Unit 6 : Unit 6: Reporting and Analyzing Cash Flow and Financial Statements – Final Exam
Time Remaining:
1. The maturity date of a note receivable: (Points : 2)
Is the day of the credit sale
Is the day the note was signed
Is the day the note is due to be paid
Is the date of the first payment
Is the last day of the month
2. Most employees and employers are required to pay: (Points : 2)
Local payroll taxes
State payroll taxes
Federal payroll taxes
Both B and C only
Local, state and federal payroll taxes
3. Sales taxes payable: (Points : 2)
Is an estimated liability
Is a contingent liability
Is a current liability for retailers
Is a business expense
Is a long-term liability
4. Pepsi’s accounts receivable turnover was 9.9 for this year and 11.0 for last year. Coke’s turnover was 9.3 for this year and 9.3 for last year. These results imply that: (Points : 2)
Coke has the better turnover for both years
Pepsi has the better turnover for both years
Coke’s turnover is improving
Coke’s credit policies are too loose
Coke is collecting its receivables more quickly than Pepsi in both years
5. Depreciation: (Points : 2)
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
6. Times interest earned is calculated by: (Points : 2)
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. The interest accrued on $3,600 at 7% for 60 days is: (Points : 2)
$36
$42
$252
$180
$420
8. Plant assets are: (Points : 2)
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
9. Total asset turnover is calculated by dividing: (Points : 2)
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
10. If the times interest ratio: (Points : 2)
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
11. The matching principle requires: (Points : 2)
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
12. A company had a bulldozer destroyed by fire. The bulldozer originally cost $125,000. The accumulated depreciation on it was $60,000. The proceeds from the insurance company were $90,000. The company should recognize: (Points : 2)
A loss of $25,000
A gain of $25,000
A loss of $65,000
A gain of $65,000
A gain of $90,000
13. A machine originally had an estimated useful life of 5 years, but after 3 complete years, it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining: (Points : 2)
2 years
5 years
7 years
8 years
10 years
14. A company had a fixed interest expense of $6,000, its income before interest expense and any income taxes was $18,000 and its net income was $8,400. The company’s times interest earned ratio is equals to (Points : 2)
0.33
0.71
1.40
3.00
12,000
15. On October 10, 2010, Printfast Company sells a commercial printer for $2,350 with a one year warranty that covers parts. Warranty expense is project to be 4% of sales. On February 28, 2011, the printer requires repairs. The cost of the parts for the repair is $80 and Printfast pays their technician $150 to perform the repair. What is the warranty liability at the end of 2010? (Points : 2)
$49.00
$84.80
$94.00
$0, there is no liability at the end of 2010
$230.00
16. A premium on common stock: (Points : 2)
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
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: (Points : 2)
$75,137
$94,013
$300,000
$375,685
18. The amount of income earned per share of a company’s common stock is known as: (Points : 2)
Restricted retained earnings per share
Earnings per share
Continuing operations per share
Dividends per share
Book value per share
19. To provide security to creditors and to reduce interest costs, bonds and notes payable can be secured by: (Points : 2)
Safe deposit boxes
Mortgages
Equity
The FASB
Debentures
20. Amortizing a bond discount: (Points : 2)
Allocates a part of the total discount to each interest period
Increases the market value of the Bonds Payable
Decreases the Bonds Payable account
Decreases interest expense each period
Increases cash flows from the bond
21. A company received cash proceeds of $206,948 on a bond issue with a par value of $200,000. The difference between par value and issue price for this bond is recorded as a: (Points : 2)
Credit to Interest Income
Credit to Premium on Bonds Payable
Credit to Discount on Bonds Payable
Debit to Premium on Bonds Payable
22. A company issues at par 7% bonds with a par value of $500,000 on June 1, which is 5 months after the most recent interest date. How much total cash interest is received on May 1 by the bond issuer? (Points : 2)
$0
$2,916.66
$100,000.00
$14,583.33
$35,000.00
23. Installment notes payable that require periodic payments of accrued interest plus equal amounts of principal result in: (Points : 2)
Periodic total payments that gradually decrease in amount
Periodic total payments that are equal
Periodic total payments that gradually increase in amount
Increasing amounts of interest each period
Increasing amounts of principal each period
24. Bonds that have interest coupons attached to their certificates, which the bondholders detach during each interest period and present to a bank for collection, are called: (Points : 2)
Coupon bonds
Callable bonds
Serial bonds
Convertible bonds
25. The market value of a bond is equal to: (Points : 2)
The present value of all future cash payments provided by a bond
The present value of all future interest payments provided by a bond
The present value of the principal for an interest-bearing bond
The future value of all future cash payments provided by a bond
The future value of all future interest payments provided by a bond
