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Lesson 7 Achievement Exam This Achievement Exam covers Lessons 6 and 7. Select the single best answer for each question or statement, then go online to https://students.ashworthcollege.edu and enter your answers. 1. 2. In a comparative balance sheet, the ending Cash was $315,000 in 2011 and $270,000 in 2012. The net increase or decrease from 2011 to 2012 is: __ a. 86.0%. __ b. 14.3%. __ c. 26.4%. __ d. 16.7%. Comparative base amount reports in which each item is expressed as a percentage without dollar amounts are called: __ comparative financial statements. a. r-" ---, b common-size statements. __ c. cash flow analysis. __ d. horizontal analysis. A03K Principles 1\\.., (\\ of Accounting II - Page 714 of a Lasson 1 3. 4. 5. If Cash is $2,345 in 20X2 and $3,671 in 20X1, what is the percent of increase or (decrease) from 20Xl to 20X2? __ a. 56.55% __ b. (56.55%) __ c. 36.12% __ d. (36.12%) If total assets are $6,000, what is the vertical analysis for Cash when it has a balance of $2,4007 __ a. 40% __ b. 60% -- c. 250% -- d. 25% What was the percentage of decrease in the Accounts Receivable account if the receivables were $80,000 in Year 1 and $60,000 in Year 2? __ a. (25%) __ b. 33.33% __ c. (33.33%) __ d. 25% A03K Principles of Accounting II - Page 715 Lasson 1 6. If current assets were $100,000in 20x7and $88,000in 20x8, what was the amount of increase or decrease? -- -- 7. 8. a. The percentage increase is 13.64%. b. The percentage decrease is 12%. c. The percentage decrease is 13.64%. d. The percentage increase is 12%. Noble Company's accounts receivable turnover was 18.2in Year 1 and 24.6 in Year 2. This change in accounts receivable turnover indicates: __ a. the company is not sellingits inventory as fast. __ b. the company is selling its inventory faster. __ c. the company's customers are paying faster. __ d. the company/s customers are paying slower. The lower the times interest earned ratio, the more likely: __ a. a default in payment will occur. __ b. a business needs to borrow money. -- c. a business will suffer a loss. __ d. interest payments can be made. A03K Principles of Accounting II - Page 7'16 Lasson 7 9. 10. 11. If management wishes to evaluate the ability of a business to provide funding to cover operating expenses, they could use the: a. rate of return on total assets. b. rate of return on common stockholders"equity. c. gross profit rate. d. times interest earned. If management wishes to evaluate the amount of assets that were financed by creditors, they could use the: a. debt to total assets. b. rate of return on common stockholders"equity. c. debt to total liabilities. d. times interest earned. If Rick Company's sales increased from $40,000 to $80,000 and its cost of goods sold increased from $30,000 to $50,000, then vertical analysis based on sales would show the cost of goods sold for the two periods as: a. 75% and 62.5%. b. 62.5% and 75%. c. 133.33% and 160%. d. 160% and 133.33%. A03K Principles of Accounting II - Page 717 Lasson 7 12. 13. If current assets were $100,000 in 20x7 and $88,000 in 20x8, what was the amount of increase or decrease? a. The percentage increase is 13.64%. b. The percentage decrease is 12%. c. The percentage decrease is 13.64%. d. The percentage increase is 12%. If Cara Piano's sales increased from $40,000 to $60,000 and its cost of goods sold increased from $20,000 to $40,000, then vertical analysis based on sales would show which of the following for cost of goods sold? 14. a. 40% and 20% b. 10% and 30% c. 50% and 67% d. 67% and 40% The sales for Mary's Services for Years 1, 2, and 3 are $25,000,$45,000, $60,000, respectively. The trend percentage for Year 3 is: a. 42%. b. 240%. c. 140%. d. 58%. A03K Principles of Accounting II - Page 118 lesson 1 15. 16. 17. The current ratio for a cqmpany with current assets of $70,000, current liabilities of $50,000, total assets of $150,000, and net sales of $80,000, would be: a. 1.4. b. 0.714. c. 3.0. d. 0.875. A company has $56,000 in cash, $12,000 in accounts receivable, $25,000 in temporary investments, and $100,000 in merchandise inventory. 'The company has $60,000 in current liabilities. The company's acid test (quick) ratio is: a. 3.217. b. 1.550. c. 1.133. d. 0.933. Chuck Company has a beginning Accounts Receivable balance of $65,000 and an ending balance of $60,000. Net credit sales are $250,000. 'The company's accounts receivable turnover ratio is: a. 3.846. b. 4.167. c. 4.000. d. None of the above A03K Principles of Accounting" - Page 719 Lasson 1 18. 19. 20. If beginning and ending inventories are $100,000 and 150,000, respectively, and the cost of goods sold is $450,000, what is the inventory turnover ratio? a. 4.50 b. 3.00 c. 3.60 d. 0.28 Compute the gross profit rate when net sales are $350,000 and gross profits are $178,500. a. 51:10 b. 54% c. 51% d. 54:10 Saxon Corporation's beginning inventory was $30,000. The cost of goods sold was $350,000 for the year, with an ending inventory of $40,000. Inventory turnover for the year is: a. 20 times. b. 10 times. c. 11.67 times. d. 8.75 times. A03K Principles of Accounting II - Page 120 Lasson 1 21. 