Multiple Choice Answers

Question 1 of 20
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%
Question 2 of 20
If Cash is $2,345 in 20X2 and $3,671 in 20X1, what is the percentage of increase or (decrease) from 20X1 to 20X2?
A. 56.55%
B. (56.55%)
C. 36.12%
D. (36.12%)
Question 3 of 20
When a company tracks gross profit by department, the sales journal will
A. not differ from a company that doesn’t 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.
Question 4 of 20
Scott Company had a current ratio of 2.76:1 in Year 1 and 2.57:1 in Year 2. This change in current ratio indicates that the
A. company’s debt-paying ability has improved.
B. company’s debt-paying ability has weakened.
C. company’s customers are paying their accounts sooner.
D. company is able to sell its inventory faster.
Question 5 of 20
Indirect expenses are expenses that
A. may be incurred outside the control of a department manager.
B. can’t be identified with a specific department.
C. are incurred for the general benefit of a company.
D. All of the above
Question 6 of 20
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.
Question 7 of 20
Liquidity ratios measure
A. how effectively a company is using its equity.
B. how effectively a company is using its liabilities.
C. a company’s ability to pay shareholders.
D. a company’s ability to pay off short-term debts.
Question 8 of 20
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
Question 9 of 20
Debt management ratios measure
A. how effectively a company is using its cash.
B. how well a company is using debt versus equity position.
C. a company’s ability to earn profit.
D. a company’s ability to meet payable obligations.
Question 10 of 20
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%.
Question 11 of 20
Profitability ratios measure
A. a company’s ability to earn profits.
B. a company’s ability to meet short-term obligations.
C. how well a company is using debt versus equity.
D. how effectively a company is using its assets.
Question 12 of 20
Direct expenses are expenses that
A. can be identified with a specific department.
B. can’t be identified with a specific department.
C. can be identified with more than one department.
D. None of the above
Question 13 of 20
Sales minus cost of goods sold yields
A. operating expenses.
B. gross profit.
C. income before taxes.
D. net income.
Question 14 of 20
Gross profit by department appears on the
A. balance sheet.
B. statement of retained earnings.
C. statement of cash flows.
D. income statement.
Question 15 of 20
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
Question 16 of 20
A maintenance department would be an example of a
A. cost center.
B. direct expense.
C. profit center.
D. None of the above
Question 17 of 20
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
Question 18 of 20
The lower the times interest earned ratio, the more likely
A. a default in payment will occur.
B. a business will need to borrow money.
C. a business will suffer a loss.
D. interest payments can be made.
Question 19 of 20
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.
Question 20 of 20
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%