Accounting 201Chapter 12 Practice Test Flashcards Preview

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Flashcards in Accounting 201Chapter 12 Practice Test Deck (10):
1

Which of the following ratios is more useful in evaluating solvency?
A) Receivables turnover ratio.
B) Debt to equity ratio.
C) Current ratio.
D) Inventory turnover ratio.

B

2

A loss from discontinued operations is reported
A) As an operating expense.
B) As part of other revenues and expenses.
C) Before income tax expense.
D) Below income from continuing operations.

D

3

Which of the following qualifies as an extraordinary item?
A) Damage from a summer storm. Storms of this nature occur occasionally.
B) Damage from a warehouse fire.
C) A loss from a lawsuit.
D) A penalty payable to the IRS.

B

4

The Pernell Company reports net sales of $2 million, cost of goods sold of $1 million, operating expenses of $500,000, and other revenues and expenses of $100,000. Pernell Company's gross profit ratio is:
A) 50%.
B) 25%.
C) 100%.
D) 5%.

A

5

If a company's sales revenue and cost of goods sold increase by a higher percentage than its inventory balances, inventory turnover will:
A) Increase.
B) Decrease.
C) Remain the same.
D) Increase or decrease depending on whether the inventory is purchases on account or for cash.

A

6

Neuman Corporation reports net income of $250,000, sales revenue of $24 million, and average assets of 3 million. The asset turnover is:
A) 12 times.
B) 8 times.
C) 1.5 times.
D) 0.8 times.

B

7

Which of the following is an example of conservative accounting?
A) Adjusting the allowance for uncollectible accounts to a smaller amount.
B) Recording inventory at lower of cost or market.
C) Changing to a longer useful life for depreciating a long-lived asset.
D) Recording the lowest possible warranty expense.

B

8

Which of the following is classified as a liquidity ratio?
A) Inventory turnover ratio.
B) Gross profit ratio.
C) Profit margin.
D) Debt to equity ratio.

A

9

The times interest earned ratio is classified as an indicator of a company's:
A) Liquidity.
B) Profitability.
C) Solvency.
D) Long-term survival.

C

10

Growth stocks tend to have relatively
A) High P/E ratios.
B) Low P/E ratios.
C) Constant P/E ratios.
D) Negative P/E ratios.

A