Incomplete Submission A company had total assets of $10,900 at the start of the year 2011. The following additional information has been taken from the records:
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What is the debt-to-assets ratio for 2011 and 2012?
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Option A
Option B
Option C
Option D
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1. Purrfect Pets has a debt-to-assets ratio of 0.55. This means that:
A) stockholders' equity is 55% of total assets.
B) stockholders' equity is 45% of total assets.
C) the asset turnover ratio also is 0.55.
D) the asset turnover ratio also is 0.45.
2. A retail clothing company began operations in 2011 with assets of $42,000 and ended the year with assets of $51,618. The following additional data have been taken from the records as of December 31, 2011 and for the year 2011:
All accounts have normal balances.
What is the asset turnover ratio for 2011?
A) 3.80
B) 4.67
C) 4.19
D) 3.23
3. A company had total assets of $10,900 at the start of the year 2011. The following additional information has been taken from the records:
What is the asset turnover for 2012?
A) .124
B) .076
C) .071
D) .133
4. A company has net income of $148,000 and a net profit margin ratio of .087.
Which of the following is not a true statement?
A) A net profit margin ratio of .087 means that 8.7 cents of profit or net income is made for each dollar of sales.
B) The amount of sales revenue for this period is $1,700,000 (rounded to the nearest whole number).
C) A higher net profit margin ratio this year than last year indicates an improvement in controlling expenses.
D) If income from operations is less than net income, this means that the company had no non-operating revenue.
5. If a publicly traded company is trying to maximize its perceived performance, as reported to decisions makers external to the corporation, the company is most likely to understate which of the following on its balance sheet?
A) Assets.
B) Liabilities.
C) Retained earnings.
D) Contributed capital.
6. Accounting information serves a contracting function when it is used by:
A) creditors to manage financial agreements.
B) government officials to regulate the business and its financial records.
C) analysts to assess business risks.
D) investors to vote on company policies.
7. Which of the following misstatements would cause the debt-to-assets ratio to be overstated?
A) Capitalizing costs that should have been expensed.
B) Failing to adjust for depreciation in the current period.
C) Failing to accrue income taxes of the current period.
D) Failing to accrue interest earned of the current period.
8. Which of the following accurately describes how the collection of cash on account from a customer would affect the ratios indicated?
A) Option A
B) Option B
C) Option C
D) Option D
9. Two of the most common areas in the financial data of public corporations that have led to misrepresentation, or at least misunderstanding, are:
A) unrealistic estimates and areas where alternative accounting rules exist.
B) outright fraud and data entry error.
C) a lack of auditing and unrealistic estimates.
D) outright fraud and a lack of auditing.
10. External audits are conducted by Certified Public Accountants (CPAs) who are not independent of the company.
A) True
B) False
11. Which of the following describes the order in which the financial reports or disclosures would normally be issued by public companies?
A) (1) annual report, (2) Form 10-K, (3) Press release announcing annual earnings.
B) (1) Form 10-K, (2) annual report, (3) Press release announcing annual earnings.
C) (1) Press release announcing annual earnings, (2) Form 10-K, (3) annual report.
D) (1) Press release announcing annual earnings, (2) annual report, (3) Form 10-K.
12. The incentive element of the fraud triangle includes reasons why top management may commit fraud such as enhancing job security and obtaining bigger paychecks.
A) True
B) False
13. As of the beginning of 2012 a company had total contributed capital of $300,000 and total retained earnings of $35,000. Total liabilities were $100,000. During the year 2012, the company had the following transactions:
- Issued stock for cash of $60,000.
- Declared and paid a cash dividend of $15,000.
- Reported total revenue of $160,000 and total expenses of $90,000.
What is the amount of contributed capital that will be reported on the Statement of Stockholders' equity at the end of 2012?
A) $300,000
B) $360,000
C) $352,000
D) $365,000
14. Further information about financial data, accounting methods, and financial statements is included in what part of the annual report?
A) The balance sheet.
B) The unaudited condensed quarterly data.
C) The notes to the financial statements.
D) The summarized financial data.
15. Which of the following accurately describes how recording depreciation for an existing building would affect the ratios indicated?
A) Option A
B) Option B
C) Option C
D) Option D
16. Which of the following is true of a company's quarterly report?
A) Contains the same detail as is found in the annual report.
B) Is an audited report.
C) Does not include any discussion of financial results.
D) Has the benefit of being released on a timelier basis.
17. Companies may adopt a Code of Ethics for some of their financial officers, but this is not required by the Sarbanes-Oxley Act (SOX).
A) True
B) False
18. When auditors conclude that a company's financial statements conform to GAAP, the audit report is said to be:
A) validated.
B) qualified.
C) relevant.
D) unqualified.
19. Condensed financial statements in the quarterly reports are usually audited to ensure that GAAP were followed.
A) True
B) False
20. A retail clothing company began operations in 2011 with assets of $42,000 and ended the year with assets of $51,618. The following additional data have been taken from the records as of December 31, 2011 and for the year 2011:
All accounts have normal balances.
What is the net profit margin ratio for 2011?
A) .068
B) .059
C) .104
D) .078