Series 79: Chapter 2 Practice Questions

Chapter 2 Practice Questions

1. 1. Which of the following types of assets is least likely to be classified as a current asset on the balance sheet of XYZ Corp?
2. A. Money owed to XYZ by its customers for purchasers made within the last month; XYZ is generous in its terms and requires payment within 180 days of purchase
3. B. Three forklifts XYZ uses in its warehouse
4. C. Raw materials XYZ has stockpiled for use in producing goods for sale
5. D. Commercial paper issued by another company
6. 2. Which of the following items would not generally be reflected on a company’s income statement?
7. A. Amortization of a patent
8. B. Interest paid on a bank loan
9. C. Gains on foreign exchange
10. D. Retained earnings
11. 3. Which of the following items is not considered a selling, general and administrative expense for accounting purposes?
12. A. Office furniture
13. B. Management salaries
14. C. Warranty costs
15. D. Legal expenses
16. 4. Simpering Systems has total assets of $7.1 million, of which $5.2 million represents long-term assets; the rest is current assets. Simpering has current liabilities of $1.1 million. Its inventories are worth $650,000. What is Simpering’s approximate quick ratio?
17. A. 4.14
18. B. 1.14
19. C. 1.23
20. D. 0.76
21. 5. Vanna Havana Casual Wear operates a chain of retail clothing stores. It began its last fiscal year with inventories of $2.3 million; it ended the fiscal year with inventories of $1.5 million. Vanna Havana’s cost of goods sold for the fiscal year was $20.9 million. What is the days inventory outstanding figure for Vanna Havana for that fiscal year, rounded to the nearest full day?
22. A. 36
23. B. 40
24. C. 33
25. D. 26
26. 6. You have been retained to advise MegaMusical Corp. on a possible acquisition of Xylophonic Industries. Xylophonic has 20 million shares outstanding; its shares are currently trading a