Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Business > 217 Exam > Flashcards

217 Exam Flashcards

1
Q

Formula for calculating current ratio (ability to pay short-term obligations)

A

CurrentRatio= Currentassets/Currentliabilities
​

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Formula for calculating the inventory turnover ratio

A

InventoryTurnoverRatio= COGS/ AverageInventory
​
*AverageInventory= BeginningInventory+EndingInventory/2
​

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Formula for calculating TimesInterestEarnedRatio (measures a company’s ability to meet its interest payment obligations on debt)

A

TimesInterestEarnedRatio=
Net earnings + interest expense + IT expense / InterestExpense
​

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Formula for calculating The return on assets ratio (It indicates how efficiently a company is using its assets to produce earnings.)

A

ReturnonAssets(ROA)= Netprofit/AverageTotalAssets

*AverageTotalAssets= BeginningTotalAssets+EndingTotalAssets/2
​

​

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Formula for calculating TotalAssetsTurnoverRatio (measures how efficiently a company uses its assets to generate revenue)

A

TotalAssetsTurnoverRatio= NetSales/AverageTotalAssets
​

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

On December 31, 2021, the statement of financial position of Trac Ltd. included the following items:
- Equipment, at cost $20,000
- Accumulated depreciation, equipment 5,000
A reader of Trac’s statement of financial position would reasonably conclude that:
A. the equipment is two years old.
B. the company has used 25 percent of the expected benefits from this asset.
C. the remaining useful life of the equipment is six years.
D. the market value of the equipment at December 31, 2021 was $15,000.
E. the market value of the equipment at December 31, 2021 was $5,000.

A

B

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Which of the following items would you expect to find in a public company’s annual report?
A. Notes to the financial statements.
B. Management’s discussion and analysis of the company’s performance.
C. Photographs and/or charts that assist in communicating the company’s message.
D. Only items A and B above
E. Items A, B, and C.

A

E

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Which of the following statements provides the best definition of earnings per share (EPS)?
A. EPS equals the increase in cash during the accounting period divided by the average
number of shares outstanding during the period.
B. EPS equals net earnings divided by the average number of shares outstanding during the
accounting period.
C. EPS equals retained earnings at the end of the accounting period divided by the average
number of shares outstanding during the period.
D. EPS equals net earnings divided by the average shareholders’ equity during the
accounting period.

A

B

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

A customer purchased merchandise from Trimac, Inc. at a total price of $1,000. The customer paid the company a total of $1,125, which includes the Goods and Services Tax (GST) of 5% and the Provincial Sales Tax (PST) of 7.5%. The sales revenue recognized by
Trimac should be:
A. $1,050. B. $1,125. C. $1,075. D. $1,000

A

D

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

The primary responsibility of the audit committee of the board of directors is
A. to hire, and if needed, fire the company lawyers.
B. to oversee the conduct of the company’s middle managers.
C. to oversee the company’s financial reporting system and internal controls.
D. to audit the company’s financial statements.
E. to conduct surprise or unexpected audits of the company’s operations.

A

C

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

On January 1, 2022, NOL’s accounts showed a balance of $21,000 for Estimated Liability for Warranties. Sales for the year totalled $1,000,000. The company’s experience has shown that warranty costs averaged 3% of sales. Cash payments for providing warranty service were $25,000 during the year ending on December 31, 2022. Based on these details,
A. the balance of the Estimated Liability for Warranties at December 31, 2022 should be
$26,000.
B. the warranty expense for 2022 should be $25,000.
C. the warranty expense for 2022 should be $26,000.
D. the balance of the Estimated Liability for Warranties at December 31, 2022 should be
$30,000.
E. the balance of the Estimated Liability for Warranties at December 31, 2022 cannot be
determined without additional information.

A

A

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

The balance of the account Retained Earnings
A. reflects the net amount of revenues, expenses, gains, losses and dividends for the current
accounting period.
B. indicates the amount of cash available for the distribution of dividends.
C. is the net of all net earnings and losses that have accumulated since the creation of the
company, but have not been distributed to shareholders as dividends.
D. reflects the maximum amount that can be distributed as cash dividends, but not stock
dividends.

A

C

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

The inventory turnover ratio
A. is used to analyze profitability.
B. is used to measure solvency.
C. depends on the type of inventory valuation method.
D. validates the acid-test ratio.
E. measures how quickly a firm sells its merchandise inventory.

A

E

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

If accounts receivable are collected quickly, it may indicate that
A. the accounts receivable turnover is low.
B. the company’s credit policies may be overly stringent.
C. credit is often granted to customers with high credit risk.
D. the company is becoming more profitable.
E. the company’s net profit margin ratio is low.

