A. MULTIPLE CHOICE-Indicate the one best answer on the Scantron sheet provided company receives $75 for merchandise sold to a consumer, of which $5 is for sales tax. The $5 of sales tax a. increases sales revenue b. C. d. 1. A increases current liabilities. Increases selling expenses none of these 2. On February 1, you borrow $300,000 for 10 years at 6% interest in order to build a new acility. In August and again in February of the following year, you pay half the annual interest to your creditors. The journal entry to record the issuance of the n a. debit Notes Payable for $300,000, debit Interest Expense for $18,000, credit Cash for b. C. d. $300,000, and credit Interest Payable for $18,000. debit Accrued Interest for $9,000 and credit Cash for $9,000 debit Cash for $300,000 and credit Notes Payable for $300,000 debit Cash for $300,000, debit Interest Expense for $9,000, credit Notes Payable for $300,000, and credit Interest Payable $9,000 3. During one pay period, Northern Oklahoma College distributes $1,300,500 to employees as net pay. The income tax withholding $50,000. A total of $20,000 was also withh College Foundation. The total payroll expense to the company during this period was a. $1,010,500 b. $1,350,500 c. $1,040,500 d. $1,090,500 0 and the FICA withholdings were eld for donations to the Northern Oklahoma s were $190,00 If the market rate of interest is 8%, a $100,000, 10-year bond with a stated annual interest rate of 6% would issue at an amount a. less than face value b. equal to the face value c. greater than face value 4. d. that cannot be determined. A corporate bond with a face value of $1,000 is issued at 103. This means that the bond actually sold for: a. $103 dollars, and the stated interest rate was lower than the market interest rate b. $1,030 dollars, and the stated interest rate was lower than the market interest rate. c. $103 dollars, and the stated interest rate was higher than the market interest rate d. $1,030 dollars, and the stated interest rate was higher than the market interest rate. 5. 6. Your company issues $500,000 in bonds at an issue price of 97. The company will record: a debit of $485,000 to cash, a debit of $15,000 to a contra liability account to reflect the discount, and a credit of $500,000 to bonds payable a debit of $485,000 to cash, a debit of $15,000 to a contra asset account to reflect the discount, and a credit of $500,000 to bonds payable a debit of $500,000 to bonds payable, a credit of $15,000 to a contra liability account to reflect the discount, and a credit to cash of $485,000 a debit of $485,000 to bonds payable, a debit of $15,000 to a contra asset account to reflect the discount, and a credit to cash of $500,000 a. b. c. d. 7. Sassy Shirts, Inc., sold shirts made from a fabric that gave many of its customerts rash. The customers are suing the company in a class action suit and Sassy attorneys think it is probable that the case will cost the company verdict is not yet in. The company should a. not include this information in its annual report b. record a liability and a loss for $2 million. c. only explain the situation in the notes to the financial statements d. record a liability and a gain for $2 million Shirt's $2 million, although the 8. Cash dividends can be paid only when a. the cash account has a balance greater than the amount of the dividend declared b. the board of directors has declared the dividend the retained earnings account has a positive balance greater than the dividend. d. c. All of these 9. A corporate chart company sells 15 million shares to investors and later buys back 2 million shares. The number of treasury shares and outstanding shares after these transactions are er specifies that the company may sell up to 20 million shares of stock. The Treasur Outstanding a. 15 million shares b. 2 million shares c. 2 million shares d. 5 million shares 5 million shares 15 million shares 13 million shares 2 million shares 10. A company sells 1 million shares of stock with no par value for $15 a share. In recording the transaction, it would: a. debit Cash for $150,000 and credit Common Stock for $150,000. b. debit Cash for $15 million and credit Common Stock for $15 million. c. debit Cash for $15 million, credit Common Stock for $150,000 and credit Additional Paid- in Capital for $14,850,000 d. debit Cash for $150,000, debit Capital Receivable for $14,850,000, credit Common Stock for $150,000 and credit Additional Paid-in Capital for $14,850,000 11. The declaration date for a dividend is the date on which the company: a. debits Dividend Expense and credits Cash for the dividend amount. b. debits Dividends Payable and credits Cash for the dividend amount. c. establishes who will receive the dividend payment. d. debits Dividends Declared and credits Dividends Payable for the amount of the dividend. 