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Accounting
Q:
vertical analysis is useful in making comparisons of companies of different sizes.
Q:
Martin Jackson receives an hourly wage rate of $30, with time-and-a-half pay for all hours worked in excess of 40 hours during a week. Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld, $350; social security tax rate, 6.0%; and Medicare tax rate, 1.5%. What is the net amount to be paid to Jackson? a. $1,470.00 b. $1,009.75 c. $1,097.95 d. $460.25
Q:
in the vertical analysis of a balance sheet, the base for current liabilities is total liabilities.
Q:
Assuming a 360-day year, the interest charged by the bank at the rate of 6% on a 90-day, discounted note payable of $100,000 is a. $6,000 b. $1,500 c. $500 d. $3,000
Q:
liquidity ratios measure the ability of the enterprise to survive over a long period of time.
Q:
in the vertical analysis of an income statement, each item is generally stated as a percentage of net income.
Q:
An unfunded pension liability is reported on the balance sheet as a. a current liability b. owner's equity c. a long-term liability d. a current liability or long-term liability, depending on when the pension liability is to be paid
Q:
receivable turnover is useful in assessing the profitability of receivables.
Q:
On May 18, Rodriguez Co. issued an $84,000, 6%, 120-day note payable on an overdue account payable to Wilson Company. Assume that the fiscal year of Rodriguez ends on June 30. Which of the following relationships is true? a. Rodriguez is the creditor and credits Accounts Receivable. b. Wilson is the creditor and debits Accounts Receivable. c. Wilson is the borrower and credits Accounts Payable. d. Rodriguez is the borrower and debits Accounts Payable.
Q:
the current ratio is a measure of all the ratios calculated for the current year.
Q:
Most employers are levied a tax on payrolls for a. sales tax b. medical insurance premiums c. federal unemployment compensation tax d. union dues
Q:
a solvency ratio measures the income or operating success of an enterprise for a given period of time.
Q:
from a creditor's point of view, the higher the total debt to total assets ratio, the lower the risk that the company may be unable to pay its obligations.
Q:
The journal entry a company uses for pension rights that have not been funded for its salaried employees at the end of the year is a. debit Salaries Expense; credit Cash b. debit Pension Expense; credit Unfunded Pension Liability c. debit Pension Expense; credit Unfunded Pension Liability and Cash d. debit Pension Expense; credit Cash
Q:
the current ratio is one of the most utilized measures of profitability.
Q:
Payroll entries are made with data from the a. wage and tax statement b. employee's earnings record c. employer's quarterly federal tax return d. payroll register
Q:
the return on assets ratio will be greater than the rate of return on common stockholders' equity if the company has been successful in trading on the equity at a gain.
Q:
Chang Co. issued a $50,000, 120-day, discounted note to Guarantee Bank. The discount rate is 6%. Assuming a 360-day year, the cash proceeds to Chang Co. are a. $49,750 b. $47,000 c. $49,000 d. $51,000
Q:
leverage and return on equity are closely related.
Q:
An employee receives an hourly wage rate of $15, with time and a half for all hours worked in excess of 40 during the week. Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld, $110; cumulative earnings for the year prior to this week, $24,500; social security tax rate, 6.0%; Medicare tax rate, 1.5%; state unemployment compensation tax, 3.4% on the first $7,000; and federal unemployment compensation tax, 0.8% on the first $7,000. What is the net amount to be paid to the employee? a. $569.88 b. $539.00 c. $625.00 d. $544.88
Q:
both profit margin and asset turnover affect a companys return on assets.
Q:
Current liabilities are due a. but not receivable for more than one year b. but not payable for more than one year c. and receivable within one year d. and payable within one year
Q:
profitability ratios are frequently used as a basis for evaluating management's operating effectiveness.
Q:
Scott Company sells merchandise with a one-year warranty. Sales consisted of 2,500 units in Year 1 and 2,000 units in Year 2. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in Year 1 and 70% in Year 2 for the Year 1 sales. Similarly, 30% of repairs will be made in Year 2 and 70% in Year 3 for the Year 2 sales. On the Year 3 income statement, how much of the warranty expense shown will be due to Year 1 sales? a. $6,000 b. $14,000 c. $20,000 d. $0
Q:
Assuming that all wages are subject to federal and state unemployment taxes, the employer's payroll tax expense would be a. $1,370 b. $750 c. $620 d. $2,870
Q:
inventory turnover is a measure of liquidity that focuses on efficient use of inventory.
