Filters
Question type
Study Flashcards

Classify each of the following accounting practices as conservative or aggressive: 1. Increase the allowance for uncollectible accounts. 2. When costs are rising, change from FIFO to LIFO. 3. Increase the estimated useful life of equipment.

Correct Answer

verifed

verified

1. Conserv...

View Answer

Using horizontal analysis, if the base year is negative and the following year is positive, the percentage change is just as useful as if the base year and the following year were both positive.

A) True
B) False

Correct Answer

verifed

verified

Stealth Company's 2013 return on assets is:


A) 7.1%.
B) 7.8%.
C) 13.5%.
D) 44.7%.

E) A) and B)
F) A) and C)

Correct Answer

verifed

verified

An extremely high inventory turnover ratio may be a signal that the company is losing sales due to inventory shortages.

A) True
B) False

Correct Answer

verifed

verified

Listed below are eight terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term placing the number designating the term in the space provided. -     Accounting choices that result in reporting lower income, lower assets, and higher liabilities. 


A)  Liquidity 
B)  Conservative accounting practices 
C)  Solvency 
D)  Extraordinary item 
E)  Discontinued operation 
F)  Horizontal analysis 
G)  Vertical analysis 
H)  Aggressive accounting practices 

I) A) and B)
J) A) and C)

Correct Answer

verifed

verified

TPX Company's 2013 inventory turnover is:


A) 3.0 times.
B) 5.2 times.
C) 3.3 times.
D) 3.6 times.

E) B) and C)
F) A) and D)

Correct Answer

verifed

verified

TPX Company's 2013 asset turnover is:


A) 3.7 times.
B) 2.8 times.
C) 2.2 times.
D) 0.5 times.

E) All of the above
F) A) and B)

Correct Answer

verifed

verified

Listed below are eight risk ratios followed by a list of phrases that describe or characterize the ratios. Match each phrase with the correct ratio placing the number designating the ratio in the space provided.

Premises
Ratio that compares interest expense with income available to pay those charges.
Approximate number of days the average accounts receivable balance is outstanding.
Cost of goods sold divided by average inventory; the number of times the firm sells its average inventory balance during a reporting period.
Cash, short-term investments, and accounts receivable divided by current liabilities; measures the availability of liquid current assets to pay current liabilities.
Approximate number of days the average inventory is held.
Net sales divided by average accounts receivable; the number of times during a year that the average accounts receivable balance is collected.
Current assets divided by current liabilities; measures the availability of current assets to pay current liabilities.
Total liabilities divided by total stockholders' equity; measure a company's solvency risk.
Responses
Average collection period
Debt to equity ratio
Acid-test ratio
Average days in inventory
Inventory turnover ratio
Receivables turnover ratio
Current ratio
Times interest earned ratio

Correct Answer

Ratio that compares interest expense with income available to pay those charges.
Approximate number of days the average accounts receivable balance is outstanding.
Cost of goods sold divided by average inventory; the number of times the firm sells its average inventory balance during a reporting period.
Cash, short-term investments, and accounts receivable divided by current liabilities; measures the availability of liquid current assets to pay current liabilities.
Approximate number of days the average inventory is held.
Net sales divided by average accounts receivable; the number of times during a year that the average accounts receivable balance is collected.
Current assets divided by current liabilities; measures the availability of current assets to pay current liabilities.
Total liabilities divided by total stockholders' equity; measure a company's solvency risk.

Which of the following ratios is most useful in evaluating solvency?


A) Debt to equity ratio.
B) Current ratio.
C) Receivables turnover ratio.
D) Inventory turnover ratio.

E) A) and C)
F) None of the above

Correct Answer

verifed

verified

We use the times interest earned ratio to compare interest payments with a company's income available to pay those charges.

A) True
B) False

Correct Answer

verifed

verified

When using vertical analysis, we express income statement accounts as a percentage of:


A) Net income.
B) Gross profit.
C) Sales.
D) Total assets.

E) A) and C)
F) A) and D)

Correct Answer

verifed

verified

TPX Company's 2013 profit margin is:


A) 18.8%.
B) 9.0%.
C) 19.4%.
D) 15.1%.

E) A) and B)
F) None of the above

Correct Answer

verifed

verified

We calculate the times interest earned ratio by dividing net income by interest expense.

A) True
B) False

Correct Answer

verifed

verified

The acid-test ratio is:


A) The liquidity ratio divided by the equity ratio.
B) Current assets minus inventory divided by current liabilities minus accounts payable.
C) Cash, net receivables, and current investments divided by current liabilities.
D) Cash divided by accounts payable.

E) B) and D)
F) C) and D)

Correct Answer

verifed

verified

When using vertical analysis, we express balance sheet accounts as a percentage of:


A) Sales.
B) Total assets.
C) Total liabilities.
D) Total stockholders' equity.

E) B) and C)
F) All of the above

Correct Answer

verifed

verified

Conservative accounting practices are those that result in reporting higher income, higher assets, and lower liabilities.

A) True
B) False

Correct Answer

verifed

verified

Which of the following is an aggressive accounting practice?


A) The use of a shorter service life for depreciation.
B) Waiting to record a litigation loss.
C) Adjust the allowance for uncollectible accounts to a larger amount.
D) The write-down of overvalued inventory.

E) None of the above
F) A) and B)

Correct Answer

verifed

verified

Which of the following items is most likely to be reported as an extraordinary loss?


A) Losses due to the write-down of inventory.
B) Losses on the sale of long-term assets.
C) Losses due to business restructuring.
D) Uninsured losses from a natural disaster.

E) C) and D)
F) B) and D)

Correct Answer

verifed

verified

Which of the following is not a solvency ratio?


A) Time interest earned ratio.
B) The debt to equity ratio.
C) The current ratio.
D) All of the other options are solvency ratios.

E) A) and C)
F) A) and D)

Correct Answer

verifed

verified

Which of the following is not a common type of comparison in accounting?


A) Comparisons of sales growth between companies.
B) Comparisons of earnings per share between companies.
C) Comparisons over time.
D) Comparisons to industry.

E) None of the above
F) B) and C)

Correct Answer

verifed

verified

Showing 41 - 60 of 152

Related Exams

Exam 1

Accounting Information and Decision Making

172 Questions

Exam 2

The Accounting Information System

183 Questions

Exam 3

The Financial Reporting Process

183 Questions

Exam 4

Cash and Internal Controls

178 Questions

Exam 5

Receivables and Sales

183 Questions

Exam 6

Inventory and Cost of Goods Sold

189 Questions

Exam 7

Long-Term Assets

155 Questions

Exam 8

Current Liabilities

142 Questions

Exam 9

Long-Term Liabilities

155 Questions

Exam 10

Stockholders Equity

142 Questions

Exam 11

Statement of Cash Flows

150 Questions

Exam 13

Time Value of Money

75 Questions

Exam 14

Investments

52 Questions

Exam 15

International Financial Reporting Standards

43 Questions

Show Answer