CHAPTER 2:

1) Consider the following information for Ball Corp.

Selling and administrative expense	$	40,000
Depreciation expense	$	70,000
Sales	$	350,000
Interest expense	$	30,000
Cost of goods sold	$	110,000
Taxes	$	17,500

What is the operating profit for Ball Corp.?

A) $71,450

B) $90,000

C) $130,000

D) None of the options

2) Candy Company had sales of $320,000 and a cost of goods sold of $112,000. What is the gross profit margin (ratio of gross profit to sales)?

A) 55%

B) 65%

C) 35%

D) 73.3%

CHAPTER 3:

3) A firm's long-term assets = $100,000, total assets = $400,000, inventory = $50,000 and current liabilities = $200,000. What are the firm's current ratio and quick ratio?

A) Current ratio = 0.5; quick ratio = 1.25

B) Current ratio = 1.0; quick ratio = 2.0

C) Current ratio = 1.5; quick ratio = 1.25

D) Current ratio = 2.5; quick ratio = 2.0

4) MEGAFRAME COMPUTER COMPANY
Balance Sheet
As of December 31
ASSETS
Cash	$	50,000
Accounts receivable		70,000
Inventory		110,000
Net plant and equipment		220,000
Total assets	$	450,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	70,000
Accrued expenses		50,000
Long-term debt		130,000
Common stock		70,000
Paid-in capital		40,000
Retained earnings		90,000
Total liabilities and stockholders' equity	$	450,000

MEGAFRAME COMPUTER COMPANY
Income Statement
For the year ended December 31
Sales (all on credit)	$	875,000
Cost of goods sold		600,000
Gross profit	$	275,000
Sales and administrative expenses		30,000
Depreciation		55,000
Operating profit	$	190,000
Interest expense		25,000
Profit before taxes	$	165,000
Taxes (30%)		49,500
Net income	$	115,500

Refer to the tables above. Megaframe's current ratio is ________.

A) 1.9:1

B) 1.8:1

C) 1:1

D) 3.0:1

CHAPTER 4:

5) A firm has forecasted sales of $4,500 in April, $3,000 in May, and $5,000 in June. All sales are on credit. 30% is collected in the month of the sale, and the remainder in the following month. How much cash is collected in June?

A) $1,500

B) $5,250

C) $4,050

D) $3,600

6) If Excel Inc. has projected sales of $30,000 in January, $20,000 in February, and $20,000 in March, where 20% of sales are cash sales and the remaining credit sales are collected the month after, what are the cash receipts in March?

A) $20,000

B) $16,000

C) $21,400

D) $10,300

CHAPTER 6:

7) Samuelson has a beginning inventory balance on January 1 of 12,000 units and desires an ending balance of 20% of the next month's sales. If sales are expected to be 17,000 for January and 20,000 for February, what is the ending balance as of January 31?

A) 4,000 units

B) 5,500 units

C) 3,400 units

D) 8,400 units

8) Retail companies like Target and Macy's exhibit sales patterns that are most typically influenced by

A) cyclical economic indicators.

B) competitive prices.

C) seasonality.

D) sales promotions

CHAPTER 7:

9) Modos Company has deposited $3,500 in checks received from customers. It has written $1,400 in checks to its suppliers. The initial bank and book balance was $600. If $1,600 of its customers' checks have cleared, but only $600 of its own, calculate its float.

A) $1,200

B) $1,100

C) $300

D) $700

CHAPTER 8:

10) The cost of not taking the discount on trade credit of 2/10, net 30 is approximately ________.

A) 44.54%

B) 43.20%

C) 36.73%

D) None of these options are true