Chapter 2 FA Mgmt.
A) Which of the following would be shown on the balance sheet as a current asset?
B) Sales revenue
C) Property and equipment, net
D) Accounts payable
Inventory
What is Inventory
A company sells a dress costing $75 for $150 to a customer for cash, how would this affect the financial statements?
A) Increase liabilities, decrease stockholders’ equity.
B) Increase assets, decrease stockholders’ equity.
C) Increase liabilities, decrease assets.
D) Increase assets, increase stockholders’ equity.
What are increasing assets, increasing stockholders’ equity.
Inventory is defined as:
A) Items a company intends for sale to customers.
B) Any assets of the company that can be sold.
C) The amount of cash received from the sale of goods to customers during the year.
D) The cost of goods sold to customers during the year.
What are items a company intends for sale to customers.
Which of the following is not reported as an intangible asset in the balance sheet?
A) Trademarks
B) Goodwill
C) Research and development
D) Patents
What is research and development
Which of the following statements regarding liabilities is true?
A) Liabilities result from future transactions
B) Liabilities involve an obligation of a company to transfer some economic benefit in the future
C) Liabilities are always payable in cash
D) Liabilities are all reported as current in the balance sheet
What are liabilities involving an obligation of a company to transfer some economic benefit in the future
A company’s total assets minus total liabilities is its
A) Retained earnings
B) Accumulated other comprehensive income
C) Book value
D) Market value
What is Book Value
An airline receives $575 for a flight that is to be taken two months from now. How would this transaction affect the financial statements?
A) Decrease cash, increase expenses.
B) Increase cash, increase liabilities.
C) Decrease cash, decrease liabilities.
D) Increase cash, increase revenues.
What is increase cash, increase liabilities.
A multiple-step income statement provides the advantage of:
A) Excluding the effects of income taxes in the calculation of net income.
B) Separating revenues and expenses based on their different types of activities.
C) Placing all revenues after all expenses.
D) Placing all revenues before all expenses.
What is separating revenues and expenses based on their different types of activities
Which of the following expenditures should be recorded as an expense?
A) Successful legal defense of an intangible asset
B) An addition which increases future benefits
C) Ordinary repairs and maintenance
D) An improvement
What are ordinary repairs and maintenance
A company’s capital structure refers to:
A) Its mixture of current versus long-term assets.
B) Its mixture of current versus long-term liabilities.
C) Its mixture of paid-in capital versus retained earnings.
D) Its mixture of liabilities and stockholders’ equity.
What is it's mixture of liabilities and stockholders’ equity
The amount of profit that has been generated for each stockholder is
A) Dividends
B) Sales revenue minus cost of goods sold
C) Earnings per share
D) Operating income
What are Earnings Per Share
Which of the following is one of the steps for recognizing revenue?
A) Allocate all revenue to the performance obligation with the largest stand-alone selling price.
B) Estimate the total transaction price of the contract based on fair value.
C) Identify the performance obligations of the contract.
D) Determine whether bad debts can be reasonably estimated.
What is identify the performance obligations of the contract.
Which cost flow assumption generally results in the highest reported amount of net income in periods of rising inventory costs?
A) Income will be the same under each assumption.
B) FIFO
C) Weighted-average
D) LIFO
What is FIFO
If equipment is retired, which of the following accounts would be debited?
A) Accumulated depreciation
B) Depreciation expense
C) Cash
D) Equipment
What is accumulated depreciation
An advantage of leasing an asset rather than purchasing the asset is:
A) Leased assets are more likely to generate additional profits than are purchased assets
B) Lease payments are tax deductible while depreciation on a purchased asset is not
C) Leases are not reported as liabilities in the balance sheet
D) Leases typically require less cash upfront to begin using the asset
What are leases typically requiring less cash upfront to begin using the asset
Cash flows from investing activities include
A) acquisition and disposition of long-term assets.
B) Borrowing from creditors through notes, loans and bonds.
C) purchases and sales of inventory.
D) sale of goods or services to customers.
What are acquisition and disposition of long-term assets.
Which of the following transactions would result in an account receivable?
A) Purchasing supplies on account.
B) Providing services to customers on account.
C) Paying for supplies previously purchased on account.
D) Receiving a loan from the bank.
What is providing services to customers on account.
A company’s inventory turnover ratio measures:
A) The quantity of inventory remaining at the end of the year.
B) The profitability on sales of inventory during the year.
C) The number of times the company sells its average inventory balance during the year.
D) The average cost at which inventory was purchased during the year.
What is the number of times the company sells its average inventory balance during the year
Return on assets is equal to:
A) Net income divided by average long-term assets
B) Average total assets divided by net income
C) Net income divided by average total assets
D) Net income divided by long-term assets
What is net income divided by average total assets
Which of the following definitions describes a term bond?
A) Matures in installments
B) Supported by specific assets pledged as collateral by the issuer
C) Secured only by the "full faith and credit" of the issuing corporation
D) Matures on a single date
What is maturing on a single date
The statement of stockholders’ equity reports:
A) Assets and liabilities.
B) Revenues, expenses and other comprehensive income.
C) Issuances of common stock.
D) Cash flows from finance activities.
What are issuances of common stock
The receivables turnover ratio is a measure of:
A) The profitability of transactions related to providing goods and services to customers on account during the year.
B) The number of times during a year that the average accounts receivable balance is collected.
C) The proportion of credit sales to total sales for the year.
D) The likelihood that customers will not pay the full amount due at the end of the year.
What is the number of times during a year that the average accounts receivable balance is collected.
If a company understates its ending inventory in the current period, what effect will this have on cost of goods sold in the following period?
A) Not possible to determine with information given.
B) Overstate cost of goods sold
C) Understate cost of goods sold
D) Have no effect on cost of goods sold
What is understating cost of goods sold
Which of the following differences between financial reporting and tax purposes ordinarily creates a deferred tax liability?
A) The use of MACRS
B) Losses on the sales of fully-depreciated long-term assets
C) Gains on the sales of fully-depreciated long-term assets
D) None of these answer choices are correct
What is the use of MACRS
Financial leverage is best measured by which of the following ratios?
A) The times interest earned ratio
B) The debt-to-equity ratio
C) The return on assets ratio
D) The return on equity ratio
What is the debt-to-equity ratio