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If Frye Company has working capital of $540,000 and a current ratio of 3 to 1, the amount of current assets is: a. $540,000 b. $810,000 c. $270,000...

Question:

If Frye Company has working capital of $540,000 and a current ratio of 3 to 1, the amount of current assets is:

a.            $540,000

b.            $810,000

c.             $270,000

d.            $405,000

 

Question 4

Which of the following statements is true regarding vertical analysis?

a.            Common-size financial statements can be used to compare businesses of different sizes.

b.            Vertical analysis can only be used with balance sheet accounts.

c.             Vertical analysis can only be used with income statement accounts.

d.            Vertical analysis can only be used with retained earnings accounts.

 

Question 5

Swanson Company has 100,000 authorized shares of $4 par common stock. The company issued 40,000 shares at $8. Subsequently, Swanson declared a 2% stock dividend on a date when the market price was $11 a share. What is the amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend?

a.            $8,800

b.            $4,800

c.             $3,200

d.            $6,400

 

Question 6

Which of the following items should not appear in the long-term liability section of the balance sheet?

a.            Accrued income taxes

b.            Deferred income taxes

c.             Bonds payable

d.            Pension obligations

 

Question 7

Use the information below for Sidney Inc. for 2011 and 2012 to answer the following question.

Equipment, December 31, 2011 $65,000

Equipment, December 31, 2012 72,000

Accumulated depreciation, December 31, 2011  39,000

Accumulated depreciation, December 31, 2012  30,000

During 2012, Sidney Inc. sold equipment with a cost of $30,000 and accumulated depreciation of $25,000. A gain of $3,000 was recognized on the sale of the equipment This was the only equipment sale during the year.

Assume that all purchases of equipment were paid with cash. How much cash was paid by Sidney for the purchase of equipment during 2012?

a.            $ 7,000

b.            $30,000

c.             $37,000

d.            $72,000

 

Question 8

Capitalizing an expenditure rather than recording it as a revenue expenditure

a.            affects the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period.

b.            affects the total book value of plant assets on the balance sheet, but has no effect on the amount of net income reported during an accounting period.

c.             affects the amount of net income reported during an accounting period, but has no effect on the total book value of plant assets on the balance sheet.

d.            has no effect on the book value of plant assets on the balance sheet or the amount of income reported on the income statement.

 

Question 9

The data presented below is for Omega, Inc. for 2012.

Credit sales during the year         $2,100,000

Accounts receivable - December 31, 2012             295,000

Allowance for doubtful accounts - December 31, 2012    28,000

Bad debt expense for the year  17,000

What is the effect on liquidity when Omega records its estimate for bad debt expense using the allowance method?

a.            Liquidity decreases

b.            Liquidity increases

c.             Liquidity stays the same

d.            Liquidity both increases and decreases

 

Question 10

The net assets of a company are equal to

a.            current assets less current liabilities.

b.            total assets less current assets.

c.             long-term assets less accumulated depreciation.

d.            the stockholders' equity.

 

Question 11

When using the direct method, how is the collection of cash from customers shown on the statement of cash flows?

a.            Operating activity

b.            Investing activity

c.             Financing activity

d.            Noncash investing and financing activity

 

Question 12

Adorn Corp. issued 10-year, 8%, $100,000 bonds paying interest on an annual basis, at a $5,200 premium. Which one of the following statements is true?

a.            Adorn’s annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year.

b.            Adorn’s annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year

c.             Adorn will receive $94,800 as the issue price.

d.            The cash paid to bondholders will be $520 each interest period.

 

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