January 31st, 2010 | 
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Which of the following would be an external user of accounting information?
a. chief executive officer
b. vice president of finance
c. bank loan officer
d. chief financial officer
2. What is the characteristic that allows financial statement users to compare information over time?
a. reliability
b. relevance
c. consistency
d. comparability
3. Auditors are responsible for
a. preparing a company’s financial statements in accordance with GAAP
b. preparing a company’s earnings forecast in accordance with GAAP
c. determining whether a company prepared its financial statements in accordance with GAAP
d. determining whether their clients prepared their financial statements accurately
4. Companies acquire and sell property and equipment as a result of which business activity?
a. financing
b. investing
c. operating
d. auditing
5. Ace Co. has total assets in the amount of $3,000,000 and total liabilities in the amount of $2,000,000. It sold stock to new shareholders for cash of $1,000,000. As a result of this transaction:
a. the debt to assets ratio will increase
b. the assets turnover ratio will increase
c. the debt to assets ratio will decrease
d. the net profit margin ratio will decrease
6. The following information is available for Aztech:
Total assets $800,000
Net Income 120,000
Average total liabilities 400,000
Sales revenue 1,500,000
Total liabilities 500,000
Average total assets 700,000
The net profit margin ratio is
a. 8%
b. 12.5%
c. 15%
d. 17.1%
7. North Co. understated its expenses for the year. As a result
a. its debt to assets ratio will be understated
b. its net profit margin ratio will be understated
c. its debt to assets ratio will be overstated
d. its net profit margin ratio will be overstated
8. Which of the following results in an expense for a company?
a. purchase of land
b. payment of advertising for last month
c. payment of a dividend
d. purchase of supplies
9. Which of the situations results in unearned revenue?
a. collection of $100 from a customer who charged the purchase of goods a month ago
b. the receipt of an order from a customer who will purchase and pay for goods in two weeks
c. the sale of $100 of goods today with the payment due from the customer in 30 days
d. the receipt of $100 cash from a customer for an order of goods to be shipped next month
10. Which of the following is a stockholders’ equity item?
a. contributed capital
b. cash
c. accounts receivable
d. accounts payable
11. Which of the following items will reduce stockholders’ equity?
a. the purchase of equipment
b. the purchase of supplies
c. receiving a loan
d. the payment of salaries
12. If a company does not receive cash until after it delivers goods
a. it must wait to receive cash until it can record revenue
b. it must record unearned revenue at the time it delivers goods
c. it must record revenue at the time it delivers the goods
d. it must increase the amount of accounts receivable at the time it gets paid by its customer
13. Dividends paid to stockholders
a. are a reduction to retained earnings
b. appear in the cash flow from operations section of the statement of cash flows
c. appear on the income statement
d. are subtracted from contributed capital
14. Net income is
a. assets minus liabilities
b. revenues minus expenses
c. contributed capital minus dividends
d. stockholders’ equity minus liabilities
15. Which of the following statements is prepared as of a point in time?
a. income statement
b. statement of retained earnings
c. balance sheet
d. statement of cash flows
16. The Hamlet Corp has assets of $20,000, and stockholders’ equity of $12,000. The amount of liabilities is
a. $8,000
b. 12,000
c. 20,000
d. 32,000
17. Which of the following would appear in the cash flow from operations section of the statement of cash flows
a. cash paid to suppliers and employees
b. cash paid to purchase equipment
c. cash paid on notes payable
d. cash paid
Frida Hainley
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