20 question exam on accounting and corporations

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Student ID: 21563066

Exam: 061692RR – CORPORATIONS

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Questions 1 to 20: Select the best answer to each question. Note that a question and its answers may be split across a page
break, so be sure that you have seen the entire question and all the answers before choosing an answer.

1. What are the rate of return on stockholders’ equity and the rate of return on common stockholders’
equity (rounded to the nearest one-tenth of a percent) given the following information:

Net Income $350,000
Preferred Dividends 20,000
Common Stock 48,000
Common Stockholders’ Equity 1/1/2011 4,400,000
Total Stockholders’ Equity 1/1/2011 5,300,000
Total Stockholders’ Equity 12/31/2011 5,500,000

A. Return on Stockholders’ Equity: 6.5 %; Return on Common Stockholders’ Equity: 7.6%
B. Return on Stockholders’ Equity: 7.8 %; Return on Common Stockholders’ Equity: 8.9%
C. Return on Stockholders’ Equity: 8.1 %; Return on Common Stockholders’ Equity: 9.2%
D. Return on Stockholders’ Equity: 5.6 %; Return on Common Stockholders’ Equity: 6.7%

2. 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

A. $76,380.
B. $83,730.
C. $70,000.
D. $77,350.

3. 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).
A. 1
B. 73
C. 153
D. 81

4. A company has $56,000 in cash; $12,000 in accounts receivable; $25,000 in short-term investments;
and $100,000 in merchandise inventory. The company also has $60,000 in current liabilities. The
company’s quick ratio is
A. 1.133.
B. 3.217.
C. 1.550.
D. 0.933.

5. Operating cash flows affect
A. long-term liability accounts.
B. long-term asset accounts.
C. equity accounts.
D. current assets and current liabilities.

6. Earnings that a stockholder receives from a corporation are an example of which stockholder right?
A. Vote
B. Dividends
C. Liquidation
D. Preemption

7. 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

A. $20,200
B. $12,000
C. $14,700
D. $16,100

8. Casey Company has a $2,400 credit balance in Paid-In Capital— Treasury Stock. It sells 500 shares of
treasury stock that the company reacquired at $21/share, for $18/share. After the transaction, what will the
balance be in the Paid-In Capital in Excess of Par— Treasury account?
A. $3,900 credit
B. $900 credit
C. $1,500 debit
D. $900 debit

9. 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. 160.0% and 133.3%
B. 75.0% and 62.5%
C. 62.5% and 75.0%
D. 133.3% and 160.0%

10. 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?
A. 26.4%
B. 22.7%
C. The rate of return can’t be determined from the information given.
D. 86.0%

11. To determine why net income and cash on the balance sheet don’t equal, an accountant can prepare
a/an
A. statement of retained earnings.
B. income statement.
C. balance sheet.
D. statement of cash flows.

12. The accuracy of the statement of cash flows can be verified by computing the change in the balance of
the
A. cash and cash equivalent accounts.
B. asset and liability accounts.
C. equity account.
D. revenue accounts.

13. Rick Company’s net sales decreased from $90,000 in year 1 to $45,000 in year 2, and its cost of goods
sold decreased from $30,000 in year 1 to $20,000 in year 2. Vertical analysis based on sales would show
which decreases in cost of goods sold for the two periods (rounded to the nearest tenth of a percent)?
A. 225% and 300%
B. 33.3% and 44.4%
C. 44.4% and 33.3%
D. 300% and 225%

14. 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
A. $8,000.
B. $34,000.
C. $26,000.
D. $30,000.

15. Ryan Industries has an inventory turnover of 112 days, an accounts payable turnover of 73 days, and

an accounts receivable turnover of 82 days. Ryan’s cash conversion cycle is _______ days.
A. 43
B. 9
C. 103
D. 121

16. Tammy Company has a beginning accounts receivable balance of $65,000 and an ending accounts
receivable balance of $60,000. Net credit sales are $250,000. Tammy’s accounts receivable turnover rate is
A. 4.167.
B. 3.846.
C. 4.000.
D. 2.000.

17. Cost of goods sold for the year was $850,000. Inventory was $60,000 at the beginning of the year and
$90,000 at the end of the year. There were no changes in the amount in accounts payable for the year.
Cash payment for merchandise to be reported under the direct method is
A. $910,000.
B. $850,000.
C. $940,000.
D. $880,000.

18. 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
payment?
A. $34,000 preferred; $6,000 common
B. $0 preferred; $40,000 common
C. $6,000 preferred; $34,000 common
D. $40,000 preferred; $0 common

19. Which activities are computed differently using the two methods of formatting a statement of cash
flows?
A. Financing activities
B. Investing activities
C. Both operating activities and investing activities
D. Operating activities

20. 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. 50% and 67%
B. 67% and 40%
C. 10% and 30%
D. 40% and 20%

End of exam