1. The Rupert Company leased a machine at the beginning of 2010. The machine, which had cost the lessor $85,000, was properly capitalized by Rupert at $73,734.84. A lease payment of $16,563 is due at the end of each year. The expected life of the machine is seven years, and the term of the lease is five years. At the beginning of 2015, the machine will be returned to the lessor. Both Rupert and the lessor use the straight-line method of depreciation. What amount of depreciation expense should Rupert record in 2010 for the machine (round calculations up to the nearest dollar)?

a) $14,600

b) $14,747

c) $16,563

d) $17,000

2. An auditor issues an audit report that expresses three opinions. Which of the following is not one of those opinions?

a) Whether management's assessment of the company's internal control over its financial reporting is appropriate

b) Whether management's assessment that the financial statements are based upon the proper use of GAAP

c) Whether the company maintained effective internal control over its financial reporting

d) Whether the company's financial statements present fairly the results of operations and cash flows in conformity with GAAP

3. An operating segment is a reportable segment if it

a) Satisfies the revenue test, profit test, and asset test

b) Satisfies the revenue test, profit test, or asset test

c) Operates predominately within a single industry

d) Satisfies the net income test

4. Which one of the following ratios is a test of a company's short-term debt-paying ability?

a) Profit margin

b) Price/earnings

c) Acid-test (quick ratio)

d) Times interest earned

5. Given the following information:

Inventory................................................................... $500

Short-term marketable securities................................100

Cash...........................................................................200

Prepaid insurance.....................................................300

Accounts receivable..................................................400

Current liabiliti...........................................................400

What is the acid- test ratio?

a) 0.75 times

b) 1.75 times

c) 2.50 times

d) 3.75 times

6. Given the following information:

Preferred dividends.....................................................$ 50

Income taxes..............................................................$200

Average number of shares outstanding...........250 shares

Market price per common share.................................$ 10

Net income.................................................................$600

What is the price/earnings ratio?

a) 3.3 times

b)2.9 times

c) 3.8 times

d) 4.5 times

7. Based upon the following information, which company has the best collection policy?

Company A...........................................30.4 days

Company B...........................................29.8 days

Company C............................................2.2 times

a) Company A

b) Company B

c) Company C

d) Not enough information is available to determine the answer.

8. Monroe Company reported the following information for the year ended December 31, 2010:

Net income........................................................................$ 600,000

Preferred dividends declared and paid..................................60,000

Common dividends declared and paid..................................80,000

Average common shares outstanding...................................90,000

Ending market price per share.....................................................40

Net sales..........................................................................4,100,000

Monroe's earnings per share for 2010 was

a) $6.67

b) $6.00

c) $5.11

d) $0.15

Answer rating: 100% (QA)

1 b 14747 2 c Whether the company maintained e... View the full answer