A

B

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Brad & Kelly Company has borrowed $100,000 from the bank to be repaid over the next five years, with payments beginning next month. Which of the following best describes the presentation of this debt in the statement of financial position as of the date of the loan?
A. $100,000 in the non-current liabilities section.
B. $100,000 plus the interest to be paid over the five-year period in the non-current
liabilities section.
C. A portion of the $100,000 in the current liabilities section and the remainder of the
principal in the non-current liabilities section.
D. A portion of the $100,000 plus interest in the current liabilities section and the remainder
of the principal plus interest in the non-current liabilities section.

A

C

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Which of the following transactions would usually cause the accounts payable turnover ratio to increase?
A. Payment of cash to a supplier for merchandise previously purchased on credit.
B. Collection of cash from a customer.
C. Purchase of equipment on credit.
D. Purchase of merchandise for cash.
E. None of the above transactions.

A

A

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Which of the following account(s) would be included in the debt-to-equity ratio calculation?
A. Deferred revenue
B. Income tax payable
C. Contributed surplus
D. A and B
E. A, B, and C.

A

E

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Which of the following assets should be amortized using the straight-line method?
A. Intangible assets with definite lives
B. Intangible assets with indefinite lives
C. Goodwill
D. All of the above.

A

A

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

The word “dividends” represents
A. Periodic expenses deducted from revenues to determine net earnings.
B. A reduction from the proprietor’s capital account in a proprietorship.
C. Assets that are held by the entity to finance future capital expenditures.
D. A distribution of assets to shareholders as a result of profitable operations.
E. None of the above statements.

A

D

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Goodwill is determined for accounting purposes as:

A. the financial effect of activities undertaken by companies that are for the best interest of society,
even if they have a detrimental effect on the company’s short-run financial results.
B. the amount of contributions that a corporation makes to charitable organizations.
C. the value of a company’s reputation for such things as service, quality, and product reliability.
D. the excess of the cost of an acquired company over the fair market value of its net assets
(identifiable individual assets minus liabilities).

A

D

21
Q

The capital structure of a company is
A. its property, plant and equipment.
B. the mix of debt and equity to finance a company.
C. the composition of its shareholders’ equity.
D. the different types of debt that the company has outstanding.

A

B

22
Q

Which one of the following would normally be considered a disadvantage of the corporate form of
organization?
A. Limited liability of shareholders B. Separate legal existence
C. Continuous life D. Government regulation

A

D

23
Q

Provo Co. buys a piece of equipment with a selling price of $9,000. The dealer grants the company a reduction of 15% on the list price. The company made the following additional expenditures: sales
taxes that are refundable, $1,350; insurance on the equipment for one year, $250; and a delivery charge, $300, paid by Provo. At what cost should Provo record the equipment on its books?
A. $7,950 B. $8,797.5 C. $8,200 D. $7,650 E. None of the other amounts

A

A ($9,000 – ($9,000 x 15%) + $300

24
Q

On January 1, 2022, KJK Company had $12,000 in assets, $3,000 in liabilities, $4,000 in share capital and $2,000 in other components of equity. During 2022, the Company had revenues of $10,000, expenses of $7,000, and distributed $1,000 in dividends. The amount of retained earnings that would appear on the statement of financial position at December 31, 2022 would be:
A. $6,000 B. $5,000 C. $7,000 D. $8,000 E. None of the other amounts.

A

B RE, Jan. 1 = $12,000 – 3,000 – 4,000
– 2,000
RE, Dec. 31 = $3,000 + 10,000 – 7,000
– 1,000

25
Q

The following totals for the month of April were taken form the payroll register of Minsk Company.
Salaries $12,000
CPP withheld 550
Income taxes withheld 2,500
Medical insurance deductions 450
EI withheld 196
Union dues withheld 216
The recording of the monthly payroll on April 30 would include
A. an increase to Salaries Expense by $12,000.
B. an increase to Salaries Payable by $12,000.
C. a decrease to Salaries Payable by $8,088.
D. an increase to Salaries Expense by $8,088.

A

A

26
Q

Lucky Dubois Inc. operates in a province where customers pay a federal sales tax of 5% but do not pay a provincial sales tax. If a customer purchased merchandise for $300 cash plus sales tax, then the effects
of this sale on Lucky Dubois’s accounts should include
A. an increase to Cash for $300.
B. an increased to Sales Tax Payable for $15.
C. an increase to Sales Revenue for $315.
D. an increase to Sales Tax Expense for $15.

A

B

27
Q

Which of the following statements best reflects the meaning of the debt-to-equity ratio?
A. It measures the company’s ability to secure new financing.
B. It shows the relative amounts of financing provided by creditors and owners.
C. It provides an indicator of the company’s ability to pay interest in the next period.
D. It reveals the company’s ability to pay current debts from money in equity

A

B

28
Q

Which of the following tasks is not commonly performed by external auditors?
A. External auditors examine the transactions of a company during the accounting period, but the
number of transactions examined depends on the strength or weakness of the internal control
system.
B. External auditors evaluate the system of internal controls.
C. External auditors are expected to provide an opinion on whether the company’s transactions are
reported in accordance with International Financial Reporting Standards.
D. External auditors usually advise the company on various accounting and tax issues.
E. External auditors prepare the financial statements of companies.

