Reference no: EM133103597
Questions -
Q1. A and B are in partnership sharing profits and losses equally. They admit C as a partner and adjusted the profit-sharing ratio to 2:2:1 for A, B and C respectively. Goodwill is valued at $20 000 but no goodwill is to be recorded in the books. The entries in the capital accounts will be:
a. Debit A and B with $2 000 each and credit C with $4 000
b. Credit B and C with $2 000 each and debit A with $2 000
c. Debit A and C with $2 000 each and credit B with $4 000
d. Credit A and B with $2 000 each and debit C with $4 000
Q2. If you wished to assess whether or not the firm's borrowings were too high, which of these ratios would you use:
a. Debtors' collection period
b. Return on capital employed
c. Stock turnover
d. Interest cover
Q3. The financial statements for Silver Service Company include the following items:
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|
2019
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2018
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|
Cash
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$49,500
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$40,000
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|
Short-term Investments
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33,000
|
20,500
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|
Net Accounts Receivable
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52,000
|
53,000
|
|
Inventory
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132,000
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45,000
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|
Total Assets
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530,000
|
547,000
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|
Accounts Payable
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131,500
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122,000
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|
Salaries Payable
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15,000
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18,000
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|
Long-term Note Payable
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58,000
|
57,000
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Compute the acid-test ratio for 2018.
a. 0.81
b. 0.92
c. 0.93
d. 0.66
Q4. Regarding the profit margin ratio, which of the following statements is incorrect?
a. The higher the profit margin ratio, the more sales dollars end up as profit.
b. The profit margin ratio focuses on the profitability of a company and is often reported in the business press.
c. The profit margin ratio shows how much net income a business earns on every $1.00 of sales.
d. The profit margin ratio is computed by dividing net sales by net income.
Q5. In a partnership dissolution:
a. the last journal entry credits the partners
b. gains and losses on the sale of assets are allocated to the partners on the basis of their current capital balance
c. the distribution of remaining assets to the partners is based on their stated ratios
d. creditors must be paid before partner
Q6. The maximum capital a company is allowed to let the public subscribe for is called.
a. paid up capital
b. issued
c. authorized
d. subscribed
Q7. The issued share capital of a company:
a. is equal to the reserves of the company
b. cannot be more than the authorized share capital
c. is the same as the preference share capital
d. is always the same as the authorized capital
Q8. Which of the following is NOT correct regarding preference shares?
a. Preference shareholders appoint directors
b. It has priority over ordinary shareholders regarding return of their capital
c. The final dividend is expressed as a percentage of their nominal value
d. Preference shares may be cumulative
Q9. A company has an authorized capital of 1 000 000 consisting of 0 .25¢ ordinary shares its issued share capital consists of 500 000 shares. A dividend of 2¢ per share is declared the cash payable to shareholders amounts to:
a. $25 000
b. $20 000
c. $10 000
d. $40 000
Q10. Which of the following would be classified as reserve on a company's balance sheet?
a. Share Premium
b. Ordinary shares
c. Debentures
d. Preference shares
Q11. The order of priority with which a company must give to the payment of interest and dividends is:
a. preference dividends, ordinary dividends, debenture interest
b. debenture interest, preference dividends, ordinary dividends
c. debenture interest, ordinary dividends, preference dividends
d. preference dividends, debenture interest, ordinary dividend
Q12. Non-current assets are:
a. a form short term of investment
b. all assets acquired by the business
c. acquired for retention in the business rather than resale
d. used for the purpose of resale