MULTIPLE CHOICE

40. ratios that test liquidity include all except:

A. inventory turnover

B. acid-test ratio

C. return on assets

D. current ratio

46. If stock is issued for an asset other than cash, the asset should be recorded on the books of the corporation at:

A. fair market value of the asset

B. Par value of the asset

C. book value of the asset

D. fair value of the stock minus the par value of the stock

48. A debtor and a creditor record the same not, respectively, as a:

A. note receivable and note payable

B. note payable and note receivable

C. note receivable and account receivable

D. note payable and account payable

49. A company's balance sheet:

A. lists liabilities before assets

B. has two main categories of liabilities

C. is dated for a period of time

D. has three main categories of assets

50. following the expense recognition principle, recognizing expenses along with related revenues means to:

A. abandon the matching principle

B. add all the expenses paid during the period and call it a net loss

C. add expenses and revenues together to compute net income or net loss

D. subtract expenses from the related revenues to compute net income or net loss

51. A disadvantage of using bonds instead of stock as a method of long-term financing is that with bonds:

A. interest expense is tax deductible

B. issuing bonds results in higher earnings per share than issuing common stock

C. interest must be paid regardless of the level of earnings

D. bonds do not dilute stockholders' proportionate ownership

57. With an accrual of revenue:

A. the cash is paid before the expense is recorded

B. plant assets can create an accrual adjustment

C. prepaid expenses can create an accrual adjustment

D. the cash is received after the revenue is recorded

60. On the statement of cash flows, financing activities involve:

A. lending money

B. issuing notes payable

C. purchasing investments

D. acquiring long-term assets

62. if ending inventory is understated for year 1, then in year 2:

A. cost of goods sold and gross profit will both be understated

B. cost of goods sold will be understated and gross profit will be overstated

C. cost of goods sold will be overstated and gross profit will be understated

D. cost of goods sold and gross profit will both be overstated

66. notes payable due in 6 months are reported as:

A. current assets on the balance sheet

B. long-term liabilities on the balance sheet

C. current liabilities on the balance sheet

D. a reduction to notes receivable on the balance sheet

74. When preparing the financial statements, why is the income statement prepared first?

A. the income statement is used to prepare the balance sheet

B. net income or net loss from the income statement is used for the statement of retained earnings

C. the income statement is easiest to prepare

D. the income statement is the most important statement to investors and creditors