Q:
On January 5, Thomas Company, which follows a calendar year, issued $1,000,000 of notes payable, of which $250,000 is due on January 1 each of the next four years. The proper balance sheet presentation on December 31 is a. Current liabilities, $1,000,000 b. Current liabilities, $250,000; Long-term debt, $750,000 c. Long-term debt, $1,000,000 d. Current liabilities, $750,000; Long-term debt, $250,000Use this information for Harris Company to answer the following questions.Harris Company has the following information for the pay period of January 15–31:Gross payroll $10,000 Federal income tax withheld $1,800Social security rate 6.0% Federal unemployment tax rate 0.8%Medicare rate 1.5% State unemployment tax rate 5.4%Assume that for the year to date no employees have reached the maximum earnings subject to FICA taxes.
Q:
the inventory turnover ratio measures the number of times on the average the inventory was sold during the period.
Q:
Vacation pay payable is reported on the balance sheet as a(n) a. current liability or long-term liability, depending on when the vacations will be taken by employees b. current liability c. expense d. long-term liability
Q:
improper recognition of income is not one of the factors affecting the quality of earnings.
Q:
Which of the following taxes would be deducted in determining an employee's net pay? a. FUTA taxes b. SUTA taxes c. FICA taxes d. All of these choices
Q:
alternative accounting methods affect the quality of earnings.
Q:
Young Company has the following assets and liabilities: Assets Cash $35,000Accounts receivable 15,000Inventory 30,000Equipment 50,000 Liabilities Current portion of long-term debt $10,000Accounts payable 2,000Long-term debt 25,000Determine the quick ratio (rounded to one decimal place). a. 6.7 b. 13.0 c. 4.2 d. 3.5
Q:
declining profitability and liquidity ratios are indications that a company may not survive.
Q:
The amount of federal income taxes withheld from an employee's gross pay is recorded as a(n) a. payroll expense b. contra account c. asset d. liability
Q:
using borrowed money to increase the rate of return on common stockholders' equity is called "trading on the equity."
Q:
During its first year of operations, a company granted its employees vacation privileges and pension rights estimated at a cost of $21,500 and $15,000, respectively. The vacations are expected to be taken in the next year, and the pension rights are expected to be paid in the future 5–30 years. What is the total cost of vacation pay and pension rights to be recognized in the first year? a. $15,000 b. $36,500 c. $6,500 d. $21,500
Q:
a current ratio of 1.2 to 1 indicates that a company's current assets exceed its current liabilities.
Q:
because pro forma earnings are based on specific rules, these amounts are highly reliable.
Q:
Estimating and recording product warranty expense in the period of the sale best follows the a. cost concept b. business entity concept c. matching concept d. materiality concept
Q:
Quick assets include a. cash, cash equivalents, receivables, prepaid expenses, and inventory b. cash, cash equivalents, receivables, and prepaid expenses c. cash, cash equivalents, receivables, and inventory d. cash, cash equivalents, and receivables
Q:
a change in accounting principle occurs when the principle used in the current year is different from the one used by competitors in the current year.
Q:
The following totals for the month of April were compiled from the payroll data of Magnum Company:Salaries $10,000FICA taxes withheld 750Income taxes withheld 2,000Medical insurance deductions 450Unemployment taxes 420 The journal entry for the accrual of the employer’s payroll taxes would include a a. debit to Payroll Tax Expense for $1,170 b. debit to FICA Taxes Payable for $1,500 c. credit to Payroll Tax Expense for $420 d. debit to Payroll Tax Expense for $1,620
Q:
the loss on disposal of a significant component of a business is disclosed in the statement of retained earnings.
