Calculations Shown




1. In a comparative balance sheet, the ending Cash was $315,000 in 2011 and $270,000 in 2012. The net increase or decrease from 2011 to 2012 is:
a. 86.0%
b. 14.3%
c. 26.4%
d. 16.7%
2. Comparative reports in which each item is expressed as a percentage of a base amount without dollar amounts are called:
a. comparative financial statements.
b. common-size statements.
c. cash flow analysis.
d. horizontal analysis.
3. If Cash is $2,345 in 20X2 and $3,671 in 20X1, what is the percent of increase or (decrease) from 20X1 to 20X2?
a. 56.55%
b. (56.55%)
c. 36.12%
d. (36.12%)
4. If total assets are $6,000, what is the vertical analysis for Cash when it has a balance of $2,400?
a. 40%
b. 60%
c. 250%
d. 25%
5. What was the percentage of decrease in the Accounts Receivable account if the receivables were $80,000 in Year 1 and $60,000 in Year 2?
a. (25%)
b. 33.33%
c. (33.33%)
d. 25%
6. If current assets were $100,000 in 20×7 and $88,000 in 20×8, what was the amount of increase or decrease?
a. The percentage increase is 13.64%
b. The percentage decrease is 12%
c. The percentage decrease is 13.64%
d. The percentage increase is 12%
7. Noble Company’s accounts receivable turnover was 18.2 in Year 1 and 24.6 in Year 2. This change in accounts receivable turnover indicates:
a. the company is not selling its inventory as fast.
b. the company is selling its inventory faster.
c. the company’s customers are paying faster.
d. the company’s customers are paying slower.
8. The lower the times interest earned ratio, the more likely:
a. a default in payment will occur.
b. a business needs to borrow money.
c. a business will suffer a loss.
d. interest payments can be made.
9. If management wishes to evaluate the ability of a business to provide funding to cover operating expenses, they could use the:
a. rate of return on total assets.
b. rate of return on common stockholders’ equity.
c. gross profit rate.
d. times interest earned.
10. If management wishes to evaluate the amount of assets that were financed by creditors, the could use the:
a. debt to total assets.
b. rate of return on common stockholders’ equity.
c. debt to total liabilities.
d. times interest earned.
11. If Rick Company’s sales increase from $40,000 to $80,000 and its cost of goods sold increased from $30,000 to $50,000, then vertical analysis based on sales would show the cost of goods sold for the two periods as:
a. 75% and 62.5%.
b. 62.5% and 75%.
c. 133.33% and 160%.
d. 160% and 133.33%.
12. If current assets were $100,000 in 20×7 and $88,000 in 20×8, what was the amount of increase or decrease?
a. The percentage increase is 13.64%.
b. The percentage decrease is 12%.
c. The percentage decrease is 13.64%.
d. The percentage increase is 12%.
13. If Cara Piano’s sales increased from $40,000 to $60,000 and its cost of goods sold increased from $20,000 to $40,000, the vertical analysis based on sales would show which of the following for cost of goods sold?
a. 40% and 20%
b. 10% and 30%
c. 50% and 67%
d. 67% and 40%
14. The sales for Mary’s Services for Years 1, 2, and 3 are $25,000, $45,000, $60,000, respectively. The trend percentage for Year 3 is:
a. 42%.
b. 240%.
c. 140%
d. 58%.
15. The current ratio for a company with current assets of $70,000, current liabilities of $50,000, total assets of $150,000, and net sales of $80,000, would be:
a. 1.4.
b. 0.714.
c. 3.0.
d. 0.875.
16. A company has $56,000 in cash, $12,000 in accounts receivable, $25,000 in temporary investments, and $100,000, in merchandise inventory. The company has $60,000 in current liabilities. The company’s acid test (quick) ratio is:
a. 3.217
b. 1.550
c. 1.133
d. 0.933
17. Chuck Company has a beginning Accounts Receivable balance of $65,000 and an ending balance of $60,000. Net credit sales are $250,000. The company’s accounts receivable turnover ratio is:
a. 3.846
b. 4.167
c. 4.000
d. None of the above
18. If beginning and ending inventories are $100,000 and 150,000, respectively, and the cost of goods sold is $450,000, what is the inventory turnover ratio?
a. 4.50
b. 3.00
c. 3.60
d. 0.28
19. Compute the gross profit rate when net sales are $350,000 and gross profits are $178,500.
a. 51:10
b. 54%
c. 51%
d. 54:10
20. Saxon Corporation’s beginning inventory was $30,000. The cost of goods sold was $350,000 for the year, with an ending inventory of $40,000. Inventory turnover for the year is:
a. 20 times.
b. 10 times.
c. 11.67 times.
d. 8.75 times.
