Multiple Choice questions on basics of balance sheet and income statement.
1. Which of the following equations is not true?
a. Assets = Liabilities - Stockholders\' Equity
b. Assets = Liabilities + Stockholders\' Equity
c. Assets - Stockholders\' Equity = Liabilities
d. Assets - Liabilities = Stockholders\' Equity
e. Assets - Liabilities - Stockholders\' Equity = Zero
2. An incomplete balance sheet for Software Square Company is presented below:
Software Square Company
Balance Sheet
March 31, 2002
Assets Liabilities and Stockholders\' Equity
Cash $ ? Notes payable $45,000
Accounts receivable 10,000
Building 50,000
Stockholders\' equity
Capital stock $ ?
Retained earnings 11,000
If the firm issued capital stock for cash in the amount of $70,000, then the cash on hand must be:
a. $65,000
b. $66,000
c. $70,000
d. $115,000
e. Cannot be determined from the above information.
3. Kenny Tieg Corporation had total assets of $200,000 and stockholders\' equity of $104,000 at the beginning of the year. During the year, assets increased by $26,000 and liabilities decreased by $41,000. Stockholders\' equity at the year\'s end totaled:
a. $185,000
b. $171,000
c. $169,000
d. $89,000
e. $67,000
4. The B-Bop Corporation began the current year with assets of $250,000 and liabilities of $170,000. During the year, stockholders\' equity increased by $50,000 and liabilities decreased by $20,000. Total assets
a. increased by $50,000.
b. increased by $30,000.
c. increased by $70,000.
d. decreased by $30,000.
e. decreased by $70,000.
5. The following transactions were extracted from the accounting records of Tyvall Corporation:
Borrowed $150,000 from a bank.
Collected $30,000 from a sale made in March.
Sold $35,000 in cash and $65,000 on account.
Tyvall\'s revenues for the month of April were:
a. $280,000
b. $215,000
c. $100,000
d. $130,000
e. $245,000
6. Comparing one firm\'s liquidity to another is best accomplished by comparing
a. working capital.
b. current ratio.
c. debt-to-asset ratio.
d. debt-to-equity ratio.
e. gross profit.
7. A firm\'s debt ratio is 60%. This means that
a. 40% of the assets were provided by shareholders.
b. 60% of the assets were provided by shareholders.
c. The firm has legal claims against only 40% of the assets.
d. The firm has legal claims against only 60% of the assets.
e. 60% of every sales dollar must be paid to the creditors.
8. Compute operating expenses using the following information:
Gross profit was $80,000
Income tax rate was 20%
Profit margin ratio was 5%
Gross profit ratio was 40%
a. $30,000
b. $70,000
c. $67,500
d. $20,000
e. $28,000
9. Possible asset categories on a balance sheet include all of the following except
a. property, plant, and equipment.
b. intangible assets.
c. retained earnings.
d. current assets.
e. long-term investments.
10. Accumulated depreciation would be shown under which of the following categories on a balance sheet?
a. current assets
b. current liabilities
c. long-term liabilities
d. property, plant, and equipment
e. stockholders\' equity