Ram 57.doc

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1. Birch issued 200 shares of $12 par common stock in exchange for a piece of equipment with a current
market value of $3,000. Which of the following is not part of the journal entry for this transaction?
A. Crediting paid-in capital in excess of par common for $600
B. Crediting common stock for $3,000
C. Crediting common stock for $2,400
D. Debiting equipment for $3,000
2. A company has $56,000 in cash; $12,000 in accounts receivable; $25,000 in short-term investments;
and $100,000 in merchandise inventory. The company also has $60,000 in current liabilities. The
company’s quick ratio is
A. 0.933.
B. 1.550.
C. 3.217.
D. 1.133.
3. What is the rate of return on common stockholders’ equity if sales are $100,000, net income is $22,700,
and average common stockholders’ equity is $86,000?
A. 86.0%
B. The rate of return can’t be determined from the information given.
C. 22.7%
D. 26.4%
6. Cost of goods sold for the year was $850,000. Inventory was $60,000 at the beginning of the year and
$90,000 at the end of the year. There were no changes in the amount in accounts payable for the year.
Cash payment for merchandise to be reported under the direct method is
A. $910,000.
B. $850,000.
C. $940,000.
D. $880,000.
8. Earnings that a stockholder receives from a corporation are an example of which stockholder right?
A. Liquidation
B. Vote
C. Preemption
D. Dividends
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. $18,000 preferred; $22,000 common
B. $20,000 preferred; $20,000 common
C. $40,000 preferred; $0 common
D. $6,000 preferred; $34,000 common
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. $18,000 preferred; $22,000 common
B. $20,000 preferred; $20,000 common
C. $40,000 preferred; $0 common
D. $6,000 preferred; $34,000 common
10. 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. 44.4% and 33.3%
C. 300% and 225%
D. 33.3% and 44.4%
12. In a common-size income statement, selling expenses are 55%. This means that they’re 55% of
A. net income.
B. gross profit.
C. net sales.
D. net profit.
13. Ryan Industries has an inventory turnover of 112 days, an accounts payable turnover of 73 days, and
an accounts receivable turnover of 82 days. Ryan’s cash conversion cycle is _______ days.
A. 103
B. 9
C. 43
D. 121
16. 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
End of exam
Total Stockholders’ Equity 12/31/2011 5,500,000
A. Return on Stockholders’ Equity: 7.8 %; Return on Common Stockholders’ Equity: 8.9%
B. Return on Stockholders’ Equity: 5.6 %; Return on Common Stockholders’ Equity: 6.7%
C. Return on Stockholders’ Equity: 8.1 %; Return on Common Stockholders’ Equity: 9.2%
D. Return on Stockholders’ Equity: 6.5 %; Return on Common Stockholders’ Equity: 7.6%
19. What is the rate of return on equity if net income is $22,700; preferred dividends are $3,000; sales are
$100,000; and average common stockholders’ equity is $86,000?
A. 22.7%
B. 26.4%
C. 22.9%
D. 86.0%