Reference no: EM132235195

Questions: 1. Profitability ratios measure __________.

A. a company's ability to earn profits
B. a company's ability to meet short-term obligations
C. how well a company is using debt versus equity
D. how effectively a company is using its assets

2. The current ratio determines the ability of a company to __________.

A. pay off all payables
B. pay off current payables
C. manage its ability to earn profit
D. use its equity

3. Noble Company's accounts receivable turnover was 18.2 in Year 1 and 24.6 in Year 2. This change in accounts receivable turnover indicates __________.

A. the company is not selling its inventory as fast
B. the company is selling its inventory faster
C. the company's customers are paying faster
D. the company's customers are paying slower

4. If management wishes to evaluate the amount of assets that were financed by creditors, they could use the __________.

A. debt to total assets
B. rate of return on common stockholders' equity
C. debt to total liabilities
D. times interest earned

5. What was the percentage of decrease in the Accounts Receivable account if the receivables were $80,000 in Year 1 and $60,000 in Year 2?

A. (25%.
B. 33.33%
C. (33.33%.
D. 25%

6. The current ratio for a company with current assets of $70,000, current liabilities of $50,000, total assets of $150,000, and net sales of $80,000, would be __________.

A. 1.4
B. 0.714
C. 3.0
D. 0.875

7. The ratio that indicates how many days it takes to turn accounts receivable into cash is the __________.

A. accounts receivable turnover ratio
B. average turnover ratio
C. average collection period
D. quick assets turnover ratio

8. If Rick's sales decreased from $90,000 (Year 1. to $45,000 (Year 2. and its cost of goods sold decreased from $30,000 (Year 1. to $20,000 (Year 2., then vertical analysis based on sales would show the following decreases for cost of goods sold for the two periods __________.

A. 33.33% and 44.44%.
B. 44.44% and 33.33%.
C. 300% and 225%.
D. None of the above.

9. Debt management ratios measure __________.

A. how effectively a company is using its cash
B. how well a company is using debt versus equity position
C. a company's ability to earn profit
D. a company's ability to meet payable obligations

10. If current assets were $100,000 in 20x7 and $88,000 in 20x8, what was the amount of increase or decrease?

A. The percentage increase is 13.64%.
B. The percentage decrease is 12%.
C. The percentage decrease is 13.64%.
D. The percentage increase is 12%.

11. If Cash is $2,345 in 20X2 and $3,671 in 20X1, what is the percent of increase or (decrease. from 20X1 to 20X2?

A. 56.55%
B. (56.55%.
C. 36.12%
D. (36.12%.

12. The sales for Mary's Services for Years 1, 2, and 3 are $25,000, $45,000, $60,000, respectively. The trend percentage for Year 3 is __________.

A. 42%
B. 240%
C. 140%
D. 58%

13. If beginning and ending inventories are $100,000 and 150,000, respectively, and the cost of goods sold is $450,000, what is the inventory turnover ratio?

A. 4.50
B. 3.00
C. 3.60
D. 0.28

14. The lower the times interest earned ratio, the more likely __________.

A. a default in payment will occur
B. a business needs to borrow money
C. a business will suffer a loss
D. interest payments can be made

15. If Rick Company's sales increased from $40,000 to $80,000 and its cost of goods sold increased from $30,000 to $50,000, then vertical analysis based on sales would show the cost of goods sold for the two periods as __________.

A. 75% and 62.5%
B. 62.5% and 75%
C. 133.33% and 160%
D. 160% and 133.33%

16. Compute the gross profit rate when net sales are $350,000 and gross profits are $178,500.

A. 51:10
B. 54%
C. 51%
D. 54:10

17. Which statement below best describes the quick (acid test. ratio?

A. The acid test ratio considers only the most liquid assets: cash, accounts receivable, and temporary investments.
B. The current ratio includes only the assets most easily converted into cash.
C. The acid test adds merchandise inventory and prepaid expenses in the computation of current assets.
D. none of the above

18. The inventory turnover ratio calculates __________.

A. how many times the inventory turns over in one period
B. number of times inventory is purchased in one period
C. the dollar amount of change in inventory in one period
D. none of the above

19. If management wishes to evaluate the ability of a business to provide funding to cover operating expenses, they could use the __________.

A. rate of return on total assets
B. rate of return on common stockholders' equity
C. gross profit rate
D. times interest earned

20. In a comparative balance sheet, the ending Cash was $315,000 in 2011 and $270,000 in 2012. The net increase or decrease from 2011 to 2012 is __________.

