20. Which of the following represents the largest number of common shares?
a. Treasury shares
b. Issued shares
c. Outstanding shares
d. Authorized shares
21. Treasury stock is
a. stock issued by the U.S. Treasury Department.
b. stock purchased by a corporation and held as an investment in its treasury.
c. corporate stock issued by the treasurer of a company.
d. a corporation's own stock which has been reacquired but not canceled.
22. King Corporation makes a short-term investment in 300 shares of Renfro Company's common stock. The stock is purchased for $30 a share plus brokerage fees of $400. The entry for the purchase is
a. Debt Investments 9,000
Cash 9,000
b. Stock Investments 9,400
Cash 9,400
c. Stock Investments 9,000
Brokerage Fee Expense . 400
Cash 9,400
d. Stock Investments 9,000
Cash 9,000
23. Baden Corporation sells 200 shares of common stock being held as a short-term investment. The shares were acquired six months ago at a cost of $50 a share. Baden sold the shares for $45 a share. The entry to record the sale is
a. Cash 9,000
Loss on Sale of Stock Investments 1,000
Stock Investments 10,000
b. Cash 10,000
Gain on Sale of Stock Investments 1,000
Stock Investments 9,000
c. Cash 9,000
Stock Investments 9,000
d. Stock Investments 9,000
Loss on Sale of Stock Investments 1,000
Cash 10,000
24. Short-term investments are listed on the balance sheet immediately below
a. cash.
b. inventory.
c. accounts receivable.
d. prepaid expenses.
25. The statement of cash flows
a. must be prepared on a daily basis.
b. summarizes the operating, financing, and investing activities of an entity.
c. is another name for the income statement.
d. is a special section of the income statement.
26. Which one of the following items is not generally used in preparing a statement of cash flows?
a. Adjusted trial balance
b. Comparative balance sheets
c. Current income statement
d. Additional information
27. The primary purpose of the statement of cash flows is to
a. provide information about the investing and financing activities during a period.
b. prove that revenues exceed expenses if there is a net income.
c. provide information about the cash receipts and cash payments during a period.
d. facilitate banking relationships.
28. Financing activities involve
a. lending money.
b. acquiring investments.
c. issuing debt.
d. acquiring long-lived assets.
29. The category that is generally considered to be the best measure of a company's ability to continue as a going concern is
a. cash flows from operating activities.
b. cash flows from investing activities.
c. cash flows from financing activities.
d. usually different from year to year.
30. Meyer Company reported net income of $40,000 for the year. During the year, accounts receivable increased by $14,000, accounts payable decreased by $6,000 and depreciation expense of $10,000 was recorded. Net cash provided by operating activities for the year is
a. $30,000.
b. $70,000.
c. $38,000.
d. $40,000.
31. Which of the following would be subtracted from net income using the indirect method?
a. Depreciation expense
b. An increase in accounts receivable
c. An increase in accounts payable
d. A decrease in prepaid expenses
32. The current cash debt coverage ratio is used to evaluate
a. solvency.
b. profitability.
c. liquidity.
d. earning power.
33. Assume the following sales data for a company:
2004 $1,200,000
2003 1,020,000
2002 840,000
2001 600,000
If 2001 is the base year, what is the percentage increase in sales from 2001 to 2003?
a. 100%
b. 160%
c. 70%
d. 62.5%
34. Profit margin is calculated by dividing
a. sales by cost of goods sold.
b. gross profit by net sales.
c. net income by stockholders' equity.
d. net income by net sales.