Given an accounts receivable turnover of 8 and annual credit sales of $362,000, the average collection period (360-day year) is

Given an accounts receivable turnover of 8 and annual credit sales of $362,000, the average collection period (360-day year) is

A) 90 days.

B) 45 days.

C) 75 days.

D) 60 days.

If you were given the components of current assets and of current liabilities, what ratio(s) could you compute?

A) Acid test or quick ratio

B) Average collection period

C) Current ratio

D) Both A and C

E) All of the above

The debt ratio is a measure of a firm's

A) leverage.

B) profitability.

C) liquidity.

D) efficiency.

Which of the following statements is true?

A) Current assets consist of cash, accounts receivable, inventory, and net plant, property, and equipment.

B) The quick ratio is a more restrictive measure of a firm's liquidity than the current ratio.

C) For the average firm, inventory is considered to be more "liquid" than accounts receivable.

D) A successful firm's current liabilities should always be greater than its current assets.

Which of the following transactions does NOT affect the quick ratio?

A) Land held for investment is sold for cash.

B) Equipment is purchased and is financed by a long-term debt issue.

C) Inventories are sold for cash.

D) Inventories are sold on a credit basis.

The question "Did the common stockholders receive an adequate return on their investment?" is answered through the use of

A) liquidity ratios.

B) profitability ratios.

C) coverage ratios.

D) leverage ratios.

How many of the items listed above are generally long-term assets?Land Accounts Receivable Notes Payable

Consider the following items:

Land

Accounts Receivable

Notes Payable (due in three years)

Accounts Payable

Retained Earnings

Prepaid Rent

Deferred Revenue

Buildings

Notes Payable (due in six months)

Equipment

How many of the items listed above are generally long-term assets?

A) Two.

B) Three.

C) Four.

D) Five.

Answer: B

Resources owned by the company that will provide a benefit for more than one year are called:

A) Current assets.

B) Current liabilities.

C) Long-term assets.

D) Revenues.

Answer: C

Long-term productive assets used in the normal course of business are typically classified as:

A) Current assets.

B) Investments.

C) Intangible assets.

D) Property, plant, and equipment.

Answer: D

The following financial information is from Shovels Construction Company: Accounts Payable $ 15,000 Buildings 80,000

The following financial information is from Shovels Construction Company:

Accounts Payable $ 15,000

Buildings 80,000

Cash 10,500

Accounts Receivable 9,500

Sales Tax Payable 4,500

Retained Earnings 47,500

Supplies 40,000

Notes Payable (due in 18 months) 35,000

Interest Payable 3,000

Common Stock 35,000

What is the amount of current assets, assuming the accounts above reflect normal activity?

A) $20,000.

B) $60,000.

C) $140,000.

D) $175,000.

Answer: B

With respect to current assets, liquidity refers to:

A) How quickly the asset can be converted to cash.

B) The magnitude of the asset's account balance.

C) Whether cash was paid for the asset at the time of acquisition.

D) The accuracy of the balance being reported.

Answer: A

Current assets include:

A) Assets that must be paid for within 12 months.

B) Assets that will be used up or converted to cash within 12 months.

C) Assets that will be used for many years.

D) Any assets that were purchased for cash.

Answer: B

Confirmations of accounts receivable provide evidence primarily about which two assertions?

Confirmations of accounts receivable provide evidence primarily about which two assertions?

a. existence and rights & obligations
b. valuation and rights & obligations
c. completeness and valuation
d. existence and completeness

Answer: a. existence and rights & obligations

The revenue cycle of a company generally includes which accounts?

a. inventory, accounts payable, and general expenses
b. cash, notes payable, and capital stock
c. cash, accounts receivable, and sales
d. inventory, general expenses, and payroll


Answer: c. cash, accounts receivable, and sales

When auditing the existence assertion for an asset, auditors proceed from the

a. general ledger back to the supporting original transaction documents
b. supporting original transaction documents to the general ledger
c. financial statement amounts back to the potentially unrecorded items
d. potentially unrecorded items forward to the financial statement amounts


Answer: a. general ledger back to the supporting original transaction documents