MGMT 200 Exam 3 Practice Quiz 3

1.

1 point

When using vertical analysis, we express income statement accounts as a percentage of

Net income

Gross profit

Sales

Total assets

2.

1 point

When using vertical analysis, we express balance sheet accounts as a percentage of

Sales

Total assets

Total liabilities

Total stockholders' equity

3.

1 point

Which of the following is an example of vertical analysis?

Comparing gross profit across companies

Comparing income statement items as a percentage of sales

Comparing debt with industry averages

Comparing the change in sales over time

4.

1 point

To calculate a year-to-year percentage change in any financial statement line item such as sales, you should take the current year's amount, subtract the prior year's amount, then divide by ____, and finally multiply the result by 100

net income

total assets

the current year's amount

the prior year's amount

5.

1 point

Brady's Inflation Needle Co. reports accounts receivables of $100,000 in 2017 and $250,000 in 2018. Using horizontal analysis, what would be the percentage increase or decrease in accounts receivable?

60% decrease

60% increase

150% decrease

150% increase

6.

1 point

Which of the following is an example of horizontal analysis?

Comparing gross profit across companies

Comparing gross profit with operating expenses

Comparing assets with equity

Comparing the change in sales over time

7.

1 point

Profit margin and gross margin are the same thing.

True

False

8.

1 point

Assuming a current ratio of 1.0, how will the purchase of inventory with the cash affect the ratio?

Increase the current ratio

No change to the current ratio

Decrease the current ratio

Could either increase or decrease the current ratio

9.

1 point

Which type of account is gross margin?

An income account

An expense account

An asset account

None of these are correct

10.

1 point

Richard's Sporting Goods reports net income of $100,000, net sales of $500,000, and average assets of $1,000,000. The profit margin is

10%

20%

50%

5 times

11.

1 point

Will the profit margin of a business be higher than its gross margin?

Yes

No

12.

1 point

A company with a current ratio 1.0 is considered more liquid than one with a current ratio of 2.0.

True

False

13.

1 point

The CEO of a company is elected by a vote of the shareholders.

True

False

14.

1 point

Contributed capital is the amount stockholders have invested in the company

True

False

15.

1 point

Limited liability means that even in the event of bankruptcy, stockholders in a corporation can lose no more the amount they invested in the company

True

False

16.

1 point

All publicly held corporations are regulated by what government organization?

The Financial Accounting Standards Board

The Commission on Accounting Procedures

The Accounting Principles Board

The Securities and Exchange Commission

17.

1 point

Advantages of the corporate form of business include which of the following?

I. Double taxation
II. Ability to raise capital
III. Ability to transfer ownership
IV. More paperwork
V. Limited Liability

II

II, III, V

I, II, III

II, IV, V

18.

1 point

Which of the following is a reason that a corporation would prefer to issue stock instead of bonds?

Dividend payments can be deducted for income tax purposes but interest payments cannot

Expansion is accomplished without surrendering control

The risk of going bankrupt is less

All of these

19.

1 point

Authorized stock is the number of shares that have been sold to investors

True

False

20.

1 point

Par value is the legal capital per share of stock that's assigned when the corporation is first established

True

False

21.

1 point

Outstanding common stock refers to the total number of shares

Issued

Issued plus treasury stock

Issues less treasury stock

Authorized

22.

1 point

The par value of a share of common stock is normally equal to market value

True

False

23.

1 point

The par value of shares issued is normally recorded in the

Additional Paid-in Capital account

Common Stock account

Retained Earnings account

Treasury Stock account

24.

1 point

A company credits Additional Paid-in Capital for the portion of the cash proceeds above par value received for the issuance of stock

True

False

25.

1 point

If a company issues 1,000 shares of $1 par value common stock for $20 per share, what would be the effect on the accounting?

Increase assets and increase liabilities

Increase assets and increase revenue

Increase assets and increase stockholders' equity

Increase assets and decrease stockholders' equity

26.

1 point

If a company issues 1,000 shares of $1 par value common stock for $20 per share, which of the following accounts would be credited?

Treasury stock

Cash

Additional Paid-in Capital

Retained Earnings

27.

1 point

When a company issues 25,000 shares of $1 par value common stock for $10 per share, the journal entry for this issuance would include:

A debit to Cash for $25,000

A debit to Additional Paid-in Capital for $25,000

A credit to Common Stock for $250,000

A credit to Additional Paid-in Capital for $225,000

28.

1 point

Jade Jewelers issued 15,000 shares of $1 par value stock for $20 per share. What is true about the journal entry to record the issuance?

Credit Common Stock $300,000

Credit Cash $300,000

Credit Common Stock $15,000

Debit Additional Paid-in Capital $285,000