Reference no: EM132477416
Question - For Questions 1-3, consider the following information pertaining to Company X at the end of the 2016 fiscal year.
Current Assets $400,000
Inventory (included in current assets) $50,000
Prepaid Rent (included in current assets) $30,000
Total Assets $900,000
Current Liabilities $250,000
Total Liabilities $500,000
Retained Earnings $250,000
Q1- What is Company X's current ratio?
a- 0.80
b- 1.28
c- 1.60
d- 1.80
Q2- What is Company X's acid-test (quick) ratio?
a- 0.80
b- 1.28
c- 1.60
d- 1.80
Q3- What is Company X's debt to equity ratio?
a- 0.80
b- 1.25
c- 2.00
d- 3.33
Q4- Which of the following policy decisions would not need to be disclosed in the Summary of Significant Accounting Policies?
a- Issuance of debt or equity
b- Costing method for inventory
c- Revenue recognition for long-term construction contracts
d- Depreciation method
Q5- The times interest earned ratio:
a- Measures the ability to pay short-term obligations
b- Measures the liquidity of a firm
c- Measures the ability to pay fixed debt obligations
d- Measures the liquidity of a firm AND measures the ability to pay fixed debt obligations
Q6- Which of the following descriptions correctly classifies accumulated depreciation on the Balance Sheet?
a- Liability
b- Contra asset
c- Contra liability
d- Asset
Q7- Which of the following limits the usefulness of the Balance Sheet for internal and external decision makers?
a- The Balance Sheet uses estimates to calculate Balance Sheet amounts.
b- The Balance Sheet does not contain information in regards to the revenues and expenses of the firm.
c- The Balance Sheet is not audited by an external company as often as the other financial statements.
d- The Balance Sheet displays the amounts at a point in time instead of the amounts for an entire period.
Q8- Which of the following would not be necessary for an operating segment to report?
a- Reconciliations of segment revenues to corresponding enterprise revenues
b- Information regarding a loss reported by the operating segment
c- Information regarding the hiring of new employees
d- The types of products/services sold by the operating segment
Q9- Company X has current assets worth $750,000 and current liabilities worth $550,000.
Company Y has current assets worth $800,000 and current liabilities worth $600,000.
What is Company X's current ratio, and how does Company X's default risk compare to that of Company Y?
a- 1.36; Higher default risk
b- 1.33; Higher default risk
c- 1.36; Lower default risk
d- 1.33; Lower default risk
Q10- Company X had pre-tax income of $300,000. An interest expense of $50,000 was already taken into account in this calculation. The tax rate is 30%. Assume that net income is equal to pre-tax income minus tax. Calculate the times interest earned ratio for Company X.
a- 0.17
b- 5.00
c- 6.00
d- 7.00