Assessment 1:
1. Who uses accounting information?
Corporate creditors
Corporate treasury operations
The internal revenue service
All of the listed
Corporate executives
None of the listed
Investors
2. Which of the following statements is FALSE?
The balance sheet represents a “snapshot” of the company’s solvency and financial
position.
The balance sheet reflects a company’s profitability from operations.
The income statement reflects a company’s profitability during a period of time.
The statement of retained earnings shows the change in retained earnings between the
beginning and end of a period.
The statement of cash flows shows the cash inflows and outflows over a period of time.
3. A corporation is:
A business incorporated under the laws of a state and owned by a single proprietor.
A business incorporated under the laws of a state and owned by stockholders.
A business chartered directly by Congress.
An unincorporated business owned by two or more persons.
Only incorporated by the IRS
A government agency
4. When the stockholders invest cash in the business, what is the effect?
None of these
Both assets and stockholders’ equity increase
Both assets and liabilities increase
Liabilities increase and stockholders’ equity increases.
5. The ending balance in retained earnings is shown in the:
A statement of retained earnings
Statement of retained earnings and the balance sheet
Balance sheet
Income statement
6. Which of the following is not a correct form of the accounting equation?
Assets equals liabilities + stockholders’ equity
Assets + stockholders’ equity equals liabilities
Assets – Stockholders’ equity equals liabilities
Assets – Liabilities equals stockholders’ equity
7. When a business purchases a truck with cash on hand, that transaction is reflected on the:
Cash flow statement
Income statement
Balance sheet
Balance sheet and cash flow statement
, Income statement, balance sheet, and cash flow statement
8. The basic accounting equation is:
Assets A equals Cash C- Loans L – Stockholders’ Equity SE
Assets A equals Stockholders’ Equity SE – Liabilities L
Assets A equals Liabilities L + Stockholders’ Equity SE
Stockholders’ Equity SE equals Assets A+ Liabilities L
None of these
Assets A equals Liabilities L + Stockholders’ Salaries SS
9. Of the five primary accounting concepts, which one assumes an indefinite future?
Exchange-price (or cost) concept principle
None of these
The business entity concept
The money measurement concept
Going-concern (continuity) concept
Periodicity (time periods) concept
Assessment 2:
1. “Y” Company began the accounting period with $60,000 of merchandise, and net cost of
purchases was $240,000. A physical inventory showed $72,000 of merchandise unsold at the end
of the period. The cost of goods sold of Y Company for the period is:
$228,000
2. A business purchased merchandise for $12,000 on account’ terms are 2/10, n/30. If $2,000 of
the merchandise was returned and the remaining amount due was within the discount period,
the purchase discount would be:
$200
3. One a sales invoice, 2/10, n30 means
If paid within 10 days, take a cash discount of 2%. Otherwise, the full amount is due
within 30 days.
4. The major differences between unclassified and classified income statements are:
An unclassified income statement only has two categories – revenues and expenses.
A classified income statement divides both revenues and expenses into operating
and non-operating items.
5. Gross margin percentage is calculated by:
None of these
Gross margin minus non-operating expenses divided by Gross sales
Gross margin divided by Net Inventory Turnover x 100
Gross margin divided by net sales x 200
Net cost of sales divided by net sales x 100
6. Current liabilities are obligations that:
Only (y) and (z) are true
(y) Will typically be paid out of current assets
(z) Are payable within one year or one operating cycle, whichever is shorter.
(x) Are payable within one year or one operating cycle, whichever is longer.
, Only (x) and (y) are true.
7. Dividing net credit sales, of net sales, by average net accounts receivable yields:
Inventory turns
Asset turnover
Receivables aging
Not a meaningful calculation since sales and receivables are both debits.
Accounts receivable turnover.
8. Which of the following statements is false?
The allowance for uncollectible accounts reduces accounts receivable to their net
realizable value.
A write-off of an account reduces the net amount shown for accounts receivable on
the balance sheet.
The percentage-of-receivables method may use either an overall rate or a different
rate for each age category.
None of these.
Any existing balance in the Allowance for uncollectible accounts is ignored in
calculating the uncollectible accounts expense under the percentage-of-sales
method except that the allowance account must have a credit balance after
adjustment.
