WEEK8 Final Exam Part 1


(TCO A) An advantage of the corporate form of business is  

 it is simple to establish

the corporate tax rate is less than the personal tax rate

corporations must pay dividends

the shareholders are not responsible for the corporation’s debts



2. (TCO A) Dividends flow through which one of the following statements?

The Balance Sheet

The Statement of Retained Earnings

The Income Statement

None of the above


3. (TCOs A, B) Below is a partial list of account balances for LBJ Company:



Prepaid rent


Accounts receivable


Accounts payable


Notes payable


Common stock








What did LBJ Company show as total credits?


4. (TCOs B, E) Which of the following statements is correct with regard to accrual accounting?

Accrual accounting is consistent with the matching principle.

Accrual accounting is less complex than the cash-basis method.

Accrual accounting does not record expenses until paid.

Accrual accounting does not record revenue until payment is received.


5. (TCO D) Three different companies each utilize a different inventory costing method. If the price of goods has increased during the period, then the company using _____.


FIFO will have the highest ending inventory

FIFO will have the highest cost of goods sold

LIFO will have the lowest cost of goods sold

LIFO will have the highest ending inventory


6. (TCOs A, E) Equipment was purchased for $85,000. Freight charges amounted to $2,550 and there was a cost of $10,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $5,000 salvage value at the end of its 6-year useful life. Depreciation expense each year using the straight-line method will be _____.



7. (TCOs D, G) When the market rate of interest is equal to the stated rate of interest on the bond, the bond will require _____.


a debit to Discount on Bonds Payable

a credit to Discount on Bonds Payable

a credit to Bonds Payable

a debit to Bonds Payable


8. (TCO C) Accounts receivable arising from sales to customers amounted to $90,000 and $80,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $200,000. Based on these transactions, the cash flows from operating activities to be reported on the statement of cash flows would be _____



9. (TCO F) Which one of the following tools uses the percentage change formula to make year-over-year comparisons of sales growth?

Horizontal analysis

Common-size analysis

Vertical analysis

Ratio analysis


10. (TCO F) Vertical analysis is also known as _____.

ratio analysis

linear analysis

common-size analysis

linear analysis


11. (TCO F) Which one of the following is typically analyzed via financial statement ratio analysis?


The design of a new product

The internal control failure rate

The leverage of the firm

The effectiveness of a marketing campaign


12. (TCO F) A common ratio to measure liquidity is the _____.

rate of return on stockholders’ equity

debt ratio

quick (acid-test) ratio

times-interest-earned ratio


13. (TCO F) The rate of return on common stockholder's equity ratio is NOT affected by

dividends paid to preferred stockholders

net income

dividends paid to common stockholders

average common stockholders’ equity


14. (TCO G) To calculate the market value of a bond, we need to (Points : 5)

multiply the stated rate times the bond’s face value

calculate the present value of the principal only

calculate the present value of both the principal and the interest


calculate the present value of the interest only

    • Posted: 4 years ago
    WEEK8 Final Exam Part 1

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