Assignment 10 —  20 Multiple choice


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 1)   If current assets were $100,000 in 20×7 and $88,000 in 20×8, what was the amount of increase of decrease?

a)   The percentage increase was  13.64%

b)   The percentage decrease was 12%

c)   The percentage decrease was 13%64%

d)   The percentage increase was 12%


2)   A maintenance department would be an example of a

a)   Cost center.

b)   Direct expense.

c)   Profit center.

d)   None of the above


3)   An example of a cost center is

a)   A Holiday Inn.

b)   The restaurant in a hotel.

c)   The administrative department in a hotel

d)   The catering department in a hotel.


4)   If total assets are $6,000, what is the vertical analysis for Cash when it has a balance of $2,400?

a)   40%

b)   60%

c)   250%

d)   25%


5)   When preparing an income statement showing departmental contribution margin,

a)   Indirect expenses are combined with direct expenses.

b)   Indirect departmental expenses are added to contribution margin.

c)   Direct expenses are subtracted from contribution margin on sales.

d)   None of the above


6)   Direct expenses are expenses that

a)   Can be identified with a specific department.

b)   Can’t be identified with a specific department.

c)   Can be identified with more than one department.

d)   None of the above


7)   If management wishes to evaluate the ability of a business to provide funding to cover operating expenses, they could use the

a)   Rate of return on total assets.

b)   Rate of return on common stockholders’ equity.

c)   Gross profit rate.

d)   Times interest earned.


8)   When a company tracks gross profit by department, the sales journal will

a)   Not differ from a company that doesn’t track gross profit by department.

b)   Have a separate column for accounts receivable for each department.

c)   Have a separate column for sales for each department.

d)   Have a column for purchases for each department.


9)   Scott Company had a current ratio of 2.76:1 in Year 1 and 2.57:1 in Year 2. This change in current ration indicates that the

a)   Company’s debt-paying ability has improved.

b)   Company’s debt-paying ability has weakened.

c)   Company’s customers are paying their accounts sooner.

d)   Company is able to sell its inventory faster.


10)The lower the times interest earned ratio, the more likely

a)   A default in payment will occur.

b)   A business will need to borrow money.

c)   A business will suffer a loss.

d)   Interest payments can be made.


11)Comparative reports in which each item is expressed as a percentage of a base amount without dollar amounts are called

a)   Comparative financial statements.

b)   Common-size statements.

c)   Cash flow analysis.

d)   Horizontal analysis.


12)Managerial accounting is primarily used for _____ , but financial accounting is used for ______

a)   Business decisions; external reports

b)   CEOs; stockholders

c)   Customers; tax reporting

d)   External reports; decision-making


13)Liquidity ratios measure

a)   How effectively a company is using its equity.

b)   How effectively a company is using it liabilities.

c)   A company’s ability to pay shareholders.

d)   A company’s ability to pay off short-term debts.


14)What is the purpose of determining the contribution margin?

a)   To show the contribution by a department toward covering indirect costs

b)   To help determine whether to eliminate a department

c)   To show the effect on net income of each department

d)   All of the above


15)What was the percentage of decrease in the Accounts Receivable account if the receivables were $80,000 in Year 1 and $60,000 in Year 2?

a)   (25%)

b)   33.33%

c)   (33.33%)

d)   25%


16)Noble Company’s accounts receivable turnover was 18.2 in Year 1 and 24.6 in Year 2. This change in accounts receivable turnover indicates that the

a)   Company isn’t selling its inventory as fast.

b)   Company is selling its inventory faster.

c)   Company’s customers are paying faster.

d)   Company’s customers are paying slower.


17)If Cash is $2,345 in 20×2 and $3,671 in 20×1, what is the percentage of increase or (decrease) from 20×1 to 20×2?

a)   56.55%

b)   (56.55%)

c)   36.12%

d)   (36.12%)


18) To determine how each profit center is performing, management would analyze the

a)   Income tax rate.

b)   Indirect expenses.

c)   Gross profit for each profit center.

d)   Other expenses.


19)Debt management ratios measure

a)   How effectively a company is using its cash.

b)   How well a company is using debt versus equity position.

c)   A company’s ability to earn profit.

d)   A company’s ability to meet payable obligations


20) In a comparative balance sheet, the ending Cash was $315,000 in 2011 and $270,000 in 2012. The net increase or decrease from 2011 to 2012 is

a)   86.0%.

b)   14.3%.

c)   26.4%.


d)   16.7%.

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