Questions -
Q1. How much would Kristen have to deposit in the bank at the end of each of the next five years if she wishes to have $5,000 in the bank at the end of that time period, assuming she will be earning 6% annual rate of return?
A) $887.
B) $943.
C) $1,000.
D) $1,187.
E) $5,000.
Q2. Calculation of the amount of the equal periodic payments that would be required at the end of each year to accumulate a $20,000 fund at the end of the tenth year is most readily determined by reference to a table that shows the
A) Future value of $1.
B) Present value of $1.
C) Future value of annuity of $1.
D) Present value of a single sum.
E) None of the above is correct.
Q3. Present value can be defined as the
A) Future amount of a sum of money held now.
B) Value today of future cash inflow(s).
C) Maturity value of a debt.
D) Sum of cash inflows over a future period of time.
E) Amount of debts owed as of the first interest payment date.
Q4. On January 1, 20A, Goldstein Company purchased a machine. The seller agreed that a total of $9,000 would be paid over a three-year period--$3,000 per year at the end of 20A, 20B, and 20C. At the time the machine was purchased, the market rate of interest was 10%. The amount that should be debited to the asset account, Machinery, on the date of purchase is (round to the nearest dollar)
A) $9,000.
B) $9,948.
C) $7,461.
D) $9,016.
E) None of the above is correct.
Q5. Genentech, a biotechnology company, reported current assets of $2,209 million and current liabilities of $652 million in 2001, and in 2000, current assets of $1,793 million and $453 million of current liabilities. Calculate the current ratio for 2001.
A) 3.39
B) 3.62
C) 3.96
D) 4.00
Q6. In 2000, Genentech reported a current ratio of 3.96 and in 2001 it was 3.39. In examining their balance sheet for 2001, they disclosed current assets of $2,209 million and current liabilities of $652 million. In 2000, they had no short-term borrowings but they disclosed $150 million in new short term borrowing for 2001. What would Genentech's current ratio have been in 2001 if they had not borrowed those funds?
A) 3.75
B) 4.40
C) 4.10
D) It cannot be computed without knowing the amount of current liabilities for 2000.
Q7. Current liabilities are short-term obligations that will be paid within the current operating cycle of the business or within one year of the balance sheet date, whichever is longer.
A) True
B) False
Q8. The payable turnover can indicate if a company is experiencing cash flow problems.
A) True
B) False
Q9. The "accounts payable" account should generally be used only for trade accounts payable (obligations owed to suppliers in the normal course of business) which relate to the purchase of goods and services.
A) True
B) False
Q10. Residual value is
A) Equal to the acquisition cost of a tangible operational asset.
B) The same as book value of an asset.
C) The amount expected to be recovered when an asset is disposed of at the end of its estimated useful life.
D) The current value of an asset as of the balance sheet date.
E) The total of depreciation accumulated to date.
Q11. A company decided to use the units of production method to calculate depreciation on a car to be driven by the sales manager. The amount of annual depreciation will vary with the
A) Age of the car.
B) Balance in accumulated depreciation.
C) Number of miles the car is driven.
D) Amount of maintenance expense incurred on the car.
E) Number of oil changes the car has.
Q12. On January 1, 20D, Haight, Inc., purchased a machine with a cash price of $18,000. Haight also paid $750 for transportation and installation. The expected useful life of the machine is 5 years and the residual value is $1,000. Assuming straight-line depreciation, the annual depreciation expense would be
A) $3,600.
B) $3,550.
C) $3,750.
D) $3,400.
E) None of the above is correct.
Q13. Downey Company bought a delivery truck for $62,000 on January 1, 20D. They installed a rear hydraulic lift for $8,000 and paid sales tax of $3,000. In addition, Downey paid $2,400 for a one-year insurance policy and $500 for registration fees. They estimate the useful life of the truck to be 10 years and its residual value to be $8,000.What amounts connected to the truck's acquisition should be expensed during 20D other than depreciation for the year?
A) $5,900
B) $13,900
C) $500
D) $2,900
Q14. Which of the following is true?
A) The book value at the end of an asset's useful life will be the same under all the depreciation methods allowed under GAAP.
B) The total depreciation in the accumulated depreciation account will be the same at the end of the asset's useful life under all the methods allowed under GAAP.
C) The annual depreciation expense will differ under the various depreciation methods.
D) Both A and B are true.
E) All of the above are true.
Q15. In which depreciation method is the first year's depreciation computed by applying the depreciation rate to the total cost of the asset (without reducing it for residual value)?
A) Straight-line.
B) Units-of-production.
C) Amortization.
D) Declining-balance.
E) None of the above are correct.
Q16. In 2001, Toys "R" Us reported net income of $404 million, interest expense of $127 million and income tax expense of $233 million therefore, its times interest earned ratio equals 5.02.
A) True
B) False