22. 23. Departmental reportsare useful for all of the following purposes EXCEPT: __ a. determiningperformance. __ b. determiningfuture revenue. __ c. controlling. __ d. planning. Managerial accountingis primarily used for accounting is used for _ __ a. businessdecisions; external reports __ b. CEOs;stockholders __ c. customers;tax reporting __ d. externalreports; decision-making --',but financial Normally the report prepared for a department is a(n): -- a. cashflow statement. __ b. statementof equity. __ c. incomestatement. -- d. balancesheet. I il I I ::1' !i h A03K Principles of Accounting II - Page 721 il j'::1 I i :1 Losson 1 I 24. i Salesminus cost of goods sold yields: a. operating expenses. b. gross profit. i 1 c. income before taxes. I d. net income. p I~ 1\\ I~ ~ " I I ( I I 25. Gross profit by department appears on the: i I 26. a. balance sheet. b. statement of retained earnings. c. statement of cash flows. d. income statement. When a company tracks gross profit by department,the sales journal will: a. not differ from a company that does not track gross profit by department. b. have a separate column for accountsreceivable for each department. c. have a separate column for sales for each department. d. have a column for purchasesfor each department. AIl3K Principles of Accounting II - Page 722 lasson 1 27. 28. 29. A maintenance department would be an exampleof a: a. cost center. b. direct expense. c. profit center. d. None of the above .A unit or department that incurs costsand generates revenues is a(n): a. expense center. b. direct center. c. cost center. d. profit center. An example of a cost center is: a. a Holiday Inn. b. the restaurant in a hotel. c. the administrative departmentin a hotel. d. the catering department in a hotel. A03K Principles of Accounting II - Page 723 ,:11 Lasson 1 30. 31. 32. Todetermine how each profit center is performing, managementwould analyzethe: a. income tax rate. b. indirect expenses. c. gross profit for each profit center. d. other expenses. Directexpenses are expenses that: a. can be identified with a specific department. b. cannot be identified with a specific department. c. can be identified with more than one department. d. None of the above Indirectexpenses are expensesthat: a. may be incurred outside the control of a department manager. b. cannot be identified with a specific department. c. are incurred for the general benefit of a company. d. All of the above A03K Principles of Accounting II - Page 724 Llmsson 1 33. 34. 35. When preparing an income statement showingdepartmental contribution margin,: a. indirect expenses are combinedwith direct expenses. b. indirect departmental expensesare added to contribution margin. c. direct expenses are subtractedfrom contribution margin on sales. d. None of the above A line on the income statement that indicateswhat a department has left after covering cost of goods sold and directexpensesis: a. the gross margin. b. the net income. c. the contribution margin. d. None of the above What is the purpose of determining the contributionmargin? a. To show the contribution by a department toward covering indirect costs b. To help determine whether to eliminate a department c. To show the effect on net incomeof each department I i I lII'~ I. d. All of the above A03K Principles of !I:' 1 i Accounting II - Page 7.25 ill 1\\ IiI I' I I. Lasson 1 36. 37. Supporters of the contribution margin approach believe that: a. indirect expenses should be departmentalized. b. indirect expenses should not be used for evaluating departmental performance. c. indirect expenses are proportionally charged to each department. d. direct expenses should not be used in evaluating departmental performance. The women's shoe department shows gross sales of $245,000with the cost of the shoes $147,000. The men's shoe department shows gross sales of $184,000 with the cost of the shoes $110,000. What is the gross profit for each department? a. $392,000 and $294,000 b. $245,000 and $184,000 c. $98,000 and $74,000 d. $429,000 and $257,000 A03K Pr ln e Ip l e s of Accounting II - Page 726 38. 39. A company has four departments (A, B, C, and D) and the net sales are $35,000, $40,000, $60,000, and $25,000, respectively. The cost of goods sold per department are $25,000, $15,000, $40,000, and $15,000, respectively. Which department has the lowest gross profit? a. A b. B c. C d. Both A and D Calculate a department's gross profit on sales given the following: 1,600 350 900 a. $350 b. $700 c. $1,050 d. $1,250 A03K Principles of Accounting II - Page 727 Losson 1 40. The photography department in a department store experienced the following revenue and expenses during October: 11,000 5,000 800 2,100 The photography department's __ a. $3,100. __ b. $5,200. __ c. $6,000. __ d. $8,100. A03K Principles gross profit on sales is: of Accounting II - Page 728