12. The acquisition or purchase of treasury stock by a corporation a. has no effect on total assets and total stockholders' equity b. requires that a gain or loss be recognized on the income statement. c. increases its total assets and total stockholders' equity. d. decreases its total assets and total stockholders' equity 13. Which of the following statements is true? a. Stock splits and stock dividends both reduce the market price of a share but only stock b. Stock splits and stock dividends both reduce the market price of a share but only stock c. Stock splits and stock dividends both reduce the market price of a share and the par d. Stock splits and stock dividends both reduce the market price of a share and reduce dividends reduce the par value of a share splits reduce the par value of a share value of a share retained earnings 14. A c ompany has outstanding 8 million shares of $2 par value common stock and 1 million shares of com an $5 par value preferred stock. The preferred stockhas an 8% dividend rate The company declares $600,000 in total dividends for the year. Which of the following is true i dividends in arrears are $50,000? Show your calculationsll! a. Prefered stockholders will receive s400,000. Common stockholders will receive $200,000 referred stockholders will receive $50,000. Common stockholders will receive $550,000 stockholders will receive $450,000. Common stockholders will receive $150,000 Preferred stockholders will receive $100,000. Common stockholders will receive $500,000 d. 15. The primary objective of external financial reporting is: a. to enhance the ability of the company to acquire financial capital from external sources b. to accurately provide financial results for tax purposes. c. to comply with external regulations and requirements of government and professional associations. d. to provide useful information to decision makers, especially investors and tors. credi 16. Relevance is an objective of external financial reporting that means a. the financial reports of a business's activities. business are assumed to include the results of only that financial information can be compared across businesses because similar acco methods have been applied. b. unting c. the financial information possesses a feature that allows it to influence a decision. d. the financial information depicts the economic substance of business activities. 17. A purpose of comparative income statements is to a. reveal trends in sales b. see how the company compares to its competitors. c. show whether retained earnings has increased or decreased over the years d. help prevent fraud. 18. In a common size balance sheet, each item on the balance sheet is expressed as a percentage of a. Total assets. b. Total liabilities. c. Net income d. Total stockholders' equity 19. Which of the following is a liquidity ratio? a. Inventory turnover b. Price earnings (P/E). Net profit margin. c. d. Times interest earned. 20. Solvency ratio data are primarily concerned with the ability of a company to a. produce profits b. handle its debt. c. manage its cash flow. d. provide income for stockholders. 21. A company that has a current ratio less than one cannot cover: a. current liabilities with its current cash flow b. current expenses with its current sales revenue. c' expenses with its current revenues d. current liabilities with its current assets. 22. A company has current assets of $450,000 and a current ratio is 2.5. Assume that the company prepays rent for 9 months in the amount of $20,000. The current ratio after this transaction is closest to: a. 2.39 b. 2.61 C. 2.5 d. 2.81 23.On January 1, 2018, a company has assets of $16 billion and stockholders' equity of $8 billion. On January 1, 2019, the same company has assets of $20 billion and stockholders' equity of $9 billion. During 2018, the company had total sales revenue of $9 billion and total expenses of $7 billion. The company's debt-to-assets ratio on January 1, 2019 is: a. 0.55 b. 0.45 c. 0.035 d. 0.01 24. Net income was $418,600 in 2014 and $364,000 in 2013. The year-to-year percentage change in net income is closest to: a, 15% b. 55% . 87%. d. 1396. 25. Company X has net sales revenue of $780,000, cost of goods sold of $343,200, and all other expenses of $327,600. The gross profit percentage is closest to: a, 3290. b. 56%. C. 86%. d. 14%