A

E

29
Q

When recording depreciation, which of the following statements is true?
A. Total assets increase and shareholders’ equity increases.
B. Total assets decrease and total liabilities increase.
C. Total assets decrease and shareholders’ equity increases.
D. Both total assets and shareholders’ equity decrease.
E. None of the other statements are true.

A

D

30
Q

Which of the following transactions would usually cause accounts payable turnover to decrease?
A. Collection of cash from a customer.
B. Purchase of equipment on credit.
C. Payment of cash to a supplier for merchandise purchased through cash.
D. Purchase of merchandise on credit.

A

D

31
Q

Which of the following ratios is used to analyze liquidity?
A. Accounts payable turnover ratio.
B. Debt-to-equity ratio.
C. Current ratio.
D. Cash coverage ratio.
E. Both A and C.

A

C

32
Q

What types of benefits are taxable to the employee? (7)

A
  1. Rent-fee or low-rent housing,
  2. Gifts in cash or in kind (non-cash gifts less than $500 per year are not taxable),
  3. Premiums paid by the employer to the employee’s group term life insurance policies
  4. Holiday trips, prizes, and incentive awards in recognition of job performance,
  5. Interest-fee or low-interest loans,
  6. Club dues when membership in the club provides little or no advantage to the employer’s business,
  7. Tuition fees paid by the employer, unless the particular course was undertaken at the initiative of the employer for the maintenance or upgrading of employer-related skills
33
Q

What types of benefits are Non-taxable to the employee? (6)

A
  1. Employer contributions to an employee’s registered pension plan (RPP). An RPP is the private pension plan of the employer.
  2. Payment (by the employer) of insurance premiums for the employee’s group health and disability insurance.
  3. Discounts on merchandise given to the employee, as long as the price is not below the employer’s cost.
  4. Use of the employer’s recreational facilities.
  5. Home computers supplied by an employer provided the computer is used primarily to the benefit of the employer.
  6. Employer-provided social events are not taxable if they are available to all employees and cost less than $150 per person per year.
34
Q

A taxpayer is required to include the following returns on investments on their tax return (4)

A
  1. Interest income from savings, deposits, loans and bond investments,
  2. Dividends from investment in shares,
  3. Rental income, and
  4. Capital gains on sale of investments.
35
Q

What is the formula for calculating Gross profit?

A

Net sales - COS (cost of sales)

36
Q

What is the formula for depreciation expense

A

(cost - RV)/useful life

37
Q

The depreciation expense of an asset can change for all the following reasons except for
A. a change in the estimated useful life.
B. a change in the asset’s expected residual value.
C. increases due to additions to the asset for major repairs and improvements.
D. Regular repairs and maintenance costs that maintain the asset in a good operating
condition.

A

D

38
Q

Oceanside Developments owns a piece of land it had purchased in 2019 for $400,000. When
they started to develop the land in 2020, they discovered that there were environmental
problems with the land. It is now estimated to be worth only $150,000. Which of the
following is the correct way to account for this change of value?
A. No accounting is necessary because the land is recorded at its historical cost, not its
market value.
B. The land account should be written down to $150,000 and an impairment loss
recognized.
C. The land should be written off completely because now the company cannot use it for
the intended purpose.
D. The land should be depreciated at a new rate to reflect the decline in its value.

A

B

39
Q

. Long-term assets with a(n) ___ may not be depreciable.
A. finite life
B. indefinite life
C. residual value
D. undefined value

A

B

40
Q

A declining fixed asset turnover ratio suggests that a:
A. company is not as efficient in using its fixed assets as it was in previous periods.
B. company’s net sales must be increasing.
C. company must have purchased additional intangible assets.
D. company’s beginning fixed asset balance must be greater than its ending fixed asset
balance.

A

A

41
Q

Formula for calculating debt to equity

A

Debt to equity = total liabilities/shareholders equity

42
Q

Formula for calculating dividend yield

A

Dividend per share / Market price per share

43
Q

Formula for calculating quick ratio

A

(Cash + inventory + A/R) / current liability

44
Q

Formula for calculating accounts receivable turnover ratio

A

Net sales / avg net A/R

45
Q

Return on equity formula

A

Net earnings / Avg SE

46
Q

Price/earnings ratio formula

A

share price / earnings per share

47
Q

What is the difference between a statement of earnings and statement of financial position?

A

Statement of earnings: Shows a company’s financial performance over a specific period of time, including revenue and expenses.

Statement of financial position: Shows a company’s financial position at a specific point in time, including assets, liabilities, and shareholders’ equity.

48
Q

What is a dividend expense refered to as

A

Retained earnings

49
Q

if a person purchases +100000$ of shares from a company, what would you write in SE section

A

Common shares m+100000

Business (16 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions