1. The formula for computing additional paid-in capital in excess of par is shares of stock times A. selling price per share of stock.

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B. selling price per share minus par value per share.

C. par value per share of stock.

D. selling price per share plus par value per share.


2. For the years 2012, 2013, and 2014, the sales of Red Line, Inc. are $40,000, $60,000 and $80,000, respectively. If 2012 is the base year, the trend percentage for 2013 was A. 200%.

B. 0%.

C. 150%.

D. 133%.


3. Motor Works, Inc. has declared a $20,000 cash dividend to shareholders. The company has 5,000 shares of $15-par, 10% preferred stock and 10,000 shares of $20-par common stock. The preferred stock is cumulative. How much will be distributed to the preferred and common stockholders on the date of payment if the preferred stock is $8,000 in arrears? A. $20,000 preferred, $0 common

B. $15,500 preferred, $4,500 common

C. $8,000 preferred, $12,000 common

D. $7,500 preferred, $12,500 common


4. The statement of cash flows reports the sources and uses of cash from financing, investing, and _______ activities. A. operating

B. liquidation

C. credit

D. managerial


5. The following information applied to Advanced Industries, Inc. for 2014:

Earnings/share $17.68

Market price per share of common stock $52



What is the dividend yield for Advanced Industries, Inc. (to the nearest tenth of a percent)?

Number of shares of common stock outstanding 52,000

Net income $48,000

Dividends/share $7.14

A. 34.0%

B. 92.3%

C. 13.7%

D. 40.4%


6. On the _______ of a cash dividend, no journal entry is required. A. preferred date

B. payment date

C. declaration date

D. date of record


7. Other than depreciation, a company’s operating expenses for the year were $335,000. Prepaid expenses decreased by $7,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method are A. $335,000.

B. $328,000.

C. $7,000.

D. $342,000.


8. A purchase of new equipment on a note payable under the direct method is reported A. in the investing section of the cash flow statement.

B. in the operating section of the cash flow statement.

C. as a separate disclosure as a non-cash transaction.

D. in the financing section of the cash flow statement.


9. The following information is available for Allsport Company:

What amount was paid for merchandise during 2014?

Cost of goods sold $545,000

Merchandise inventory, 12/31/13 $105,000

Merchandise inventory, 12/31/14 $112,000

Accounts payable, 12/31/13 $98,500

Accounts payable, 12/31/14 $101,300

A. $540,800

B. $554,800



C. $545,000

D. $549,200


10. Operating activities are transactions and events associated with selling a product or providing a service related to the A. net income reported on the statement of retained earnings.

B. revenues and expenses reported on the income statement.

C. retained earnings reported on the balance sheet.

D. assets and liabilities reported on the balance sheet.


11. An example of a cash outflow from investing activities is A. paying cash dividends.

B. making a loan to another company.

C. the purchase of treasury stock.

D. issuance of a note payable.


12. Hallett Industries, Inc. reported net sales of $306,000, cost of goods sold of $192,600, operating expenses of $58,900, and income tax expense of 12,300. What is Hallett Industries’ net income percentage? A. 37.06

B. 13.79

C. 17.81

D. 62.94


13. Which of the following is not a part of financing activities? A. Buying land

B. Paying off loans

C. Issuing stock

D. Paying dividends


14. The stockholders’ right of _______ means that stockholders will receive a proportionate share of any assets left after a company goes out of business. A. preemption

B. dividends

C. liquidation

D. voting


15. Of the following, which is not classified as an investing activity on the statement of cash flows? A. Collecting the principal on loans

B. Sale of equipment for cash

C. Selling goods and services

D. Purchasing land


16. Eagle Ridge, Inc. issued 40 shares of $20 par value stock to its accountant in full payment for her $900



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fee for assisting in setting up the new company. The entry for the issuance of the stock is a A. debit to Common Stock for $800.

B. credit to Common Stock for $800.

C. credit to Common Stock for $900.

D. debit to Paid-in Capital in Excess of Par–Common for $100.


17. Fine Furniture Company had a net income of $50,000. Accounts receivable increased by $30,000; inventory decreased by $20,000; amounts payable increased by $4,000; and salaries payable decreased by $1,000. The amount of cash flow from continuing operating activities under the indirect method is A. $55,000.

B. $37,000.

C. $65,000.

D. $43,000.


18. Which is not included in paid-in capital? A. Preferred Stock

B. Cash

C. Common Stock

D. Additional Paid-in Capital


19. On the income statement, extraordinary items are reported A. before the operating income section.

B. net of income tax or net of income tax savings.

C. immediately before the discontinued operations section.

D. immediately after the continuing operations section.


20. The 2013 and 2014 balance sheets for Newport Industrial showed Cash of $8,000 and $9,500, respectively; Accounts Receivable of $14, 000 and $16,000, respectively; Inventory of $11,000 and $8,000, respectively; and Accounts Payable of $5,000 and $7,000, respectively. Its 2014 income statement showed Net Sales of $108,000, Cost of Goods Sold of $62,000, and Net Income of $27,000. The cash conversion cycle for 2014 (round calculations to two decimal places) is _______ days. A. 30.08

B. 71.30

C. 141.94

D. 40.56