1. Operating cash flows affect
A. current assets and current liabilities.
B. equity accounts.
C. long-term asset accounts.
D. long-term liability accounts.
2. Which activities are computed differently using the two methods of formatting a statement of cash
A. Operating activities
B. Both operating activities and investing activities
C. Financing activities
D. Investing activities
3. If Rick’s net sales increased from $40,000 to $80,000 and its operating expenses increased from $30,000
to $50,000, then vertical analysis based on net sales would show which of the following for operating
expenses for the two periods (to the nearest tenth of a percent)?
A. 133.3% and 160.0%
B. 62.5% and 75.0%
C. 75.0% and 62.5%
D. 160.0% and 133.3%
4. The Isaiah Corporation Stockholders’ Equity section includes the following information:
Total par value of the preferred and common stock is
Preferred Stock $22,000
Paid-in Capital in Excess of Par—Preferred 2,980
Common Stock 48,000
Paid-in Capital in Excess of Par—Common 3,400
Retained Earnings 7,350
C. $76,380.D. $77,350.
5. If you own 500 shares (2% of a corporation’s stock) and the corporation issues 15,000 new shares, how
many of the new shares can you purchase under preemptive right?
6. Casey Company has an accounts receivable turnover of 36 days, an inventory turnover of 77 days, and
an accounts payable turnover of 40 days. Casey’s cash conversion cycle is _______ day(s).
7. What is the rate of return on equity if net income is $22,700; preferred dividends are $3,000; sales are
$100,000; and average common stockholders’ equity is $86,000?
8. What is Jane’s rate of return on total assets if average total assets are $100,000; net income is $2,000;
interest expense if $1,600; and income tax is $2,000?
9. Which section of the income statement does not report net of income taxes or net ofincometax savings?
A. Cumulative effect of changes in accounting principles section
B. Extraordinary items section
C. Discontinued operations section
D. Continuing operations section
10. Isaiah Corporation’s Accounts Receivable increased by $35,000, and its Accounts Payable decreased
by $18,000. What is the net effect on cash from operations under the indirect method?
11. Earnings that a stockholder receives from a corporation are an example of which stockholder right?
12. The Amanda Corporation Stockholders’ Equity section includes the following information:
What was the total selling price of the preferred stock?
Preferred Stock $12,000
Paid-in Capital in Excess of Par—Preferred 2,700
Common Stock 15,000
Paid-in Capital in Excess of Par—Common 4,100
Retained Earnings 8,200
13. Rick Company has declared a $40,000 cash dividend to shareholders. The company has 5,000 shares
of $20 par, 6% preferred stock, and 10,000 shares of $15 par common stock. The preferred stock is
noncumulative. How much will be distributed to the preferred and common stockholders on the date of
A. $34,000 preferred; $6,000 common
B. $0 preferred; $40,000 common
C. $40,000 preferred; $0 common
D. $6,000 preferred; $34,000 common
14. What is the rate of return on common stockholders’ equity if sales are $100,000, net income is
$22,700, and average common stockholders’ equity is $86,000?
C. The rate of return can’t be determined from the information given.
15. Casey Company has 5,000 shares of treasury cost that it purchased for $13 per share. It later resold
2,000 of those shares for $17 per share. The amount to be credited to Paid-in Capital—Treasury Stock is
16. For vertical analysis purposes, the base item on the income statement isEnd of exam
A. net income.
B. total expenses.
C. gross profit.
D. net sales.
17. Net sales at Kelly’s Bakery increased from $40,000 to $60,000, and its cost of goods sold increased
from $20,000 to $40,000. Vertical analysis based on net sales would show which percentages for cost of
goods sold (rounded to the nearest %)?
A. 40% and 20%
B. 10% and 30%
C. 67% and 40%
D. 50% and 67%
18. Brandon Company had extraordinary losses of $150,000. If its corporate tax rate is 30%, at which
amount will the losses be shown on the income statement?
A. Not enough information is given to answer the question.
19. The records of Ashley Boutique showed a net loss of $30,000; depreciation expense of $25,000; and
an increase in supplies on hand of $5,000. The amount of net cash flow from operating activities using the
indirect method is
20. In a common-size income statement, selling expenses are 55%. This means that they’re 55% of
A. net income.
B. net sales.
C. gross profit.
D. net profit.