9. Hunt Company estimates uncollectable accounts using the percentage-of-receivables method
and expects that 5 percent of outstanding receivables will be uncollectible for 2014. The balance
in Accounts Receivable is $200,000, and the allowance account has a $3,000 credit balance
before adjustment at year-end. The uncollectible accounts expense for 2014 will be:
$7,000
Assessment 3
1. The following data was abstracted from the 2014 December 31, balance sheet of Andrews
Company:
Cash $136,000 asset
Short-term investments 64,000 asset
Accounts receivable 184,000 asset
Inventory 244,000 asset
Prepaid expenses 12,000 asset
Accounts payable (all due within one year) 256,000 liability
Others short term liabilities 64,000 liability
Bonds payable, long term 400,000
The current ratio is:
a. 1.2:1
b. 3:1
, c. 1:2
d. 2:1
Current assets: USD 136,000 + USD 64,000 + USD 184,000 + USD 244,000 + USD 12,000 =
USD 640,000
Current liabilities: USD 256,000 + USD 64,000 = USD 320,000
Current ratio:
USD640,000 USD 320,000
=2:1
2. Use the above data:
The quick ratio is:
a. 3:1
b. 1:2
c. 1.2:1
d. 2:1
USD 136,000 + USD 64,000 + USD 184,000 = USD 384,000 Current liabilities:256,000
+ USD 64,000 = USD 320,000
Acid-test ratio:
USD 384,000 USD 320,000
=1.2: 1
3. Benson Company shows the following data on their 2014 financial statements:
Accounts receivable, January 1 $720,000
Accounts receivable, December 31 $960,000
Merchandise inventory, January 1 $900,000
Merchandise inventory, December 31 $1,020,000
Gross sales $4,800,000
Sales returns and allowance $180,000
Net credit sales $4,620,000
Cost of good sols $3,360,000
Earnings before interest and taxes (operating income) $720,000
Interest on bonds $192,000
Net income $384,000
The Accounts Receivable Turnover is:
1. Who uses accounting information?
Corporate creditors
Corporate treasury operations
The internal revenue service
All of the listed
Corporate executives
None of the listed
Investors
2. Which of the following statements is FALSE?
The balance sheet represents a “snapshot” of the company’s solvency and financial
position.
The balance sheet reflects a company’s profitability from operations.
The income statement reflects a company’s profitability during a period of time.
The statement of retained earnings shows the change in retained earnings between the
beginning and end of a period.
The statement of cash flows shows the cash inflows and outflows over a period of time.
3. A corporation is:
A business incorporated under the laws of a state and owned by a single proprietor.
A business incorporated under the laws of a state and owned by stockholders.
A business chartered directly by Congress.
An unincorporated business owned by two or more persons.
Only incorporated by the IRS
A government agency
4. When the stockholders invest cash in the business, what is the effect?
None of these
Both assets and stockholders’ equity increase
Both assets and liabilities increase
Liabilities increase and stockholders’ equity increases.
