# Question: 1 Suppose a firm had an extraordinary loss of

1. Suppose a firm had an extraordinary loss of $ 300,000. If the firm’s tax rate is 35%, how will the loss be shown in the financial statements?

a. On the income statement, below income from operations, net of tax savings, for a net loss of $ 195,000

b. On the income statement as part of the calculation of income from operations, before taxes, for a loss of $ 300,000

c. As supplementary information in the notes to the financial statements

d. As a cash outflow from financing on the statement of cash flows

2. Current assets for Kearney Company are $ 120,000 and total assets are $ 600,000. Current liabilities are $ 80,000 and total liabilities are $ 300,000. What is the current ratio?

a. 2.00

b. 2.50

c. 1.90

d. 1.50

3. Ritchie Company sold some fixed assets for a gain of $ 100,000. The firm’s tax rate is 25%. How would Ritchie Company report this transaction on its financial statements?

a. On the income statement as part of the calculation of income from continuing operations, net of tax, in the amount of $ 75,000

b. As an extraordinary item, net of tax, in the amount of $ 75,000

c. As discontinued operations, net of tax, in the amount of $ 75,000

d. On the income statement as part of the calculation of income from continuing operations at the before tax amount of $ 100,000

4. Gerard Company reported sales of $ 300,000 for 2010; $ 330,000 for 2011; and $ 360,000 for 2012. If the company uses 2010 as the base year, what were the percentage increases for 2011 and 2012 compared to the base year?

a.10% for 2011 and 10% for 2012

b.120% for 2011 and 120% for 2012

c.110% for 2011 and 110% for 2012

d.10% for 2011 and 20% for 2012

5. On June 30, Star Radio reported total current assets of $ 45,000; total assets of $ 200,000; total cur-rent liabilities of $ 42,000; totalcur-rentliabilitiesof$42,000; and total liabilities of $ 80,000. What was the current ratio on this date?

a. 0.56

b. 2.50

c. 1.07

d. 0.93

6. Talking Puppet Company reported a P/ E ratio of 50 on the last day of the fiscal year. If the company reported earnings of $ 2.50 per share, how much was a share of the company’s stock trading for at that time?

a. $ 20 per share

b. $ 125 per share

c. $ 50 per share

d. $ 47.50 per share

7. Singleton Company had sales of $ 2,000,000, cost of sales of $ 1,200,000, and average inventory of $ 400,000. What was the company’s inventory turnover ratio for the period? a. 3.00

b. 4.00

c. 5.00

d. 0.33

8. Suppose a firm had an inventory turnover ratio of 20. Suppose the firm considers a year to be 360 days. How many days, on average, does an item remain in the inventory? a. 5.56 days

b. 18 days

c. 20 days

d. 360 days

9. Suppose a new company is trying to decide whether to use LIFO or FIFO in a period of rising inventory costs. The CFO suggests using LIFO because it will give a higher inventory turnover ratio. Is the CFO correct?

a. Yes, the average inventory will be lower (the ratio’s denominator) and the cost of goods sold (the ratio’s numerator) will be higher than if FIFO were used.

b. No, the average inventory would be the same because purchases are the same no matter which inventory method is chosen.

c. The inventory method has no effect on the inventory turnover ratio.

d. Without specific inventory amounts, it is not possible to predict the effect of the inventory method.

10. If a firm has $ 100,000 debt and $ 100,000 equity, then

a. The return on equity ratio is 1.

b. The debt- to- equity ratio is 1.

c. The return on assets ratio is 0.5.

d. The firm has too much debt.

a. On the income statement, below income from operations, net of tax savings, for a net loss of $ 195,000

b. On the income statement as part of the calculation of income from operations, before taxes, for a loss of $ 300,000

c. As supplementary information in the notes to the financial statements

d. As a cash outflow from financing on the statement of cash flows

2. Current assets for Kearney Company are $ 120,000 and total assets are $ 600,000. Current liabilities are $ 80,000 and total liabilities are $ 300,000. What is the current ratio?

a. 2.00

b. 2.50

c. 1.90

d. 1.50

3. Ritchie Company sold some fixed assets for a gain of $ 100,000. The firm’s tax rate is 25%. How would Ritchie Company report this transaction on its financial statements?

a. On the income statement as part of the calculation of income from continuing operations, net of tax, in the amount of $ 75,000

b. As an extraordinary item, net of tax, in the amount of $ 75,000

c. As discontinued operations, net of tax, in the amount of $ 75,000

d. On the income statement as part of the calculation of income from continuing operations at the before tax amount of $ 100,000

4. Gerard Company reported sales of $ 300,000 for 2010; $ 330,000 for 2011; and $ 360,000 for 2012. If the company uses 2010 as the base year, what were the percentage increases for 2011 and 2012 compared to the base year?

a.10% for 2011 and 10% for 2012

b.120% for 2011 and 120% for 2012

c.110% for 2011 and 110% for 2012

d.10% for 2011 and 20% for 2012

5. On June 30, Star Radio reported total current assets of $ 45,000; total assets of $ 200,000; total cur-rent liabilities of $ 42,000; totalcur-rentliabilitiesof$42,000; and total liabilities of $ 80,000. What was the current ratio on this date?

a. 0.56

b. 2.50

c. 1.07

d. 0.93

6. Talking Puppet Company reported a P/ E ratio of 50 on the last day of the fiscal year. If the company reported earnings of $ 2.50 per share, how much was a share of the company’s stock trading for at that time?

a. $ 20 per share

b. $ 125 per share

c. $ 50 per share

d. $ 47.50 per share

7. Singleton Company had sales of $ 2,000,000, cost of sales of $ 1,200,000, and average inventory of $ 400,000. What was the company’s inventory turnover ratio for the period? a. 3.00

b. 4.00

c. 5.00

d. 0.33

8. Suppose a firm had an inventory turnover ratio of 20. Suppose the firm considers a year to be 360 days. How many days, on average, does an item remain in the inventory? a. 5.56 days

b. 18 days

c. 20 days

d. 360 days

9. Suppose a new company is trying to decide whether to use LIFO or FIFO in a period of rising inventory costs. The CFO suggests using LIFO because it will give a higher inventory turnover ratio. Is the CFO correct?

a. Yes, the average inventory will be lower (the ratio’s denominator) and the cost of goods sold (the ratio’s numerator) will be higher than if FIFO were used.

b. No, the average inventory would be the same because purchases are the same no matter which inventory method is chosen.

c. The inventory method has no effect on the inventory turnover ratio.

d. Without specific inventory amounts, it is not possible to predict the effect of the inventory method.

10. If a firm has $ 100,000 debt and $ 100,000 equity, then

a. The return on equity ratio is 1.

b. The debt- to- equity ratio is 1.

c. The return on assets ratio is 0.5.

d. The firm has too much debt.

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