IV.

Multiple Choices
Chapter 3
Companies A, B, C :
Understanding Financial Statement Inventories
17. Which group of items would Property, P & E
most likely be included in the other Total Assets
assets account on the balance
sheet? Which company is most likely a
retailer? a wholesaler? a
a. Land held for investment, start- manufacturer?
up costs, and long-term
prepayments. Company A Company B
b. Inventories, marketable Company C
securities, bonds. a. Wholesaler Manufacturer Retailer
c. One-year prepaid insurance b. Retailer Wholesaler
policy, stock investments, Manufacturer
copyrights. c. Manufacturer Wholesaler Retailer
d. Inventories, franchies, patents. d. Manufacturer Retailer
Wholesaler
18. What is the differeance between
notes payable banks and current 20. Which if the following items
maturities of long-term debt? coyld cause the recognition of
accrued liabilities?
a. There is no difference.
b. Notes payable banks are short- a. Sales, taxes, iterest income.
term obligations, while current b. Sales, interest expense, rent.
maturities of long-term are the c. Salaries, rent, insurance.
portio of long-term debt that will be d. Salaries, interest expense,
prepaid during the upcoming year. interest income.
c. Notes payable- banks are usually
included under current liabilities, 21. Which of the items below need
and current maturities of long-term not be disclosed separately in the
debt are included under long-term income statement?
debt.
d. Notes payable- banks are long- a. Selling a major business
term liabilities, and current segment.
maturities of long-term debt are b. Salary expense.
current liabilities. c. Extraodinary transactions.
d. Cumulative effect of changes in
19. accounting principles.
A B C
90,000 120,00 180,00
0 0 22. What does the income
statement measure for a firm?
75,000 30,000 45,000
300,00 300,00 300,00
a. The financing and investment
0 0 0
activities for a period.
b. The changes in assets and
liabilities that occurred during a
pepriod.
c. The results of operations for a
period.
d. The financial position of a firm for
a period.
23. Which two financial statements
are frequently combined for
presentation purposes?
a. The income and retained
earnings statements.
b. The statement of financial
position and the balance sheet.
c. The statement of cash flows and
the retained earnings statement.
d. The balance sheet and the
income statement.
24. What are three profit measures
calculated from the income
statement?
a. Gross profit margin, cost of goods
sold percentage, EBIT.
b. Gross profit margin, operating
profit margin, net profit margin.
c. Operating profit margin, net profit
margin, repairs and maintenance to
fixed assets.
d. None of the above.