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# 1. Pattys Baker has cost of goods sold for the years 2011,

1. Patty's Baker has cost of goods sold for the years 2011, 2010, and 2009, respectively, of \$28,600,
\$26,900, and \$25,600. If 2009 is the base year, the trend percentage for 2011 is
A. 111.72%.
B. 5.08%.
C. 11.72%.
D. 105.08%.
2. Rick Company's net sales decreased from \$90,000 in year 1 to \$45,000 in year 2, and its cost of goods
sold decreased from \$30,000 in year 1 to \$20,000 in year 2. Vertical analysis based on sales would show
which decreases in cost of goods sold for the two periods (rounded to the nearest tenth of a percent)?
A. 33.3% and 44.4%
B. 44.4% and 33.3%
C. 225% and 300%
D. 300% and 225%
3. Tammy Corporation has 350,000 shares of \$3 par common stock outstanding. It has declared a 5%
stock dividend. The current market price of the common stock is \$7.50/share. The amount that will be
credited to common stock on the date of declaration is
A. \$78,750.
B. \$52,500.
C. \$131,250.
D. \$183,750.
4. Accounts receivable amounted to \$215,000 at the beginning of the year and \$245,000 at the end of the
year. Income reported on the income statement for the year was \$300,000. The cash flow from operating
activities on the cash flow statement using the indirect method is
A. \$330,000.
B. \$300,000.
C. \$315,000.
D. \$270,000.
5. Cost of goods sold for the year was \$850,000. Inventory was \$60,000 at the beginning of the year and
\$90,000 at the end of the year. There were no changes in the amount in accounts payable for the year.
Cash payment for merchandise to be reported under the direct method is
A. \$850,000.
B. \$940,000.
C. \$910,000.
D. \$880,000.
6. What is Jane's rate of return on total assets if average total assets are \$100,000; net income is \$2,000;
interest expense if \$1,600; and income tax is \$2,000?
A. 4.6%
B. 5.2%
C. 5.6%
D. 3.6%
7. Casey Company has a \$2,400 credit balance in Paid-In Capital— Treasury Stock. It sells 500 shares of
treasury stock that the company reacquired at \$21/share, for \$18/share. After the transaction, what will the
balance be in the Paid-In Capital in Excess of Par— Treasury account?
A. \$900 credit
B. \$3,900 credit
C. \$1,500 debit
D. \$900 debit
8. Birch issued 200 shares of \$12 par common stock in exchange for a piece of equipment with a current
market value of \$3,000. Which of the following is not part of the journal entry for this transaction?
A. Crediting Common Stock for \$3,000
B. Crediting Common Stock for \$2,400
C. Crediting Paid-in Capital in Excess of Par—Common for \$600
D. Debiting Equipment for \$3,000
9. Casey Company reported net income of \$35,000; depreciation expenses of \$20,000; an increase in
accounts payable of \$2,000; and an increase in current notes receivable of \$3,000. Net cash flows from
operating activities under the indirect method is
A. \$55,000.
B. \$56,000.
C. \$54,000.
D. \$50,000.
10. Brandon Company had extraordinary losses of \$150,000. If its corporate tax rate is 30%, at which
amount will the losses be shown on the income statement?
A. \$45,000
B. Not enough information is given to answer the question.
C. \$150,000
D. \$105,000
11. Casey Company has 5,000 shares of treasury cost that it purchased for \$13 per share. It later resold
2,000 of those shares for \$17 per share. The amount to be credited to Paid-in Capital—Treasury Stock is
A. \$30,000.
B. \$26,000.
C. \$8,000.
D. \$34,000.
12. Rick Company has declared a \$40,000 cash dividend to shareholders. The company has 5,000 shares
of \$20 par, 6% preferred stock, and 10,000 shares of \$15 par common stock. The preferred stock is
noncumulative. How much will be distributed to the preferred and common stockholders on the date of
payment?
A. \$34,000 preferred; \$6,000 common
B. \$40,000 preferred; \$0 common
C. \$6,000 preferred; \$34,000 common
D. \$0 preferred; \$40,000 common
13. What are the rate of return on stockholders' equity and the rate of return on common stockholders'
equity (rounded to the nearest one-tenth of a percent) given the following information:
Net Income \$350,000
Preferred Dividends 20,000
Common Stock 48,000
Common Stockholders’ Equity 1/1/2011 4,400,000
Total Stockholders’ Equity 1/1/2011 5,300,000
Total Stockholders’ Equity 12/31/2011 5,500,000
A. Return on Stockholders' Equity: 6.5 %; Return on Common Stockholders' Equity: 7.6%
B. Return on Stockholders' Equity: 8.1 %; Return on Common Stockholders' Equity: 9.2%
C. Return on Stockholders' Equity: 7.8 %; Return on Common Stockholders' Equity: 8.9%
D. Return on Stockholders' Equity: 5.6 %; Return on Common Stockholders' Equity: 6.7%
14. If Rick's net sales increased from \$40,000 to \$80,000 and its operating expenses increased from
\$30,000 to \$50,000, then vertical analysis based on net sales would show which of the following for
operating expenses for the two periods (to the nearest tenth of a percent)?
A. 75.0% and 62.5%
B. 133.3% and 160.0%
C. 62.5% and 75.0%
D. 160.0% and 133.3%
15. The Isaiah Corporation Stockholders' Equity section includes the following information:
Total par value of the preferred and common stock is
Preferred Stock \$22,000
Paid-in Capital in Excess of Par—Preferred 2,980
Common Stock 48,000
Paid-in Capital in Excess of Par—Common 3,400
Retained Earnings 7,350
A. \$76,380.
B. \$77,350.
C. \$83,730.
D. \$70,000.
16. Net sales at Kelly's Bakery increased from \$40,000 to \$60,000, and its cost of goods sold increased
from \$20,000 to \$40,000. Vertical analysis based on net sales would show which percentages for cost of
goods sold (rounded to the nearest %)?
A. 67% and 40%
B. 10% and 30%
C. 50% and 67%
D. 40% and 20%
17. Operating expenses—other than depreciation—for the year were \$335,000. Prepaid expenses
decreased by \$7,000. Cash payments for operating expenses to be reported on the cash flow statement
using the direct method would be
A. \$328,000.
B. \$7,000.
C. \$335,000.
D. \$342,000.
18. A company has \$56,000 in cash; \$12,000 in accounts receivable; \$25,000 in short-term investments;
and \$100,000 in merchandise inventory. The company also has \$60,000 in current liabilities. The
company's quick ratio is
A. 1.550.
B. 3.217.
C. 0.933.
D. 1.133.
19. What is the rate of return on common stockholders' equity if sales are \$100,000, net income is
\$22,700, and average common stockholders' equity is \$86,000?
A. The rate of return can't be determined from the information given.
B. 22.7%
C. 26.4%
D. 86.0%
20. Rick Company has declared a \$40,000 cash dividend to shareholders. The company has 5,000 shares
of \$20 par, 6% preferred stock, and 10,000 shares of \$15 par common stock. The preferred stock is
cumulative. How much will be distributed to the preferred and common stockholders on the date of
payment if the preferred stock is \$12,000 in arrears?
A. \$6,000 preferred; \$34,000 common
B. \$20,000 preferred; \$20,000 common
C. \$40,000 preferred; \$0 common
D. \$18,000 preferred; \$22,000 common
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