5. The ending balance in retained earnings is shown in the:
A statement of retained earnings
Statement of retained earnings and the balance sheet
Balance sheet
Income statement
6. Which of the following is not a correct form of the accounting equation?
Assets equals liabilities + stockholders’ equity
Assets + stockholders’ equity equals liabilities
Assets – Stockholders’ equity equals liabilities
Assets – Liabilities equals stockholders’ equity
7. When a business purchases a truck with cash on hand, that transaction is reflected on the:
Cash flow statement
Income statement
Balance sheet
Balance sheet and cash flow statement
, Income statement, balance sheet, and cash flow statement
8. The basic accounting equation is:
Assets A equals Cash C- Loans L – Stockholders’ Equity SE
Assets A equals Stockholders’ Equity SE – Liabilities L
Assets A equals Liabilities L + Stockholders’ Equity SE
Stockholders’ Equity SE equals Assets A+ Liabilities L
None of these
Assets A equals Liabilities L + Stockholders’ Salaries SS
9. Of the five primary accounting concepts, which one assumes an indefinite future?
Exchange-price (or cost) concept principle
None of these
The business entity concept
The money measurement concept
Going-concern (continuity) concept
Periodicity (time periods) concept
Assessment 2:
1. “Y” Company began the accounting period with $60,000 of merchandise, and net cost of
purchases was $240,000. A physical inventory showed $72,000 of merchandise unsold at the end
of the period. The cost of goods sold of Y Company for the period is:
$228,000
2. A business purchased merchandise for $12,000 on account’ terms are 2/10, n/30. If $2,000 of
the merchandise was returned and the remaining amount due was within the discount period,
the purchase discount would be:
$200
3. One a sales invoice, 2/10, n30 means
If paid within 10 days, take a cash discount of 2%. Otherwise, the full amount is due
within 30 days.
4. The major differences between unclassified and classified income statements are:
An unclassified income statement only has two categories – revenues and expenses.
A classified income statement divides both revenues and expenses into operating
and non-operating items.
5. Gross margin percentage is calculated by:
None of these
Gross margin minus non-operating expenses divided by Gross sales
Gross margin divided by Net Inventory Turnover x 100
Gross margin divided by net sales x 200
Net cost of sales divided by net sales x 100
6. Current liabilities are obligations that:
Only (y) and (z) are true
(y) Will typically be paid out of current assets
(z) Are payable within one year or one operating cycle, whichever is shorter.
(x) Are payable within one year or one operating cycle, whichever is longer.
, Only (x) and (y) are true.
7. Dividing net credit sales, of net sales, by average net accounts receivable yields:
Inventory turns
Asset turnover
Receivables aging
Not a meaningful calculation since sales and receivables are both debits.
Accounts receivable turnover.
8. Which of the following statements is false?
The allowance for uncollectible accounts reduces accounts receivable to their net
realizable value.
A write-off of an account reduces the net amount shown for accounts receivable on
the balance sheet.
The percentage-of-receivables method may use either an overall rate or a different
rate for each age category.
None of these.
Any existing balance in the Allowance for uncollectible accounts is ignored in
calculating the uncollectible accounts expense under the percentage-of-sales
method except that the allowance account must have a credit balance after
adjustment.
9. Hunt Company estimates uncollectable accounts using the percentage-of-receivables method
and expects that 5 percent of outstanding receivables will be uncollectible for 2014. The balance
in Accounts Receivable is $200,000, and the allowance account has a $3,000 credit balance
before adjustment at year-end. The uncollectible accounts expense for 2014 will be:
$7,000
Assessment 3
1. The following data was abstracted from the 2014 December 31, balance sheet of Andrews
Company:
Cash $136,000 asset
Short-term investments 64,000 asset
Accounts receivable 184,000 asset
Inventory 244,000 asset
Prepaid expenses 12,000 asset
Accounts payable (all due within one year) 256,000 liability
Others short term liabilities 64,000 liability
Bonds payable, long term 400,000
The current ratio is:
a. 1.2:1
b. 3:1
, c. 1:2
d. 2:1
Current assets: USD 136,000 + USD 64,000 + USD 184,000 + USD 244,000 + USD 12,000 =
USD 640,000
Current liabilities: USD 256,000 + USD 64,000 = USD 320,000
Current ratio:
USD640,000 USD 320,000
=2:1
2. Use the above data:
The quick ratio is:
a. 3:1
b. 1:2
c. 1.2:1
d. 2:1
USD 136,000 + USD 64,000 + USD 184,000 = USD 384,000 Current liabilities:256,000
+ USD 64,000 = USD 320,000
Acid-test ratio:
USD 384,000 USD 320,000
=1.2: 1
3. Benson Company shows the following data on their 2014 financial statements:
Accounts receivable, January 1 $720,000
Accounts receivable, December 31 $960,000
Merchandise inventory, January 1 $900,000
Merchandise inventory, December 31 $1,020,000
Gross sales $4,800,000
Sales returns and allowance $180,000
Net credit sales $4,620,000
Cost of good sols $3,360,000
Earnings before interest and taxes (operating income) $720,000
Interest on bonds $192,000
Net income $384,000
The Accounts Receivable Turnover is:
