A03V : Principles of Accounting II

Question-1

Issued stock is:

authorized shares of stock that can be sold.

stock only sold to another company.

shares sold and in stockholders’ possession.

stock sold to stockholders.

Question-2

In the statement of cash flows, which event would cause net income to be increased?

A decrease in Inventory

An increase in Prepaid Insurance

A decrease in Accounts Payable

An increase in Accounts Receivable

Question-3

Finished Goods Inventory appears on which of the following statements on the worksheet?

Statement of cost of goods manufactured and income statement

Statement of cost of goods manufactured and balance sheet

Income statement and balance sheet

Income statement and cost of goods sold statement

Question-4

One reason a corporation might issue bonds rather than sell stock is that :

bond interest is a tax-deductible expense.

interest rates are high.

dividends will lower the amount of tax due.

bondholders have claims at liquidation.

Question-5

For a corporation, bond interest :

is treated the same as dividends for tax purposes.

has no effect on earnings and therefore has no effect on income taxes.

reduces income tax by reducing earnings.

None of the above.

Question-6

Dividends paid to stockholders are:

taxable to the recipient stockholder.

taxable to the corporation.

treated the same as bond interest.

None of the above.

Question-7

If beginning and ending inventories are $20,000 and $30,000, respectively, and cost of goods sold is $400,000, what is the inventory turnover ratio?

18

16

15.5

15

Question-8

Declaration of a cash dividend causes:

an increase in stockholders’ equity.

an increase in cash.

an increase in liabilities.

None of the above.

Question-9

The current ratio is:

quick assets divided by current liabilities.

assets divided by liabilities.

current assets divided by current liabilities.

net sales divided by current liabilities.

Question-10

When the contract rate of interest on bonds is equal to the market rate of interest, bonds sell at:

a premium.

their face value.

their maturity rate.

a discount.