696 Accounting Practice Problems

Charity Kemper analyzes a company's current ratio before deciding whether to invest in the company. What types of information does Charity hope to gleam by analyzing the current ratio?

a. The company's proportion of current to long-term liabilities.

b. The company's proportion of current to long-term assets.

c. The company's proportion of assets that is financed with debt.

d. The company's ability to pay current liabilities with current assets.

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What type of an account is Unearned Revenue?

a. Asset

b. Liability

c. Revenue

d. Expense

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Briggs Automotive, Inc. has Cash of $20,000, Accounts Receivables of $30,000, Supplies of $10,000, Inventory of $50,000, Accounts Payable of $15,000, and Common Stock of $40,000. Assuming these are all of the accounts in the business, what is the value of its Retained Earnings?

a. $55,000

b. $85,000

c. $95,000

d. $165,000

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Given the information below for The Great Mall of the Great Plains, what is The Great Mall's Gross Profit Percentage?

Net Sales                  $300,000

Cost of Goods Sold    $170,000

Net Income                $60,000

 

a. 20%

b. 23.3%

c. 43.3%

d. 56.7%

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Dagen Haaz, Inc., an ice cream manufacturer had the following information available related to its inventory for 2014: 

What is Dagen Haaz's inventory turnover for 2014?

a. 18.64

b. 56.36

c. 34.30

d. 62.00

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The following information is available for Manhattan Quarry for the current year:

Net income: $200,000

Interest expense: 20,000

Beginning of year: Total assets: 600,000 , Total common stockholders' equity: 400,000

End of year: Total assets: 750,000, Total common stockholders' equity: 450,000

The return on assets (ROA) for Manhattan Quarry is:

 

a. 26.7%

b. 32.6%

c. 42.4%

d. 51.8%

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Yarborough Enterprises issued a $500,000 of bonds payable with a 10% interest rate at a price of 104. The journal entry to record the issuance of this bond included a:

a. Debit to Cash, $500,000

b. Debit to Bonds Payable, $500,000

c. Credit to Premium on Bonds Payable, $20,000

d. Credit to Cash, $500,000

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When a company increases accounts payable from one year to the next, the effect on cash flows

A) is a decrease in cash caused by paying down our debt to vendors.

B) is an increase in cash because we have not paid cash for all the inventory and services purchased on credit during the period.

C) is a decrease to cash because we will have to pay these liabilities in the future.

D) is an increase to cash because we have received cash from vendors.

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Laurie Co. sold a machine for cash. The machine originally cost $20,000, and accumulated depreciation of $15,000 had been recorded up to the time of disposal. A gain on the disposal of $2,000 was reported. Therefore, cash inflow from the sale of the machine was:

a. $7,000

b. $3,000

c. $4,000

d. $5,000

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Matlock Co. reported net income of $10,000 on its income statement for the year ended December 31, 2012. During 2012, accounts receivable decreases by $4,000, merchandise inventory decreased by $6,000, accounts payable increased by $2,000, and depreciation expense was $8,000. Matlock's net cash flow from operating activities was:

A. $10,000

B. $18,000

C. $19,000

D. $30,000

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Which of the following would NOT create a cash inflow or outflow?

a. The company purchases some of its own stock from a stockholder.

b. Amortization of a patent.

c. Payment of a cash dividend.

d. Sale of equipment.

e. None of the above is correct. 

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The balance sheet of Warner Co. showed the following data about its common stock, par $10.

Authorized shares               100,000

Outstanding shares               55,000

Issued shares                       60,000

The number of treasury shares was:

A. 40,000

B. 45,000

C. 30,000

D. 5,000

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Which of the following statements is FALSE?

a. Issuance of stock creates cash inflow connected to financing activities.

b. Payment of a cash dividend creates a cash outflow connected to investing activities.

c. Repurchase of the company's stock as treasury stock creates a cash outflow connected to financing activities.

d. All of the above are false.

E. None of the above are false.

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What is the correct entry for the sale of 200 shares of $10 par value preferred stock for $5,000?

A. Dr. Cash $5,000; Cr. Preferred Stock $5,000

B. Dr. Cash $2,000; Cr. Preferred Stock $2,000

C. Dr. Preferred Stock $2,000,Contributed Capital in Excess of Par $3,000; Cr. Cash $5,000

D. Dr. Cash $5,000; Cr. Preferred Stock $2,000, Contributed Capital in Excess of Par $3,000 

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On July 1, 2012, Wilson Co. issued $300,000, five-year, 9% bonds at 103. The reason that Wilson issued the bonds at a premium was:

A. the stated rate of interest was higher then the rate being paid on investments of comparable risk.

B. the stated rate of interest was the same as the rate being paid on investments of comparable risk.

C. the stated rate of interest was lower then the rate being paid on investments of comparable risk.

D. None of the above. 

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Mega Corp. sold $25,000,000 of its 9% bonds at par on January 1, 2012. On December 31, 2012, the bonds were trading on the bond exchange at 98.5. Since the issue date, the market rate of interest on similar bonds has:

A. Increased

B. Decreased

C. Stayed the same

D. None of the above

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The 5,000 shares of Goldsmith's outstanding common stock originally sold for $10 per share. As of 12/31/12, the stock is selling at $15 per share. What is Goldsmith's price/earnings ratio as of 12/31/12 (round to 2 decimal places)?

A. 3.73

B. 3.00

C. 11.19

D. 7.46

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Of each dollar of sales revenue, what percentage are wages earned by employees during 2012?

a. 6.7 %

b. 10 %

c. 2 %

d. 63 %

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Given that Eric's total revenues for 2012 were $7,600 and net income for 2012 was $1,460, what was Eric's return on equity for 2012?

A. 11.812%

B. 37.717%

C. 61.489 %

D. 12.036%

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If Eric's net income for 2012 was $1,460, what amount of dividends did Eric declare during 2012?

A. $5,720

B. $1,000

C. $460

D. $900 

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Which of the following would  not appear on a Statement of Cash Flows prepared using the direct method?

a. Payments to a supplier

b. Collections from customers

c. Proceeds from the issuance of common stock

d. Cost of goods sold

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What was Eric's working capital as of 12/31/12?

a. $9,410

b. $12,360

c. $9,160

d. $11,160

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Garmin Corporation paid $10,000 in 2006 to purchase treasury stock. Garmin should report the purchase of treasury stock on the Statement of Cash Flows as part of:

a. Operating activities

b. Investing activities

c. Financing activities

d. No activities, because the purchase of treasury stock would not be reported on the Statement of Cash Flows.

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A company has a current ratio of 2.4 before purchasing a piece of equipment with cash. Following this payment the current ratio will be:

a. less than 2.4

b. greater than 2.4 or less than 2.4 depending upon the dollar amount involved

c. greater than 2.4

d. equal to 2.4

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How would you close out Supplies Expense on 12/31/16 after the financial statements have been prepared?

a. Debit to Supplies Expense and a Credit to Retained Earnings

b. Debit to Retained Earnings and a Credit to Supplies Expense

c. Debit to Supplies Expense and a Credit to Net Income

d. Debit to Net Income and a Credit to Net Income

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