A. 86.0%
B. 14.3%
C. 26.4%
D. 16.7%

21. Gross profit by department appears on the __________.

A. balance sheet
B. statement of retained earnings
C. statement of cash flows
D. income statement

22. The women's shoe department shows gross sales of $245,000 with the cost of the shoes $147,000. The men's shoe department shows gross sales of $184,000 with the cost of the shoes $110,000. What is the gross profit for each department?

A. $392,000 and $294,000
B. $245,000 and $184,000
C. $98,000 and $74,000
D. $429,000 and $257,000

23. When preparing an income statement showing departmental contribution margin, __________.

A. indirect expenses are combined with direct expenses
B. indirect departmental expenses are added to contribution margin
C. direct expenses are subtracted from contribution margin on sales (Incorrect)
D. none of the above

24. The cosmetic department experienced the following revenue and expenses during December:

Sales       $86,000
Cost of Goods Sold       $29,000
Direct Operating Expenses      $7,000
Indirect Operating Expenses    $3,000

The cosmetic department's contribution margin is __________.

A. $57,000
B. $50,000
C. $53,000
D. $47,000

25. Supporters of the contribution margin approach believe that __________.

A. indirect expenses should be departmentalized
B. indirect expenses should not be used for evaluating departmental performance
C. indirect expenses are proportionally charged to each department
D. direct expenses should not be used in evaluating departmental performance

26. If the gross sales for the computer department are $3,700 and the book department's gross sales are $6,300, what is the allocation for advertising expense of $750 to these departments, based on gross sales?

A. computer department $425; book department $325
B. computer department $375; book department $375
C. computer department $277.50; book department $472.50
D. computer department $462.50; book department $287.50

27. Normally the report prepared for a department is a(n. __________.

A. cash flow statement
B. statement of equity
C. income statement
D. balance sheet

28. What is the total gross profit of a company that has three departments (A, B, and C. with net sales of $200,000, $164,000, and $286,000, and cost of goods sold is $86,000, $92,000, and $82,000?

A. $390,000
B. $650,000
C. $400,000
D. $260,000

29. Calculate a department's gross profit on sales given the following:

Sales     $1,600
Operating expenses    $350
Cost of goods sold     $900

A. $350
B. $700
C. $1,050
D. $1,250

30. To determine how each profit center is performing, management would analyze the __________.

A. income tax rate
B. indirect expenses
C. gross profit for each profit center
D. other expenses

31. Windermere Corporation has 25,000 square feet in Department A, 20,000 square feet in Department B, and 55,000 square feet in Department C. Janitorial services as based on the square footages of each department. How will the $35,000 of janitorial services be allocated?

A. $19,250 to C, $7,000 to B, and $8,750 to A
B. $19,250 to A, $7,000 to B, and $8,750 to C
C. split evenly ($11,666.67. to each department
D. It cannot be determined by given information.

32. Direct expenses are expenses that __________.

A. can be identified with a specific department
B. cannot be identified with a specific department
C. can be identified with more than one department
D. none of the above

33. Calculate the costume jewelry department net income given the following:

Sales      $1,300
Direct Operating Expenses     300
Indirect Operating Expenses   250
Cost of Goods Sold        1,000

A. $1,300
B. $1,000
C. $300
D. -$250

34. The photography department in a department store experienced the following revenue and expenses during October:

Sales     $11,000
Cost of Goods Sold    $5,000
Direct Operating Expenses       $800
Indirect Operating Expenses     $2,100

The photography department's gross profit on sales is __________.

A. $3,100
B. $5,200
C. $6,000
D. $8,100

35. When a company tracks gross profit by department, the sales journal will __________.

A. not differ from a company that does not track gross profit by department
B. have a separate column for accounts receivable for each department
C. have a separate column for sales for each department
D. have a column for purchases for each department

36. What is the purpose of determining the contribution margin?

A. to show the contribution by a department toward covering indirect costs
B. to help determine whether to eliminate a department
C. to show the effect on net income of each department
D. all of the above

37. Compute the contribution margin for the video department when gross profits are $880,000, direct expenses are $370,000, and indirect expenses are $190,000.

A. $320,000
B. $690,000
C. $510,000
D. $700,000

38. The candy department experienced the following revenue and expenses during October:

Sales           $13,500
Cost of Goods Sold           $8,200
Direct Operating Expenses  $1,100
Indirect Operating Expenses $700

The candy department's net income is __________.

A. $6,400
B. $3,500
C. $4,200
D. $5,300

39. A unit or department that incurs costs and generates revenues is a(n. __________.

A. expense center
B. direct center
C. cost center
D. profit center

40. A maintenance department would be an example of a __________.

A. cost center
B. direct expense
C. profit center
D. none of the above