Q:
Taylor Bank lends Guarantee Company $150,000 on January 1. Guarantee Company signs a $150,000, 8%, nine-month note. The journal entry made by Guarantee Company on January 1 for the proceeds and issuance of the note is a. Interest Expense 12,000Cash 138,000 Notes Payable 150,000 b. Cash 150,000 Notes Payable 150,000 c. Cash 162,000 Interest Expense 12,000 Notes Payable 150,000d. Notes Payable 120,000Interest Payable 7,200 Cash 120,000 Interest Expense 7,200
Q:
companies report most changes in accounting principle currently.
Q:
Zennia Company provides its employees with varying amounts of vacation per year, depending on their length of employment. The estimated amount of the current year’s vacation cost is $135,000. On December 31, the end of the current year, the current month’s accrued vacation pay is a. $135,000 b. $67,500 c. $0 d. $11,250
Q:
an event or transaction should be classified as an extraordinary item if it is unusual in nature or if it occurs infrequently.
Q:
when the disposal of a significant segment occurs, the income statement should report both income from continuing operations and income (loss) from discontinued operations.
Q:
Based on the following data, what is the quick ratio (rounded to one decimal place)?Accounts payable $ 30,000Accounts receivable 60,000Accrued liabilities 5,000Cash 30,000Intangible assets 50,000Inventory 69,000Long-term investments 80,000Long-term liabilities 100,000Marketable securities 30,000Fixed assets 670,000Prepaid expenses 1,000 a. 3.4 b. 3.0 c. 2.2 d. 1.8
Q:
one objective of the income statement is to separate the results of continuing operations from those of discontinued operations.
Q:
Each year, there is a maximum for the amount of earnings subject to all of the following taxes except a. social security tax b. federal income tax c. federal unemployment tax d. state unemployment tax
Q:
sophie's dog supplies has income before taxes of $550,000 and an extraordinary loss of $170,000. if the income tax rate is 34% on all items, the income statement should show income before irregular items and an extraordinary loss, respectively, of a.$550,000 and ($170,000) b.$363,000 and ($57,800) c.$363,000 and ($112,200) d.$187,000 and ($57,800)
Q:
The employee's earnings record would contain which of the following data that the payroll register would probably not contain? a. deductions b. net pay c. overtime earnings d. cumulative earnings
Q:
when preparing an income statement, which of the following is the proper order for income statement components? a.comprehensive income, other comprehensive income items, irregular items, net income b.net income, irregular items, comprehensive income, other comprehensive income items c.irregular items, net income, other comprehensive income items, comprehensive income d.irregular items, net income, comprehensive income, other comprehensive income items
Q:
The journal entry for the issuance of a note for the purpose of converting an existing account payable would be a. debit Cash; credit Accounts Payable b. debit Accounts Payable; credit Cash c. debit Cash; credit Notes Payable d. debit Accounts Payable; credit Notes Payable
Q:
which of the following is the best definition of sustainable income? a.sustainable income is a measure of solvency that does not include capital expenditure b.sustainable income is the same as net income c.sustainable income is income that is unusual in nature and infrequent in occurrence d.sustainable income is the most likely level of income to be obtained in the future
Q:
The detailed record indicating the data for each employee for each payroll period and the cumulative total earnings for each employee is called the a. payroll register b. payroll check c. employee's earnings record d. employer's earnings record
Q:
Proper payroll accounting methods are important for a business for all of the following reasons except a. good employee morale requires timely and accurate payroll payments b. payroll is subject to various federal and state regulations c. to help a business with cash flow problems by delayed payments of payroll taxes to federal and state agencies d. payroll and related payroll taxes have a significant effect on the net income of most businesses
Q:
which of the following income statement figures would probably be the best indicator of a companys future performance? a.total revenues b.income from operations c.net income d.gross profit
Q:
an extraordinary item must meet which of the following two criteria? a.foreseeable and material b.infrequent and unusual c.substantial and measurable d.unusual and measurable
Q:
