Reference no: EM132322446

1) Assume a company's current ratio and acid-test ratio are less than 1.0 before it purchases inventory

on credit. When it makes the purchase:

A) Its acid-test ratio decreases.

B) Its acid-test ratio remains unchanged.

C) Its current ratio decreases.

D) Its current ratio remains unchanged.

2) When treasury stock is acquired, what is the effect on assets and stockholders' equity?

A) Assets and stockholders' equity increase.

B) Assets decrease and stockholders' equity increase.

C) Assets increase and stockholders' equity decrease.

D) Assets and stockholders' equity decrease.

3) The balance sheet of ABC' reports total assets of $800,000 and $900,000 at the beginning and end of the year, respectively. The return on assets for the year is 20%. What is ABC's net income for the year?

A) $4,500,000.

B) $170,000.

C) $85,000.

D) $4,250,000.

4) What would be the impact on the accounting equation when a company acquires treasury stock?

A) Decrease assets and decrease stockholders' equity.

B) Decrease assets and increase stockholders' equity.

C) No effect on the accounting equation.

D) Increase assets and increase stockholders' equity.

5) How many of the following transactions would affect operating cash flows reported in the statement of cash flows (all transaction involve cash)?

Borrowed $50,000 from the bank

Purchased $12,000 in supplies

Provide services to customers for $27,000

Paid the utility bill of $750

Purchased a delivery truck for $12,000

Received $25,000 from issuing common stock

A) Four.

B) Two.

C) One.

D) Three.

6) It is easier for a company to cheat on its taxes

A) same for periodic inventory accounting and perpetual inventory accounting

B) under periodic inventory accounting than under perpetual inventory accounting

C) under perpetual inventory accounting than under periodic inventory accounting

7) When a firm takes a big bath

A) it increases cash flows

B) it increases revenues

C) it decreases cash flows

D) it increases expenses