21. Departmental reports are useful for all of the following purposes EXCEPT:
a. determining performance.
b. determining future revenue.
c. controlling.
d. planning.
22. Managerial accounting is primarily used for _______, but financial accounting is used for _______.
a. business decisions; external reports
b. CEOs; stockholders
c. customers; tax reporting
d. external reports; decision-making
23. Normally the reports prepared for a department is a(n):
a. cash flow statement.
b. statement of equity.
c. income statement.
d. balance sheet.
24. Sales minus cost of goods sold yields:
a. operating expenses.
b. gross profit.
c. income before taxes.
d. net income.
25. Gross profit by department appears on the:
a. balance sheet.
b. statement of retained earnings.
c. statement of cash flows.
d. income statement.
26. When a company tracks gross profit by department, the sales journal will:
a. not differ from a company that does not track gross profit by department.
b. have a separate column for accounts receivable for each department.
c. have a separate column for sales for each department.
d. have a column for purchases for each department.
27. A maintenance department would be an example of a:
a. cost center.
b. direct expense.
c. profit center.
d. None of the above
28. A unit or department that incurs costs and generates revenues is a(n):
a. expense center.
b. direct center.
c. cost center.
d. profit center.
29. An example of a cost center is:
a. a Holiday Inn.
b. the restaurant in a hotel.
c. the administrative department in a hotel.
d. the catering department in a hotel.
30. To determine how each profit center is performing, management would analyze the:
a. income tax rate.
b. indirect expenses.
c. gross profit for each profit center.
d. other expenses.
31. Direct expenses are expenses that:
a. can be identified with a specific department.
b. cannot be identified with a specific department.
c. can be identified with more than one department.
d. None of the above
32. Indirect expenses are expenses that:
a. may be incurred outside the control of a department manager.
b. cannot be identified with a specific department.
c. are incurred for the general benefit of a company.
d. All of the above
33. When preparing an income statement showing departmental contribution margin,:
a. indirect expenses are combined with direct expenses.
b. indirect departmental expenses are added to contribution margin.
c. direct expenses are subtracted from contribution margin on sales.
d. None of the above
34. A line on the income statement that indicates what a department has left after covering cost of goods sold and direct expenses is:
a. the gross margin.
b. the net income.
c. the contribution margin.
d. None of the above
35. What is the purpose of determining the contribution margin?
a. To show the contribution by a department toward covering indirect costs
b. To help determine whether to eliminate a department
c. To show the effect on net income of each department
d. All of the above
36. Supporters of the contribution margin approach believe that:
a. indirect expenses should be departmentalized.
b. indirect expenses should not be used for evaluating departmental performance.
c. indirect expenses are proportionally charged to each department.
d. direct expenses should not be used in evaluating departmental performance.
37. The women’s shoe department shows gross sales of $245,000 with the cost of the shoes $147,000. The men’s shoes department shows gross sales of $184,000 with the cost of the shoes $110,000. What is the gross profit for each department?
a. $392,000 and $294,000
b. $245,000 and $184,000
c. $98,000 and $74,000
d. $429,000 and $257,000
38. A company has four departments (A, B, C, and D) and the net sales are $35,000, $40,000, $60,000, and $25,000, respectively. The cost of goods sold per department are $25,000, $15,000, $40,000, and $15,000, respectively. Which department has the lowest gross profit?
a. A
b. B
c. C
d. Both A and D
39. Calculate department’s gross profit on sales given the following:
Sales                                       $1,600
Operating Expenses    $350
Cost of goods sold                  $900
a. $350
b. $700
c. $1,050
d. $1,250
40. The photography department in a department store experienced the following revenue and expenses during October:
Sales                                                   $11,000
Cost of Goods Sold                            $5,000
Direct Operating Expenses                $800
Indirect Operating Expenses  $2,100
The photography department’s gross profit on sales is
a. $3,100.
b. $5,200.
c. $6,000.
d. $8,100.