Chapter 16 - Multiple Choice - principlesofaccounting.com

1. Question

Zhang Corporation had net income of $100,000, paid income taxes of $30,000, and had interest expense of $8,000. What was Zhang’s times interest earned ratio?

12.5
16.25
17.25
17.85

2. Question

Selected information for 20X1 for the Bernstein Company is as follows:

Cost of goods sold

$6,000,000

Average inventory

$2,000,000

Net sales

$8,000,000

Average receivables

$3,000,000

Net income

$1,000,000

Assuming a 360-day business year, what was the inventory turnover ratio for Bernstein?

3
4
5
6

3. Question

Thompson Corporation wrote off a $200 uncollectible account receivable against the $2,400 balance in its Allowance for Bad Debts account. Compare the current ratio before the write-off (X) with the current ratio after the write-off (Y).

X greater than Y
X equals Y
X less than Y
Cannot be determined

4. Question

Ames Corporation’s net accounts receivable were $750,000 on December 31, 20X1, and $1,250,000 on December 31, 20X2. Net cash sales for 20X2 were $3,300,000. The accounts receivable turnover ratio for 20X2 was 16. What were the total net sales for 20X2?

$12,800,000
$16,000,000
$16,100,000
$19,300,000

5. Question

Which of the following activities would generally be regarded as a financing activity in preparing a statement of cash flows?

Dividend distribution
Proceeds from the sale of stocks of other firms
Loans made by the entity to other businesses
Employees' salaries and wages paid

6. Question

For purposes of calculating cash receipts from customers, which of the following adjustments should be made to convert accrual basis sales to cash basis sales?

Add an increase in accounts receivable to accrual basis sales
Subtract an increase in accounts receivable from accrual basis sales
Add cash in bank to accrual basis sales
Add the change in cash to the accrual basis sales

7. Question

If the indirect approach to the statement of cash flows is presented, which of the following items should be subtracted from accrual basis net income to derive cash flow from operating activities?

Gains on the sale of long-term investments
Losses on the sale of long-term investments
Depreciation expense
Amortization expense

8. Question

As a generalization, the adjustment of accrual basis income to cash provided by operating activities requires which of the following to be added?

Increases in current assets related to operating activities
Increases in current liabilities related to operating activities
Decreases in current liabilities related to operating activities
Both (a) and (c) are correct

9. Question

Wilkin Corporation reported accrual basis sales of $200,000, cost of goods sold of $80,000, and operating expenses, taxes, and interest summing to $30,000. In evaluating Wilkin’s comparative balance sheets, it is determined that accounts receivable increased $10,000, inventory increased $5,000, and accounts payable decreased $7,000. There were no changes in prepaid expenses nor were there any interest or taxes payable at the beginning or end of the year. How much was cash basis income for Wilkin Corporation for the year?

$68,000
$82,000
$105,000
$112,000

10. Question

Dixon Corporation reported 20X1 accrual basis net income of $50,000. Relevant information to adjust accrual basis income to cash basis income follows.

Depreciation expense

$12,000

Loss on the sale of land

16,000

Increase in accounts receivable

8,000

Decrease in merchandise inventory

4,000

Increase in accounts payable

3,000

Increase in taxes payable

2,000

How much is net cash provided by operating activities?

$47,000
$49,000
$51,000
$79,000

11. Question

In preparing a work sheet for the statement of cash flows, the lower portion corresponds to a statement of cash flows prepared using the indirect method. Items in the debit column of this lower portion most closely correspond to items which:

Explain increases in cash.
Explain decreases in cash.
Relate to financing activities.
Relate to investing activities.

Chapter 16 - Multiple Choice

Chapter 16 – Multiple Choice

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