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Question 1

Working capital is defined as


Select one:
a. current assets less current liabilities.
b. current liabilities divided by long-term liabilities.
c. current assets divided by current liabilities.
d. total assets minus total liabilities.
Question 2
Which of the following would not be classified as a current asset?
Select one:
a. Interest Receivable
b. Equipment
c. Prepaid Expenses
d. Marketable Securities
Question 3
Wall Company incurred $30,000 of fixed cost and $40,000 of variable cost when 1,000 units of product
were made and sold.
If the company's volume doubles, the company's total cost will
Select one:
a. stay the same.
b. decrease.
c. double as well.
d. increase but will not double.
Question 4
Hico Bottling Company pays its production manager a salary of $5,000 per month. Salespersons are paid
strictly on commission, at $2 for each case of product sold.
For Hico Bottling Company, the production manager's salary is an example of
Select one:
a. a variable cost.
b. a mixed cost.
c. a fixed cost.
d. none of these
Select the incorrect statement regarding the quick ratio:
Select one:
a. The quick ratio is also known as the acid-test ratio.
b. The quick ratio is a conservative variation of the current ratio.
c. The quick ratio does not include the less liquid of current assets.
d. The quick ratio equals quick assets divided by total liabilities.
Question 6
Wall Company incurred $30,000 of fixed cost and $40,000 of variable cost when 1,000 units of product
were made and sold.
If the company's volume doubles, the cost per unit will
Select one:
a. stay the same.
b. double as well.
c. increase but will not double.
d. decrease.
Question 7
Current liabilities include
Select one:
a. some notes payable.
b. the current portion of some long-term liabilities.
c. all of these.
d. Taxes Payable.
Question 8
Which of the following is a disadvantage of a sole proprietorship?
Select one:
a. Excessive regulation.
b. Double taxation.
c. Unlimited liability of the owner.
d. Entrenched management.
Question 9
Parshall Company paid $1,200 in rent expense. What impact will this transaction have on the company's
working capital?
Select one:
a. Not enough information is provided to answer the question.
b. No impact
c. Increase it
d. Decrease it
Which of the following should be recorded as an asset?
Select one:
a. Paid for raw materials to be used in production
b. Paid rent on the warehouse used to store finished goods
c. Paid for the current month's advertising cost
d. Paid salary for the vice president of marketing
Question 11
Wall Company incurred $30,000 of fixed cost and $40,000 of variable cost when 1,000 units of product
were made and sold.
If the company's volume increases to 1,500 units, the company's total costs will be
Select one:
a. $90,000.
b. $80,000.
c. $87,500.
d. $105,000.
Question 12
Which of the following terms designates the number of shares of a corporation's stock currently held by
stockholders?
Select one:
a. outstanding shares
b. authorized shares
c. issued shares
d. treasury stock




Question 13
Which form of business organization is established as a separate legal entity from its owners?
Select one:
a. None of these
b. Corporation
c. Sole proprietorship
d. Partnership
Question 14
Pandori Company collected $500 from an account receivable. What impact will this transaction have on
the firm's current ratio?
Select one:
a. Increase it
b. Not enough information is provided to answer the question.
c. Decrease it
d. No impact
Question 15
Java Joe's operates a chain of coffee shops. The company pays rent of $12,000 per year for each shop.
Supplies (napkins, bags and condiments) are purchased as needed. The manager of each shop is paid a
salary of $2,000 per month, and all other employees are paid on an hourly basis. Relative to the number
of customers for a shop, the cost of rent is which kind of cost?
Select one:
a. Relevant cost
b. Fixed cost
c. Mixed cost
d. Variable cost
Question 16

