1. If you own 500 shares (2% of a corporation’s stock) and the corporation issues 15,000 new shares, how many of the new shares can you purchase under preemptive right?
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
3. 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: 8.1 %; Return on Common Stockholders’ Equity: 9.2%
B. Return on Stockholders’ Equity: 5.6 %; Return on Common Stockholders’ Equity: 6.7%
C. Return on Stockholders’ Equity: 6.5 %; Return on Common Stockholders’ Equity: 7.6%
D. Return on Stockholders’ Equity: 7.8 %; Return on Common Stockholders’ Equity: 8.9%
4. 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 C. 153
B. 73 D. 81
5. 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. 10% and 30%
B. 40% and 20%
C. 67% and 40%
D. 50% and 67%
6. 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. statement of cash flows.
C. income statement.
D. balance sheet.
7. Which activities are computed differently using the two methods of formatting a statement of cash flows?
A. Both operating activities and investing activities
B. Operating activities
C. Financing activities
D. Investing activities
8. Isaiah Corporation’s Accounts Receivable increased by $35,000, and its Accounts Payable decreased by $18,000. What is the net effect on cash from operations under the indirect method?
9. 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 cumulative. How much will be distributed to the preferred and common stockholders on the date of payment if the preferred stock is $12,000 in arrears?
A. $20,000 preferred; $20,000 common
B. $40,000 preferred; $0 common
C. $6,000 preferred; $34,000 common
D. $18,000 preferred; $22,000 common
10. Accounts receivable amounted to $215,000 at the beginning of the year and $245,000 at the end of the year. Income reported on the income statement for the year was $300,000. The cash flow from operating activities on the cash flow statement using the indirect method is
11. The accuracy of the statement of cash flows can be verified by computing the change in the balance of the
A. revenue accounts.
B. cash and cash equivalent accounts.
C. asset and liability accounts.
D. equity account.
12. 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. 300% and 225%
D. 44.4% and 33.3%
13. If total assets are $6,000, what is the common-size figure of cash, assuming that cash has a balance of $2,400?
14. Operating expenses—other than depreciation—for the year were $335,000. Prepaid expenses decreased by $7,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be
15. 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. $0 preferred; $40,000 common
B. $6,000 preferred; $34,000 common
C. $40,000 preferred; $0 common
D. $34,000 preferred; $6,000 common
16. For vertical analysis purposes, the base item on the income statement is
A. net sales.
B. total expenses.
C. net income.
D. gross profit.
17. 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. $1,500 debit
B. $900 debit
C. $900 credit
D. $3,900 credit
18. Which section of the income statement does not report net of income taxes or net of income tax savings?
A. Extraordinary items section
B. Continuing operations section
C. Cumulative effect of changes in accounting principles section
D. Discontinued operations section
19. If current assets were $100,000 in 2009 and $88,000 in 2010, what was the amount of increase or decrease in percentage terms from 2009 to 2010? (Round to the nearest percent.)
A. Decrease of 12%
B. Decrease of 14%
C. Increase of 14%
D. Increase of 12%
20. Brandon Company had extraordinary losses of $150,000. If its corporate tax rate is 30%, at which amount will the losses be shown on the income statement?
B. Not enough information is given to answer the question.