Question 1

The debt to assets ratio is a

Accepted Answer

A)  liquidity ratio.
B)  profitability ratio.
C)  solvency ratio.
D)  None of the answer choices is correct.E) None of the above
F) All of the above

Question 2

Both investors and creditors have an interest in a company's ability to generate favorable cash flows.

Accepted Answer

A) True 
 B)False

Question 3

Use the following data to determine the total dollar amount of assets to be classified as current assets.

Accepted Answer

A)  $801,000
B)  $336,000
C)  $546,000
D)  -$546,000E) A) and D)
F) A) and C)

Question 4

Bathlinks Corporation has a debt to assets ratio of 73%.This tells the user of Bathlinks's financial statements that

Accepted Answer

A)  Bathlinks is getting a 27% return on its assets.
B)  there is a risk that Bathlinks cannot pay its debts as they come due.
C)  73% of the assets are financed by the stockholders.
D)  based on this measure, the user should not invest in Bathlinks.E) A) and B)
F) All of the above

Question 5

An item is considered material if

Accepted Answer

A)  it does not cost a lot of money.
B)  it is of a tangible good.
C)  its size is likely to influence the decision of an investor or creditor.
D)  the cost of reporting the item is greater than its benefits.E) B) and D)
F) All of the above

Question 6

The two fundamental qualities of useful information are

Accepted Answer

A)  relevance and faithful representation.
B)  verifiability and timeliness.
C)  comparability and flexibility.
D)  understandability and consistency.E) B) and C)
F) None of the above

Question 7

In the statement of cash flows, net cash provided by operating activities indicates the cash-generating capability of the company's operations.

Accepted Answer

A) True 
 B)False

Question 8

In 2022, Grider Corporation had cash receipts of $56,000 and cash disbursements of $32,000.Grider's cash balance at December 31, 2022 was $78,000.What was Grider's January 1, 2022 cash balance?

Accepted Answer

A)  $54,000
B)  $70,000
C)  $110,000
D)  $102,000E) A) and B)
F) A) and D)

Question 9

On a classified balance sheet, companies usually list current assets

Accepted Answer

A)  in alphabetical order.
B)  with the largest dollar amounts first.
C)  in the order in which they are expected to be converted into cash.
D)  in the order of acquisition.E) B) and C)
F) C) and D)

Question 10

Use the following data to determine the total dollar amount of assets to be classified as property, plant, and equipment.

Accepted Answer

A)  $1,029,000
B)  $774,000
C)  $834,000
D)  $564,000E) A) and C)
F) A) and B)

Question 11

It is not true that current assets are resources that are expected to be

Accepted Answer

A)  realized in cash within one year.
B)  sold within one year.
C)  consumed within one year.
D)  acquired within one year.E) A) and B)
F) B) and C)

Question 12

Kingery Corporation has current assets of $1,800,000 and current liabilities of $750,000.If they issue $150,000 of new stock, what will their new current ratio be? (rounded)

Accepted Answer

A)  2.6:1
B)  2.1:1
C)  2.2:1
D)  2.4:1E) A) and B)
F) C) and D)

Question 13

Accounting information is relevant to business decisions because it

Accepted Answer

A)  has been verified by external audit.
B)  is prepared on an annual basis.
C)  confirms prior expectations.
D)  is neutral in its representations.E) A) and B)
F) None of the above

Question 14

Valuing assets at their fair value rather than at their cost is inconsistent with the

Accepted Answer

A)  economic entity assumption.
B)  historical cost principle.
C)  periodicity assumption.
D)  full disclosure principle.E) A) and B)
F) A) and C)

Question 15

An intangible asset

Accepted Answer

A)  derives its value from the rights and privileges it provides the owner.
B)  is worthless because it has no physical substance.
C)  is converted into a tangible asset during the operating cycle.
D)  cannot be classified on the balance sheet because it lacks physical substance.E) A) and C)
F) B) and D)

Question 16

A short-term creditor is primarily interested in the __________ of the borrower.

Accepted Answer

A)  liquidity
B)  profitability
C)  consistency
D)  solvencyE) A) and B)
F) None of the above

Question 17

For 2022, Kuhl Co.reported net income of $36,000, net sales $400,000, and average shares outstanding of 16,000.No preferred dividends were paid.Earnings per share is

Accepted Answer

A)  $2.25
B)  $0.44
C)  $25.00
D)  $0.09E) All of the above
F) A) and D)

Question 18

Full disclosure of all important facts aids in overcoming the limitations of accounting information.

Accepted Answer

A) True 
 B)False

Question 19

The economic entity assumption states that economic events

Accepted Answer

A)  of different entities can be combined if all the entities are corporations.
B)  must be reported to the Securities and Exchange Commission.
C)  of a sole proprietorship cannot be distinguished from the personal economic events of its owners.
D)  of every entity can be separately identified and accounted for.E) All of the above
F) None of the above

Question 20

Free cash flow is net cash provided by operating activities less capital expenditures.

Accepted Answer

A) True 
 B)False

Exam 2: A Further Look at Financial Statements

An intangible asset

Correct AnswerverifiedShow Answer

Kingery Corporation has current assets of $1,800,000 and current liabilities of $750,000.If they issue $150,000 of new stock, what will their new current ratio be? (rounded)

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Free cash flow is net cash provided by operating activities less capital expenditures.

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Use the following data to determine the total dollar amount of assets to be classified as property, plant, and equipment.

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Full disclosure of all important facts aids in overcoming the limitations of accounting information.

Correct AnswerverifiedShow Answer

On a classified balance sheet, companies usually list current assets

Correct AnswerverifiedShow Answer

Accounting information is relevant to business decisions because it

Correct AnswerverifiedShow Answer

An item is considered material if

Correct AnswerverifiedShow Answer

The debt to assets ratio is a

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It is not true that current assets are resources that are expected to be

Correct AnswerverifiedShow Answer

Bathlinks Corporation has a debt to assets ratio of 73%.This tells the user of Bathlinks's financial statements that

Correct AnswerverifiedShow Answer

In the statement of cash flows, net cash provided by operating activities indicates the cash-generating capability of the company's operations.

Correct AnswerverifiedShow Answer

Valuing assets at their fair value rather than at their cost is inconsistent with the

Correct AnswerverifiedShow Answer

Both investors and creditors have an interest in a company's ability to generate favorable cash flows.

Correct AnswerverifiedShow Answer

Use the following data to determine the total dollar amount of assets to be classified as current assets.

Correct AnswerverifiedShow Answer

A short-term creditor is primarily interested in the __________ of the borrower.

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For 2022, Kuhl Co.reported net income of $36,000, net sales $400,000, and average shares outstanding of 16,000.No preferred dividends were paid.Earnings per share is

Correct AnswerverifiedShow Answer

The two fundamental qualities of useful information are

Correct AnswerverifiedShow Answer

The economic entity assumption states that economic events

Correct AnswerverifiedShow Answer

In 2022, Grider Corporation had cash receipts of $56,000 and cash disbursements of $32,000.Grider's cash balance at December 31, 2022 was $78,000.What was Grider's January 1, 2022 cash balance?

Correct AnswerverifiedShow Answer

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