Davis and Thompson have earnings of $850 each. The social security tax rate is 6.0%, and the Medicare tax rate is 1.5%. Assuming that these are the only two employees and that neither have reached the maximum earnings subject to FICA taxes, what will be the employer's total FICA taxes for this payroll period? a. $102.00 b. $127.50 c. $96.00 d. $25.50
Q:
if a company has an extraordinary gain of $20,000 and a 30% tax rate, what is the effect on net income? a.increase of $20,000 b.increase of $14,000 c.increase of $6,000 d.no effect
Q:
Current liabilities are a. due and receivable within one year b. due and to be paid out of current assets within one year c. due, but not payable for more than one year d. payable if a possible subsequent event occurs
Q:
the current assets of ott company are $210,000. the current liabilities are $120,000. the current ratio expressed as a proportion is a.175% b.1.75:1 c..57:1 d.$210,000 $120,000
Q:
Which of the following is an example of a variable component of a payroll system? a. hours worked b. Medicare tax rate c. rate of pay d. social security number
Q:
a weakness of the current ratio is a.the difficulty of the calculation b.it uses year-end balances of current asset and current liability accounts c.it is rarely used by sophisticated analysts d.it can be expressed as a percentage, as a rate, or as a proportion
Q:
Notes may be issued a. when assets are purchased b. to creditors to temporarily satisfy an account payable created earlier c. when borrowing money d. All of these choices
Q:
which one of the following ratios would not likely be used by a short-term creditor in evaluating whether to sell on credit to a company? a.current ratio b.inventory turnover ratio c.asset turnover ratio d.receivables turnover ratio
Q:
The journal entry a company uses for fully funded pension rights for its salaried employees at the end of the year is a. debit Salaries Expense; credit Cash b. debit Pension Expense; credit Unfunded Pension Liability c. debit Pension Expense; credit Unfunded Pension Liability and Cash d. debit Pension Expense; credit Cash
Q:
a supplier to a company would be most interested in the a.asset turnover ratio b.profit margin ratio c.current ratio d.earnings per share
Q:
Which of the following is not a determinant in computing federal income taxes withheld from an individual's pay? a. filing status b. type of earnings c. gross pay d. number of exemptions
Q:
if equal amounts are added to the numerator and the denominator of the current ratio and the ratio is over one, the ratio will always a.increase b.decrease c.stay the same d.equal zero
Q:
The journal entry for the issuance of a discounted note for the purpose of borrowing funds for the business is a. debit Cash and Interest Expense; credit Notes Payable b. debit Cash and Interest Payable; credit Notes Payable c. debit Accounts Payable; credit Notes Payable d. debit Notes Payable; credit Cash
Q:
a liquidity ratio measures the a.income or operating success of an enterprise over a period of time b.ability of the enterprise to survive over a long period of time c.short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash d.number of times interest is earned
Q:
Which of the following would be used to compute the federal income taxes to be withheld from an employee's earnings? a. FICA tax rate b. wage and tax statement c. FUTA tax rate d. wage bracket and withholding table
Q:
hunt company had $250,000 of current assets and $90,000 of current liabilities before borrowing $60,000 from the bank with a 3-month note payable. what effect did the borrowing transaction have on hunt company's current ratio? a.the ratio remained unchanged b.the change in the current ratio cannot be determined c.the ratio decreased d.the ratio increased
Q:
Thomas Martin receives an hourly wage rate of $40, with time-and-a-half pay for all hours worked in excess of 40 hours during a week. Payroll data for the current week are as follows: hours worked, 48; federal income tax withheld, $350; social security tax rate, 6.0%; and Medicare tax rate, 1.5%. What is the gross pay for Martin? a. $449 b. $1,730 c. $2,080 d. $1,581
Q:
the ratios that are used to determine a company's short-term debt paying ability are a.asset turnover, times interest earned, current ratio, and receivables turnover b.times interest earned, inventory turnover, current ratio, and receivables turnover c.times interest earned, receivables turnover ratio, current ratio, and inventory turnover d.current ratio, current debt coverage ratio, receivables turnover, and inventory turnover
Q:
The journal entry a company uses for partially funded pension rights for its salaried employees at the end of the year is a. debit Salaries Expense; credit Cash b. debit Pension Expense; credit Unfunded Pension Liability c. debit Pension Expense; credit Unfunded Pension Liability and Cash d. debit Pension Expense; credit Cash