Accounting: Chapter 17

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bepena09
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Accounting: Chapter 17
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2011-06-19 01:43:29
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Chapter 17
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  1. Based on the following data, what is the amount of working capital?


    Accounts payable
    $34,300

    Accounts receivable
    $72,398

    Accrued liabilities
    $6,699

    Cash
    $17,115

    Intangible assets
    $41,812

    Inventory
    $74,061

    Long-term investments
    $97,531

    Long-term liabilities
    $78,179

    Marketable securities
    $34,592

    Notes payable (short-term)
    $23,022

    Property, plant, and equipment
    $644,131

    Prepaid expenses
    $2,086


    a. $136,231

    b. $983,726

    c. $124,105

    d. $200,252
    a. $136,231
  2. The percentage analysis of increases and decreases in individual items in comparative financial statements is called

    a. vertical analysis

    b. solvency analysis

    c. profitability analysis

    d. horizontal analysis
    d. horizontal analysis
  3. The ratio of the sum of cash, receivables, and marketable securities to current liabilities is referred to as the current ratio.

    True or False
    False
  4. In a common size income statement, the 100% figure is

    a. gross profit.

    b. net cost of merchandise sold.

    c. net income.

    d. net sales.
    d. net sales.
  5. Factors which reflect the ability of a business to pay its debts and earn a reasonable amount of income are referred to as solvency and profitability.

    True or False
    True
  6. The current ratio is

    a. used to evaluate a company's liquidity and short-term debt paying ability.

    b. calculated by dividing current liabilities by current assets.

    c. calculated by subtracting current liabilities from current assets.

    d. is a solvency measure that indicated the margin of safety of a noteholder or bondholder.
    a. used to evaluate a company's liquidity and short-term debt paying ability.
  7. The excess of current assets over current liabilities is referred to as working capital.

    True or False
    True
  8. The number of days' sales in inventory is one means of expressing the relationship between the cost of merchandise sold and inventory.

    True or False
    True
  9. An analysis in which all the components of an income statement are expressed as a percentage of net sales is called

    a. horizontal analysis

    b. common-size analysis

    c. liquidity analysis

    d. vertical analysis
    d. vertical analysis
  10. A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables, $150,000 and $222,500 of inventories. Current liabilities are $225,000. The current ratio is 2.5 to 1.
    True or False
    True
  11. Based on the following data for the current year, what is the number of days' sales in accounts receivable?



    Net sales on account during year
    $452,624

    Cost of merchandise sold during year
    169,206

    Accounts receivable, beginning of year
    44,669

    Accounts receivable, end of year
    54,968

    Inventory, beginning of year
    95,158

    Inventory, end of year
    111,029


    a. 83 days

    b. 90 days

    c. 40 days

    d. 136 days
    c. 40 days
  12. Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 15%; therefore, the cost of merchandise sold as a percentage of sales must be 85%.

    True or False
    False
  13. Based on the following data, what is the amount of quick assets?


    Accounts payable
    $26,374

    Accounts receivable
    $66,609

    Accrued liabilities
    $6,971

    Cash
    $16,636

    Intangible assets
    $39,366

    Inventory
    $88,954

    Long-term investments
    $90,994

    Long-term liabilities
    $70,947

    Marketable securities
    $32,081

    Notes payable (short-term)
    $24,871

    Property, plant, and equipment
    $603,253

    Prepaid expenses
    $1,780


    a. $740,924

    b. $1,474,537

    c. $48,717

    d. $115,326
    d. $115,326
  14. A balance sheet that displays only component percentages is called

    a. comparative balance sheet

    b.
    common-sized balance sheet


    c. trend balance sheet

    d. condensed balance sheet
    b. common-sized balance sheet
  15. Based on the following data for the current year, what is the accounts receivable turnover?



    Net sales on account during year
    $406,154

    Cost of merchandise sold during year
    200,455

    Accounts receivable, beginning of year
    44,254

    Accounts receivable, end of year
    52,836

    Inventory, beginning of year
    80,033

    Inventory, end of year
    107,533


    a. 8.4

    b. 3.8

    c. 9.2

    d. 2
    a. 8.4
  16. Which of the following ratios provides a solvency measure that shows the margin of safety of noteholders or bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?

    a. number of days' sales in receivables
    b. rate earned on stockholders' equity

    c. ratio of fixed assets to long-term liabilities

    d. ratio of net sales to assets
    c. ratio of fixed assets to long-term liabilities
  17. The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred to as horizontal analysis.

    True or False
    True
  18. Assume the following sales data for a company: What is the percentage increase in sales from 2009 to 2010?

    a. 80%

    b. 180%

    c. 100%

    d. 44.4%
    a. 80%
  19. In a common size balance sheet the 100 percent figure is

    a. total assets.

    b. total property, plant and equipment

    c. total current assets.

    d. total liabilities.
    a. total assets.
  20. Based on the following data for the current year, what is the inventory turnover?



    Net sales on account during year
    $576,634

    Cost of merchandise sold during year
    208,778

    Accounts receivable, beginning of year
    41,824

    Accounts receivable, end of year
    54,932

    Inventory, beginning of year
    37,788

    Inventory, end of year
    37,831


    a. 3

    b. 1

    c. 6

    d. 24
    c. 6

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