level production and inventory buildup.

1) Companies that are mostly influenced by seasonal sales have to make a choice between
A) level production and inventory buildup.
B) seasonal production and an uneven workforce.
C) a stable workforce and a fluctuating workforce.
D) All of the above

2) The Jersey Corporation has 70% of its capital structure in the form of equity capital. $150,000 in capital needs to be raised for a project but only $30,000 in funds is available through retained earnings. How much must be raised through common stock to maintain Jersey Corporation’s capital structure?
A) $105,000
B) $75,000
C) $120,000
D) $21,000

3) If sales volume exceeds the break-even point, the firm will experience
A) an operating loss.
B) an operating profit.
C) an increase in plant and equipment.
D) an increase in stock price.

4) Firms that successfully increase their rates of inventory turnover will, among other things,
A) be able to reduce their borrowing needs.
B) be able to reduce their dividend payments to stockholders.
C) find it more difficult to be given credit by their resource suppliers.
D) have a greater need for high balances in their cash accounts.

1. On the Statement of Cash Flows, payments to purchase bonds and stocks of other companies are reported in the
operating activities section.
investing activities section.
financing activities section.
schedule of noncash investing and financing activities

2. On the Statement of Cash Flows, payments to lenders for interest are reported in the
operating activities section.
investing activities section.
financing activities section.
schedule of noncash investing and financing activities

3. When doing a horizontal analysis of Net Income for 2003, 2004, 2005, 2006, and 2007, the 2006 Net Income dollar amount is divided by the
2007 Net Income dollar amount.
2006 Net Income dollar amount.
2003 Net Income dollar amount.
an average dollar amount calculated using all five years

4. A decrease in stockholders’ equity as a result of operating a business isinvestment.
revenue.
expense.
dividends.
Investors are

1. Earnings per share shows
each common share’s piece of revenue.
each common share’s piece of net income.
each common share’s piece of stockholders’ equity.
each common share’s piece of retained earnings

2. At the end of the accounting period, the balances of which types of accounts are carried over to the next accounting period?
revenue, liability, and dividend
asset, expense, and dividend
revenue, expense, and dividend
asset, liability, and stockholders’ equity

3. Holmes Company sold merchandise on account. The retail price was $10,000; the cost of the merchandise was $8,000. The journal entry to record this transaction is
debit Accounts Receivable $8,000; credit Sales Revenue $8,000; and debit Cost of Goods Sold $10,000; credit Merchandise Inventory $10,000.
debit Accounts Receivable $10,000; credit Sales Revenue $10,000; and debit Cost of Goods Sold $8,000; credit Merchandise Inventory $8,000.
debit Sales Revenue $8,000; credit Accounts Receivable $8,000; and dedit Merchandise Inventory $10,000; credit Cost of Goods Sold $10,000.
debit Sales Revenue $10,000; credit Accounts Receivable $10,000; and debit Merchandise Inventory $8,000; credit Cost of Goods Sold $8,000.
Holmes Company received payment from a customer within the discount period; the payment terms of the sale were 2/10, n/30.

4. The journal entry to record this transaction is
debit Accounts Receivable $9,800; debit Sales Discounts $200; credit Cash $10,000.
debit Cash $10,000; credit Sales Discounts $200; credit Accounts Receivable $9,800.
debit Accounts Receivable $10,000; credit Cash $9,800: credit Sales Discounts $200.
debit Cash $9,800; debit Sales Discounts $200; credit Accounts Receivable $10,000

1. Use the following data for the question.
Jan 01 Beginning Inventory 100 units at $5 per unit Total: $500
Jan 03 Purchase 50 units at $6 per unit Total: $300
Jan 10 Purchase 80 units at $7 per unit Total: $560
Jan 17 Purchase 30 units at $8 per unit Total: $240
Goods Available for Sale 260 units Total: $1,600
Jan 24 Sale 220 units
The Jan 24 sale consisted of 100 units from the beginning inventory, 40 units from the Jan 3 purchase, 60 units from the Jan 10 purchase, and 20 units from the Jan 17 purchase.
Using Specific Identification, the ending Inventory valuation is
$200.
$246.
$280.
$310.

2. The Receivables Turnover Ratio shows
the number of times the company borrows money during the year.
the number of times receivables are collected during the year.
the number of times the company sells its inventory during the year.
the number of time the company trades in equipment during the year.

3. Revenue expenditures are debited to a(n)
asset account.
stockholders’ equity account.
revenue account.
expense account

4. Which depreciation method is used for financial statement purposes if you expect the asset’s usefulness to vary from one period to another period?
straight line
units of activity
declining balance

1. You are the owner of a construction company. You want your Return on Assets Ratio to be
high.
low

2. Capital expenditures are usually debited to a(n)
asset account.
stockholders’ equity account.
revenue account.
expense account.

3. Term bonds are
bonds that mature in installments.
bonds that have a single maturity date for all bonds in the bond issue.
bonds issued against the general credit of the borrower.
bonds that have specific assets of the issuer pledged as collateral

4. Secured bonds are
bonds that mature in installments.
bonds that have a single maturity date for all bonds in the bond issue.
bonds issued against the general credit of the borrower.
bonds that have specific assets of the issuer pledged as collateral