Practice Quiz

CLEP Financial Accounting Exam Prep - Question List

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6. Which of the following statements is correct?

I The book value of a corporation can be calculated from the balance sheet.
II The market value of a corporation can be calculated from the balance sheet.
  1. I
  2. II
  3. I and II
  4. Neither statement is correct.
  5. There is not enough information to determine if either statement is correct.
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7. If Larry was using a perpetual inventory system, how would he record the purchase of $20,000 of inventory on account?
  1. A credit to sales
  2. A debit to sales
  3. A debit to merchandise inventory
  4. A credit to merchandise inventory
  5. A credit to purchases on account
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8. Larry’s accounts show the following for the year:

Net Sales on Account: $200,000
COGS: $150,000
Accounts Receivable at the beginning of the year: $22,500
Accounts Receivable at year end: $17,500
Inventory at the beginning of the year: $45,000
Inventory at the end of the year: $55,000

What is the accounts receivable turnover ratio for the year?
  1. 10
  2. 4
  3. 2.5
  4. 5
  5. There is not enough information to compute the turnover ratio.
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9.

Ken’s Canaries shows current assets of $150,000 and current liabilities of $75,000. If Ken uses cash to purchase canaries that will be resold, which is true of his working capital and current ratio?

  1. Current ratio increases; working capital does not change
  2. Both remain unchanged
  3. Current ratio increases; working capital decreases
  4. Current ratio does not change; working capital decreases
  5. Both will increase
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10. A corporation issues $500,000 in 20-year cash bonds that have an 8% interest rate, payable annually. The current market rate is 7%. The corporation uses the straight-line method to amortize the bond discount or premium. Which of the following is true?
  1. The carrying amount increases from its amount at issuance to $500,000 at maturity.
  2. The carrying amount decreases from its amount at issuance to $500,000 at maturity.
  3. The annual interest paid to the bondholders increases over the next 20 years.
  4. The annual interest paid to the bondholders decreases as the bonds reach maturity.
  5. The bonds were sold at a discount.
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