 10%, 10-year bond has:

Ownership rights

The right to receive $10 per year until maturity

The right to receive $1,000 at maturity

The right to receive $10,000 at maturity

21. A company issues at 9% bonds at par with a par value of $100,000 on April 1, which is 4 months after the most recent interest date. How much total cash interest is received on April 1 by the bond issuer

$750

$5,250

$1,500

$3,000

$6,000

22. Bonds owned by investors whose names and addresses are recorded by the issuing company and for which interest payments are made with checks to the bondholders, are called:

Callable bonds

Serial bonds

Registered bonds

Coupon bonds

23. The right of common shareholders to protect their proportionate interest in a corporation by having the first opportunity to buy additional proportionate shares of common stock issued by the corporation

is called a:

Preemptive right

Proxy right

Right to call

Financial leverage

24. Owners of preferred stock often do not have:

Ownership rights to assets of the corporation

Voting rights

Preference to dividends

The right to sell their stock on the open market

Preference to assets at liquidation

25. The dividend yield is computed by dividing:

Cash dividends per share by earnings per share

Earnings per share by cash dividends per share

Cash dividends per share by the market price per share

Market price per share by cash dividends per share

Cash dividends per share by retained earnings

26. A company issues 9%, 20-year bonds with a par value of $750,000. The current market rate is 9%. The amount of interest owed to the bondholders for each semiannual interest payment is.

$0

$33,750

$67,500

$750,000

$1,550,000

27. Secured bonds:

Are also referred to as debentures

Have specific assets of the issuing company pledged as collateral

Are backed by the issuer’s bank

Are subordinated to those of other unsecured liabilities

Are the same as sinking fund bonds

28. Bonds with a par value of less than $1,000 are known as:

Junk bonds

Baby bonds

Callable bonds

Unsecured bonds

Convertible bonds

29. A corporation’s distribution of additional shares of its own stock to its stockholders without the receipt of any payment in return is called a:

Stock dividend

Stock subscription

Premium on stock

Discount on stock

Treasury stock

30. A premium on common stock:

Is the amount paid in excess of par by purchasers of newly issued stock

Is the difference between par value and issue price when the amount paid is below par

Represents profit from issuing stock

Represents capital gain on sale of stock

Is prohibited in most states

31. A company had a market price of $83.12 per share, earnings per share of $4.87 and dividends per share of $5.40. Its price-earnings ratio is equal to:

.056

.065

8.09

15.39

17.07

32. Reporting of discontinued segments includes:

Income or loss from operating the discontinued segment net of tax and gain or loss from disposal of the segment’s net assets net of tax

Extraordinary items

Changes in accounting principle

Items that are both unusual and infrequent

Writing off of receivables

33. One of several ratios that reflects solvency includes the:

Acid-test ratio

Current ratio

Times interest earned ratio

Total asset turnover

Days’ sales in inventory

34. The ability to meet short-term obligations and to efficiently generate revenues is called:

Liquidity and efficiency

Solvency

Profitability

Market prospects

Creditworthiness

35. A company’s transactions with its creditors to borrow money and/or to repay the principal amounts of loans are reported as cash flows from:

Operating activities

Investing activities

Financing activities

Direct activities

Indirect activities

36. A company had net cash flows from operations of $120,000, total cash flows of $500,000 and average total assets of $2,500,000. The cash flow on total assets ratio equals:

4.8%

5.0%

20.0%

20.8%

24.0%

37. Net sales divided by average accounts receivable is equal to the:

Days’ sales uncollected

Average accounts receivable ratio

Current ratio

Profit margin

Accounts receivable turnover ratio

38. The comparison of a company’s financial condition and performance across time is known as:

Horizontal analysis

Vertical analysis

Political analysis

Financial reporting

Investment analysis

39. Selected information from Doodle Company’s for 2010 is below (in millions):

Inventory decreased $6.0

Accounts Payable increased by $7.0

Cost of goods sold $36.50

Salaries Expense $24.0

Salaries Payable decreased $6.0

Accounts Receivable increased by $10.0

Sales $56.4

What is the amount of cash paid for salaries by Doodle during 2010

$4.0

$6.0

$24.0

$30.0

$18.0

40. A company has sales of $5,417,000, a gross profit ratio of 35%, ending merchandise inventory of $201,425, and total current assets of $1,539,600. What is the days sales’ in inventory ratio for the year?

6.10

20.88

26.15

22.67

15.77

41. Financial statements with data for two or more successive accounting periods placed in columns side by side, sometimes with changes shown in dollar amounts and percents, are referred to as:

Period-to-period statements

Controlling statements

Successive statements

Comparative statements

Serial statements

42. The average number of times a company’s inventory is sold during an accounting period, calculated by dividing cost of goods sold by the average inventory balance is equal to the:

Accounts receivable turnover

Inventory turnover

Days’ sales uncollected

Current ratio

43. Which of the following items is not likely to be considered an extraordinary item

Loss from an unexpected union strike

Condemnation of property by the city government

Loss of use of property due to a new and unexpected environmental regulation

Loss due to an earthquake in Florida

Expropriation of property by a foreign government

44. Net income divided by net sales is equal to the:

Return on total assets

Profit margin

Current ratio

Total asset turnover

Days’ sales in inventory

45. Comparative financial statements in which each amount is expressed as a percentage of a base amount and in which the base amount is expressed as 100%, are called:

Comparative statements

Common-size comparative statements

General-purpose financial statements

Base line statements

Index statements

46. The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts, such as receipts from customers and subtracts the major items of operating cash disbursements, such as cash paid for merchandise is referred to as the:

Direct method of reporting net cash provided or used by operating activities

Cash basis of accounting

Classified statement of cash flows

Indirect method of reporting net cash provided or used by operating activities

Net method of reporting cash flows from operating activities

47. The indirect method for the preparation of the operating activities section of the statement of cash flows:

Separately lists each major item of operating cash receipts

Separately lists each major item of operating cash payments

Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities

Is required if the company is a merchandiser

48. A company has a profit margin of 5%. If net income is equal to $83,000 and average total assets is equal to $45,000, how much are net sales

$4,150

$2,250

$1,660,000

$6,400

$128,000

49. A component of operating efficiency and profitability, calculated by expressing net income as a percent of net sales is equal to the:

Acid-test ratio

Merchandise turnover

Price earnings ratio

Accounts receivable turnover

Profit margin ratio

50. An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes is a(n):

Short-term marketable equity security

Operating activity

Common stock

Cash equivalent

Financing activity