ACCOUNTING

2)
What is Patnode’s current ratio at the end of 2004?

2.46

0.41

1.12

0.89
23)
What is Patnode’s total debt to equity ratio at the end of 2004 (rounded to two decimal places)?

5.3

0.19

0.25

4.04
24)
Patnode recorded a 2005 tax expense of $3,000. What amount did it pay to the tax authorities during 2005?

$2,400

$7,000

$600

$5,400
25)
Kirby, Inc. records a sale with a gross margin of $1,400. Which one of the following statements correctly describes the effect of such a sale on its balance sheet?

Common stock increases by $1,400

The sales revenue account increases by $1,400

The gross margin account increases by $1,400

The retained earnings account increases by $1,400
26)
Sandy Robbins is the sole owner of a hair salon. He often takes small amounts of “lunch money” from the cash register, figuring that “it is my business anyway.” His accountant, however, insists that Sandy make a note of the cash he takes, and at the end of the each accounting period, she debits owners’ equity and credits the cash account for the total amount that Sandy has taken during the period.
In recording the cash withdrawals even though Sandy is sole proprietor, the accountant is correctly applying the:

Matching concept

Entity concept

Materiality concept

Conservatism concept
27)
Anderson Electronics’ 2005 return on sales percentage is 20%. Its 2005 net income is $40,000. What is its 2005 sales?

$4,00,000

$80,000

$2,00,000

$1,00,000
28)
Anderson Electronics’ 2005 return on sales percentage is 20%. Its 2005 net income is $40,000. What is its 2005 sales?

$4,00,000

$80,000

$2,00,000

$1,00,000
29)
During June 2005, Bextra Inc. recorded sales of $55,000 but only $20,000 was collected in cash from customers. Cost of goods sold of $38,000. What was the effect of these sales on Bextra’s current ratio?

Current ratio increases

Current ratio decreases

Current ratio remains unchanged

Insufficient information provided to judge effect on current ratio
30)
Which one of the following statements is not true about statements of cash flows prepared according to U.S. GAAP?

The operating section of the indirect method starts with the net income of the period

In the indirect method statement, the period’s depreciation is added to net income because it is a source of cash

Interest payments are included in the operating section of the direct method statement

The investing section of the direct method statement for a period is identical to the investing section of the indirect method statement for the same period
31)
A company raised $50,000 in cash by taking a one-year loan of $10,000 and a 5-year loan of $40,000. Which of the following is the correct journal entry to record this transaction?

Debit short-term debt $40,000; debit retained earnings $10,000; credit cash $50,000

Debit short-term debt $50,000; credit cash $50,000

Debit cash $50,000; credit long-term debt $50,000

Debit cash $50,000; credit short-term debt $10,000; credit long-term debt $40,000
32)
Which one of the following statements describes the rules about posting transactions into T-accounts in the ledger?

For assets, debits are entered on the left; for liabilities, credits are entered on the left

For assets, credits are entered on the left; for liabilities, debits are entered on the left

Debits on the left; credits on the right

Credits on the left; debits on the right
33)
Baxtra, Inc. pays $20,000 in cash as interest to its lenders during 2005. According to U.S. GAAP, in which section of the statement of cash flows would this payment be included?

The operating section

The financing section

The investing section

Depends on whether cash flow statement is direct or indirect method.
34)
Taylor Company had a salaries payable balance of $18,000 on December 31, 2004. During 2005, it paid $50,000 in cash as salaries, and recorded a salary expense of $50,000. Its December 31, 2005 salaries payable balance is:

$50,000

$18,000

$1,00,000

Cannot be determined from the information provided

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