The term "double taxation" refers to which of the following:
Select one:
a. In a partnership, both partners are required to claim their share of net income on their tax returns.
b. Corporations must pay income taxes on their net income and their stockholders pay income tax on
the dividends they receive.
c. Limited Liability Companies are forced to pay income taxes to both the state and the federal
governments.
d. Sole proprietorships must pay income taxes on their net incomes and the owners are also required to
pay income taxes on their withdrawals.
Question 17
For a manufacturing company, product costs include all of the following except:
Select one:
a. direct material costs.
b. direct labor costs.
c. overhead costs.
d. research and development costs.
Question 18
Select the incorrect statement regarding ratio analysis.
Select one:
a. There are many different ratios available for evaluating a firm's performance.
b. Some ratios involve an account from the balance sheet and one from the income statement.
c. Ratio analysis involves making comparisons between different accounts in the same set of financial
statements.
d. Ratio analysis is a specific form of horizontal analysis.
Question 19
Wall Company incurred $30,000 of fixed cost and $40,000 of variable cost when 1,000 units of product
were made and sold.
If the company's volume increases to 1,500 units, the cost per unit will be
Select one:
a. $70.
b. $55.
c. $60.
d. $65.
Question 20
Lucy Treasures operates a chain of gift shops. The company pays liability insurance premiums of $2,500
per year for each shop. The managers of each shop are paid a salary of $3,000 per month and all other
employees are paid on an hourly basis. Relative to the number of shops, the cost of insurance is which
kind of cost?
Select one:
a. Fixed cost
b. Mixed cost
c. Semi-variable
d. Variable cost
Question 1
Which of the following costs is not considered to be a product cost?
Select one:
a. Raw materials costs
b. Wages paid to production workers
c. Factory utilities costs
d. Depreciation of delivery vehicles
Question 2
Wall Company incurred $30,000 of fixed cost and $40,000 of variable cost when 1,000 units of product
were made and sold.
If the company's volume increases to 1,500 units, the cost per unit will be
Select one:
a. $70.
b. $60.
c. $65.
d. $55.
Question 3
Working capital is defined as
Select one:
a. current liabilities divided by long-term liabilities.
b. current assets less current liabilities.
c. current assets divided by current liabilities.
d. total assets minus total liabilities.
Question 4
Which of the following would not be classified as a current asset?
Select one:
a. Marketable Securities
b. Prepaid Expenses
c. Equipment
d. Interest Receivable
Question 5
Pandori Company collected $500 from an account receivable. What impact will this transaction have on
the firm's current ratio?
Select one:
a. Decrease it
b. No impact
c. Not enough information is provided to answer the question.
d. Increase it
Question 6
Hico Bottling Company pays its production manager a salary of $5,000 per month. Salespersons are paid
strictly on commission, at $2 for each case of product sold.
For Hico Bottling Company, the production manager's salary is an example of
Select one:
a. a mixed cost.
b. a fixed cost.
c. none of these
d. a variable cost.

Question 7
Wall Company incurred $30,000 of fixed cost and $40,000 of variable cost when 1,000 units of product
were made and sold.
If the company's volume doubles, the cost per unit will
Select one:
a. stay the same.
b. decrease.
c. increase but will not double.
d. double as well.
Question 8
Select the statement regarding vertical analysis.
Select one:
a. Vertical analysis examines two or more items from the financial statements of one accounting period.
b. Vertical analysis of the balance sheet involves showing each asset as a percentage of total assets.
c. Vertical analysis of the income statement involves showing each item as a percentage of sales.
d. All of these are .
Question 9
Hico Bottling Company pays its production manager a salary of $5,000 per month. Salespersons are paid
strictly on commission, at $2 for each case of product sold.
For Hico Bottling Company, the salespersons' commissions are an example of
Select one:
a. none of these
b. a variable cost.
c. a mixed cost.
d. a fixed cost.
Question 10
Select the in statement regarding the quick ratio:
Select one:
a. The quick ratio does not include the less liquid of current assets.
b. The quick ratio is also known as the acid-test ratio.
c. The quick ratio is a conservative variation of the current ratio.
d. The quick ratio equals quick assets divided by total liabilities.
Question 11
Which of the following terms designates the number of shares of a corporation's stock currently held by
stockholders?
Select one:
a. authorized shares
b. issued shares
c. treasury stock
d. outstanding shares
Question 12
All of the following are considered to be measures of a company's short-term debt-paying ability except
Select one:
a. the current ratio.
b. inventory turnover.
c. the average number of days to collect receivables.
d. earnings per share.

Question 13
Which of the following is a disadvantage of a sole proprietorship?
Select one:
a. Entrenched management.
b. Double taxation.
c. Excessive regulation.
d. Unlimited liability of the owner.
Question 14
Select the statement regarding fixed costs.
Select one:
a. The fixed cost per unit does not change when volume decreases.
b. The fixed cost per unit decreases when volume increases.
c. The fixed cost per unit increases when volume increases.
d. Because they do not change, fixed costs should be ignored in decision making.
Question 15
Regardless of the specific type of long-term debt, which of the following are normally required with debt
transactions?
Select one:
a. to repay the debt
b. A and C are both
c. to pay dividends
d. to pay interest
Question 16
Which of the following entities would have a "Paid-in Capital in Excess" account in the equity section of
the balance sheet?
Select one:
a. A sole proprietorship
b. A corporation
c. All of these
d. A partnership
Question 17
Financial ratios can be used to assess which of the following aspects of firm performance?
Select one:
a. Liquidity.
b. Managerial effectiveness.
c. All of these.
d. Solvency.
Question 18
Financial statement analysis involves forms of comparison including
Select one:
a. comparing key items to industry averages.
b. comparing key relationships within the same year.
c. all of these.
d. comparing changes in the same item over a number of periods.
Question 19
Company N has a 5-year note payable that will mature (come due) on March 17, 2012. Company N has
an agreement with a local bank to refinance the liability by issuing a new note payable. On its December
31, 2011 balance sheet, N should
Select one:
a. report the note payable as a long-term liability.
b. transfer the amount of the note payable to stockholders' equity.
c. not report the note payable on the balance sheet because it is going to be refinanced.
d. report the note payable as a current liability.
Question 20
Which of the following should be recorded as an asset?
Select one:
a. Paid salary for the vice president of marketing
b. Paid rent on the warehouse used to store finished goods
c. Paid for raw materials to be used in production
d. Paid for the current month's advertising cost