1. Casey Company has an accounts receivable turnover of 36 days, an inventory turnover of 77 days, and an

1. Casey Company has an accounts receivable turnover of 36 days, an inventory turnover of 77 days, and

an accounts payable turnover of 40 days. Casey’s cash conversion cycle is _______ day(s).

A. 1

B. 81

C. 153

D. 73  

 

2. Which activities are computed differently using the two methods of formatting a statement of cash

flows?

A. Financing activities

B. Operating activities

C. Both operating activities and investing activities

D. Investing activities

 

3. Ryan Industries has an inventory turnover of 112 days, an accounts payable turnover of 73 days, and an

accounts receivable turnover of 82 days. Ryan’s cash conversion cycle is _______ days.

A. 103

B. 121   

C. 43

D. 9

 

4. What is the rate of return on common stockholders’ equity if sales are $100,000, net income is $22,700,

and average common stockholders’ equity is $86,000?

A. 26.4%             

B. The rate of return can’t be determined from the information given.

C. 22.7%

D. 86.0%

 

5. Birch issued 200 shares of $12 par common stock in exchange for a piece of equipment with a current

market value of $3,000. Which of the following is not part of the journal entry for this transaction?

A. Crediting paid-in capital in excess of par common for $600

B. Debiting equipment for $3,000

C. Crediting common stock for $3,000

D. Crediting common stock for $2,400

 

6. Casey Company has 5,000 shares of treasury cost that it purchased for $13 per share. It later resold

2,000 of those shares for $17 per share. The amount to be credited to Paid-in Capital—Treasury Stock is

A. $26,000.

B. $34,000.

C. $30,000.

D. $8,000.          

 

7. A company has $56,000 in cash; $12,000 in accounts receivable; $25,000 in short-term investments;

and $100,000 in merchandise inventory. The company also has $60,000 in current liabilities. The

company’s quick ratio is

A. 1.550.            

B. 0.933.

C. 1.133.

D. 3.217.

 

8. The records of Ashley Boutique showed a net loss of $30,000; depreciation expense of $25,000; and an

increase in supplies on hand of $5,000. The amount of net cash flow from operating activities using the

indirect method is

A. ($10,000).       

B. ($15,000).

C. $15,000.

D. $20,000.

 

9. Operating expenses—other than depreciation—for the year were $335,000. Prepaid expenses decreased

by $7,000. Cash payments for operating expenses to be reported on the cash flow statement using the

direct method would be

A. $7,000.

B. $342,000.

C. $335,000.

D. $328,000.         

 

10. Earnings that a stockholder receives from a corporation are an example of which stockholder right?

A. Liquidation

B. Dividends

C. Preemption

D. Vote

 

11. If you own 500 shares (2% of a corporation’s stock) and the corporation issues 15,000 new shares,

how many of the new shares can you purchase under preemptive right?

A. 800

B. 500

C. 0

D. 300        

 

12. The accuracy of the statement of cash flows can be verified by computing the change in the balance of

the

A. equity account.

B. asset and liability accounts.

C. revenue accounts.

D. cash and cash equivalent accounts.

 

13. Tammy Corporation has 350,000 shares of $3 par common stock outstanding. It has declared a 5%

stock dividend. The current market price of the common stock is $7.50/share. The amount that will be

debited to retained earnings on the date of declaration is

A. $183,750.

B. $131,250.          

C. $78,750.

D. $52,500.

 

14. What are the rate of return on stockholders’ equity and the rate of return on common stockholders’

equity (rounded to the nearest one-tenth of a percent) given the following information:

 

Net Income $350,000

Preferred Dividends 20,000

Common Stock 48,000

Common Stockholders’ Equity 1/1/2011 4,400,000

Total Stockholders’ Equity 1/1/2011 5,300,000

Total Stockholders’ Equity 12/31/2011 5,500,000

 

A. Return on Stockholders’ Equity: 6.5 %; Return on Common Stockholders’ Equity: 7.6%

B. Return on Stockholders’ Equity: 7.8 %; Return on Common Stockholders’ Equity: 8.9%

C. Return on Stockholders’ Equity: 5.6 %; Return on Common Stockholders’ Equity: 6.7%

D. Return on Stockholders’ Equity: 8.1 %; Return on Common Stockholders’ Equity: 9.2%

 

15. Tammy Corporation has 350,000 shares of $3 par common stock outstanding. It has declared a 5%

stock dividend. The current market price of the common stock is $7.50/share. The amount that will be

credited to common stock on the date of declaration is

A. $52,500.         

B. $183,750.

C. $131,250.

D. $78,750.

 

16. Rick Company has declared a $40,000 cash dividend to shareholders. The company has 5,000 shares

of $20 par, 6% preferred stock, and 10,000 shares of $15 par common stock. The preferred stock is

noncumulative. How much will be distributed to the preferred and common stockholders on the date of

payment?

A. $34,000 preferred; $6,000 common

B. $40,000 preferred; $0 common

End of exam

C. $0 preferred; $40,000 common

D. $6,000 preferred; $34,000 common    

 

17. Tammy Company has a beginning accounts receivable balance of $65,000 and an ending accounts

receivable balance of $60,000. Net credit sales are $250,000. Tammy’s accounts receivable turnover rate is

A. 2.000.

B. 4.167.

C. 4.000.              

D. 3.846.

 

18. Cost of goods sold for the year was $850,000. Inventory was $60,000 at the beginning of the year and

$90,000 at the end of the year. There were no changes in the amount in accounts payable for the year.

Cash payment for merchandise to be reported under the direct method is

A. $910,000.

B. $850,000.

C. $880,000.         

D. $940,000.

 

19. To determine why net income and cash on the balance sheet don’t equal, an accountant can prepare

a/an

A. statement of retained earnings.

B. income statement.

C. statement of cash flows.

D. balance sheet.

 

20. Net sales at Kelly’s Bakery increased from $40,000 to $60,000, and its cost of goods sold increased

from $20,000 to $40,000. Vertical analysis based on net sales would show which percentages for cost of

goods sold (rounded to the nearest %)?

A. 40% and 20%

B. 10% and 30%

C. 67% and 40%

D. 50% and 67%          

 

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