ACCT 220 Exam 3 with Questions and Answers
The only difference between the Direct Method and the Indirect Method is the way the Financing Activities section is prepared. ANSWER False
The maturity value of a $200,000, 6-month note, with a stated rate of 10% is $220,000. ANSWER False
The bal...
ACCT 220 Exam 3 with Questions and Answers
The only difference between the Direct Method and the Indirect Method is the way the Financing Activities section is prepared. ANSWER False
The maturity value of a $200,000, 6-month note, with a stated rate of 10% is $220,000. ANSWER False
The balance in retained earnings represents the amount of capital contributed by owners in exchange for stock plus the amount of net income earned. ANSWER False
Ratio analysis can be used to compare companies of different sizes. ANSWER True
The receipt of a cash dividends would be reported in the Operating Activities section of the Statement of Cash Flows ANSWER True
The current ratio measures liquidity. ANSWER True
The higher the current ratio, the less liquid the company. ANSWER False
The lower the debt ratio (14% compared to 18%), the more solvent the company. ANSWER True
The gross profit margin is computed by taking net income divided by total assets. ANSWER False EPS can be found on the Balance Sheet. ANSWER False
If cash dividends are distributed on a date after dividends have been declared, then overall total liabilities will decrease and total assets will decrease. ANSWER True
Treasury stock is shown as a reduction to total stockholders' equity and is reported on the Statement of Stockholders' Equity. ANSWER True
If the debt-to-assets ratio is 70%, then 30% of the company's financing has been provided by stockholders' equity. ANSWER True
Preferred stock is reported on the Statement of Retained Earnings. ANSWER False
Credits increase retained earnings and common stock ANSWER True
Bond Payable would be classified as a liability account and reported on the balance sheet. ANSWER True
A discount bond is issued above face value. ANSWER False
The account "Paid in Capital in Excess of Par - Common Stock" would be reported on the Balance Sheet and the Statement of Stockholders' Equity. ANSWER True
Discount on Bond Payable is a contra liability account. ANSWER True
A liability is recorded on the date dividends are declared. ANSWER True
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