ACC 291 Final Exam Answers
Question 1
The term “receivables” refers to
| cash to be paid to creditors. |
| merchandise to be collected from individuals or companies. |
| cash to be paid to debtors. |
| amounts due from individuals or companies. | |||||||||||
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Question 3
When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when
| an account becomes bad and is written off. |
| a customer’s account becomes past due. |
| management estimates the amount of uncollectibles. |
| a sale is made. |
Question 4
Which one of the following is not a principle of sound accounts receivable management?
| Determine to whom to extend credit. |
| Determine a payment period. |
| Delay cash receipts from receivables if necessary. |
| Monitor collections. |
Question 5
The accounts receivable turnover is computed by dividing
| net credit sales by ending receivables. |
| total sales by ending receivables. |
| net credit sales by average receivables. |
| total sales by average receivables. |
Question 6
The accounts receivable turnover is used to analyze
| profitability. |
| liquidity. |
| risk. |
| long-term solvency. |
Question 7
The following information is provided for Oriole Company and Cheyenne Corp.:
| (in $ millions) | Oriole Company | Cheyenne Corp. |
| Net income 2017 | $150 | $405 |
| Net sales 2017 | 1345 | 4770 |
| Total assets 12/31/15 | 1090 | 2150 |
| Total assets 12/31/16 | 1260 | 3030 |
| Total assets 12/31/17 | 1190 | 4000 |
What is Cheyenne’s return on assets (rounded) for 2017?
| 10.1% |
| 11.5% |
| 11.8% |
| 13.4% |
Question 8
Which of the following is not properly classified as property, plant, and equipment?
| Land improvement, such as parking lots and fences. |
| A truck held for resale by an automobile dealership. |
| Building used as a factory. |
| Land used in ordinary business operations. |
Question 9
A characteristic of a plant asset is that it is
| not currently used in the business but held for future use. |
| used in the operations of a business. |
| held for sale in the ordinary course of the business. |
| intangible. |
Question 10
A current liability is a debt that can reasonably be expected to be paid
| within one year, or the operating cycle, whichever is longer. |
| out of cash currently on hand. |
| between 6 months and 18 months. |
| out of currently recognized revenues. |
Question 11
Which of the following most likely would be classified as a current liability?
| Dividends payable |
| Mortgage payable as a single payment in 10 years |
| Bonds payable in 5 years |
| Three-year notes payable |
Question 12
The 2017 financial statements of Crane Company contain the following selected data (in millions).
| Current assets | $85 |
| Total assets | 165 |
| Current liabilities | 44 |
| Total liabilities | 76 |
| Cash | 4 |
| Interest expense | 4 |
| Income taxes | 9 |
| Net income | 14 |
The debt to assets ratio (rounded) is
| 51.8%. |
| 2.17%. |
| 7.2 times. |
| 46.1%. |
Question 13
In a recent year Grouper Corp. had net income of $145000, interest expense of $30300, and income tax expense of $37700. What was Grouper Corp.’s times interest earned (rounded) for the year?
| 5.79 |
| 6.03 |
| 7.03 |
| 4.79 |
Question 14
If bonds are issued at a discount, it means that the
| financial strength of the issuer is suspect. |
| market interest rate is lower than the contractual interest rate. |
| market interest rate is higher than the contractual interest rate. |
| bondholder will receive effectively less interest than the contractual rate of interest. |
Question 15
If bonds are issued at a premium, the stated interest rate is
| too low to attract investors. |
| higher than the market rate of interest. |
| lower than the market rate of interest. |
| adjusted to a higher rate of interest. |
Question 16
The chief accounting officer in a company is known as the
| president. |
| controller. |
| treasurer. |
| vice-president. |
Question 17
Which one of the following would not be considered an advantage of the corporate form of organization?
| Separate legal existence. |
| Government regulation. |
| Limited liability of stockholders. |
| Continuous life. |
Question 18
Which of the following would not be true of a privately held corporation?
| It is usually smaller than a publicly held company. |
| It does not offer its shares for sale to the general public. |
| It is sometimes called a closely held corporation. |
| Its shares are regularly traded on the New York Stock Exchange. |
Question 19
The following information pertains to Concord Company. Assume that all balance sheet amounts represent average balance figures.
| Total assets | $315000 |
| Stockholders’ equity-common | 195000 |
| Total stockholders’ equity | 299000 |
| Sales revenue | 117000 |
| Net income | 20300 |
| Number of shares of common stock | 6500 |
| Common dividends | 4400 |
| Preferred dividends | 6800 |
What is Concord’s payout ratio?
| 15%. |
| 7%. |
| 21.67%. |
| 35%. |
Question 20
Whispering Winds Corp. had net income of $79130 and paid dividends of $31000 to common stockholders and $20000 to preferred stockholders in 2017. Whispering Winds Corp. common stockholders’ equity at the beginning and end of 2017s was $495000 and $600000, respectively. Whispering Winds Corp. return on common stockholders’ equity is
| 15%. |
| 10%. |
| 11%. |
| 6%. |
Question 21
The primary purpose of the statement of cash flows is to
| prove that revenues exceed expenses if there is a net income. |
| facilitate banking relationships. |
| provide information about the cash receipts and cash payments during a period. |
| provide information about the investing and financing activities during a period. |
Question 22
Which one of the following items is not generally used in preparing a statement of cash flows?
| Current income statement. |
| Additional information. |
| Adjusted trial balance. |
| Comparative balance sheets. |
Question 23
The category that is generally considered to be the best measure of a company’s ability to continue as a going concern is
| usually different from year to year. |
| cash flows from investing activities. |
| cash flows from financing activities. |
| cash flows from operating activities. |
Question 24
Assume that the Fitzgerald Corporation uses the indirect method to depict cash flows. Indicate where, if at all, a stock dividend declared and issued would be classified on the statement of cash flows.
| Does not represent a cash flow. |
| Financing activities section. |
| Operating activities section. |
| Investing activities section. |
Question 25
Assume that the Fitzgerald Corporation uses the indirect method to depict cash flows. Indicate where, if at all, an inventory increase with cash would be classified on the statement of cash flows.
| Operating activities section. |
| Investing activities section. |
| Financing activities section. |
| Does not represent a cash flow. |
Question 26
Free cash flow provides an indication of a company’s ability to
| generate cash to invest in capital expenditures and to pay dividends. |
| generate net income. |
| generate cash to pay dividends. |
| generate cash to invest in capital expenditures. |
Question 27
When using the indirect method to compute cash provided by operating activities
| amortization expense is added to net income. |
| income taxes paid may be ignored. |
| increases in accounts receivable are added to net income. |
| decreases in inventory are subtracted from net income. |
Question 28
To determine the net cash provided (used) by operating activities, it is necessary to analyze
| the current year’s income statement. |
| a comparative balance sheet. |
| additional information. |
| all of these answer choices are correct. |
Question 29
Which of these is not a liquidity ratio?
| Inventory turnover |
| Accounts receivable turnover |
| Current ratio |
| Asset turnover | ||||||||||||||
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