Question 1

A company's return on total assets equals 28%.If total assets and net sales are $4,500,000 and $10,000,000 respectively,how much is net income?
A)$2,800,000
B)$4,060,000
C)$1,260,000
D)$14,500,000
E)$2,030,000

Accepted Answer

Return on total assets is calculated as Net Income / Total Assets. Given the return on total assets is 28%, and total assets are $4,500,000, the net income is 0.28 * $4,500,000 = $1,260,000.

Question 2

A company's return on total assets equals 30%.If net income and net sales are $900,000 and $8,900,000 respectively,what is the amount of total assets?
A)$2,670,000
B)$270,000
C)$29,666,667
D)$3,000,000
E)$2,940,000

Accepted Answer

Return on total assets is calculated as Net Income / Total Assets. Given that the return is 30% and net income is $900,000, we can set up the equation: $900,000 / Total Assets = 0.30. Solving for Total Assets gives Total Assets = $900,000 / 0.30 = $3,000,000.

Question 3

Investments in trading securities:
A)Include only equity securities.
B)Are reported as current assets.
C)Include only debt securities.
D)Are reported at their cost,no matter what their market value.
E)Are long-term investments.

Accepted Answer

Investments in trading securities are reported as current assets on the balance sheet. Trading securities are securities that are bought and held principally for the purpose of selling them in the near term to generate profits from short-term price movements. They can include both equity and debt securities. The market value of trading securities is reported on the balance sheet, with any unrealized gains or losses being included in the income statement.

Question 4

Investments in debt and equity securities that the company actively manages and trades for profit are referred to as short-term investments in:
A)Available-for-sale securities.
B)Held-to-maturity securities.
C)Trading securities.
D)Realizable securities.
E)Liquid securities.

Accepted Answer

Short-term investments that are actively managed and traded for profit are referred to as trading securities. Available-for-sale securities and held-to-maturity securities are typically held for a longer period of time and managed differently. Realizable and liquid securities are not specific classifications of investments.

Question 5

Micron owns 3,000 shares of JVT.JVT has 25,000 total shares of stock outstanding.JVT paid $3 per share in cash dividends to its stockholders.Micron should record a:
A)Debit to Dividends for $75,000.
B)Debit to Dividends for $9,000.
C)Debit to Cash for $9,000.
D)Debit to Long-Term Investments for $9,000.
E)Credit to Long-Term Investments for $9,000.

Accepted Answer

The answer of Micron owns 3,000 shares of JVT.JVT has...

Question 6

Morgan Company purchased 2,000 shares of Asta's common stock for $143,000 as a long-term investment and is considered available-for-sale.The par value of the stock was $1 per share.Morgan paid $375 in commissions on the transaction.The entry to record the transaction would include a:
A)Credit to Common Stock for $2,000.
B)Credit to Common Stock for $143,000.
C)Credit to Common Stock for $143,375.
D)Debit to Long-Term Investments for $143,000.
E)Debit to Long-Term Investments for $143,375.

Accepted Answer

The total cost of the investment includes the purchase price and any additional costs such as commissions. Therefore, the Long-Term Investments account should be debited for the total amount of $143,375 ($143,000 purchase price + $375 commission).

Question 7

A company had net income of $43,000,net sales of $380,500,and average total assets of $220,000.Its profit margin and total asset turnover were,respectively:
A)11.3%; 1.73
B)11.3%; 19.5
C)1.7%; 19.5
D)1.7%; 11.3
E)19.5%; 11.3

Accepted Answer

Profit margin = (net income / net sales) x 100% = (43,000 / 380,500) x 100% = 11.3%
Total asset turnover = net sales / average total assets = 380,500 / 220,000 = 1.73

Question 8

Acme owns 4,000 shares of XYZ.XYZ has 50,000 total shares of stock outstanding.XYZ paid $0.82 per share in cash dividends to its stockholders.Acme should record a:
A)Debit to Dividends for $41,000.
B)Debit to Dividends for $3,280.
C)Debit to Cash for $3,280.
D)Debit to Long-Term Investments for $3,280.
E)Credit to Long-Term Investments for $3,280.

Accepted Answer

The answer of Acme owns 4,000 shares of XYZ.XYZ has...

Question 9

Six months ago,a company purchased an investment in stock for $65,000.This investment is considered available-for-sale.The current market value of the stock is $68,500.The company should record a:
A)Debit to Unrealized Loss-Equity for $3,500.
B)Credit to Unrealized Gain-Equity for $3,500.
C)Debit to Investment Revenue for $3,500.
D)Credit to Market Adjustment - Available-for-Sale for $3,500.
E)Credit to Investment Revenue for $3,500.

Accepted Answer

The company should record a credit to Unrealized Gain-Equity for the difference between the purchase price and the current market value of the stock, which is $3,500. Unrealized gains or losses on available-for-sale securities are reported in the equity section of the balance sheet until the securities are sold. Therefore, options A, C, D, and E are incorrect.

Question 10

Doherty Corporation had net income of $30,000,net sales of $1,000,000,and average total assets of $500,000.Its return on total assets is equal to:
A)3%
B)200%
C)6%
D)17%
E)1.5%

Accepted Answer

Return on total assets is calculated as (Net Income / Average Total Assets) * 100. For Doherty Corporation, it is ($30,000 / $500,000) * 100 = 6%.

Question 11

Available-for-sale debt securities are:
A)Recorded at cost and remain at cost over the life of the investment.
B)Reported at historical cost,adjusted for the amortized amount of any difference between cost and maturity value.
C)Reported at market value on the balance sheet.
D)Intended to be held to maturity.
E)Always classified with Long-Term Liabilities.

Accepted Answer

Available-for-sale debt securities are reported at fair value (market value) on the balance sheet, with unrealized gains and losses reported in other comprehensive income until the security is sold.

Question 12

A company had net income of $82,000,net sales of $781,000,and average total assets of $300,000.Its profit margin and total asset turnover were respectively:
A)10.5%; 0.38
B)10.5%; 2.6
C)9.52%; 2.6
D)27.3%; 1
E)27.3%; 9.52

Accepted Answer

The answer of A company had net income of $82,000,net...

Question 13

Held-to-maturity securities are:
A)Always classified as long-term liabilities.
B)Part of equity.
C)Debt securities that a company intends and is able to hold to maturity.
D)Equity securities that a company intends and is able to hold to maturity.
E)Equity securities that have a maturity value greater than cost.

Accepted Answer

Held-to-maturity securities are debt securities that a company intends and is able to hold to maturity. They are reported at amortized cost on the balance sheet and any unrealized gains or losses are ignored. They are not classified as long-term liabilities or part of equity, and they do not include equity securities. The maturity value is not relevant for held-to-maturity securities.

Question 14

A company had investments in long-term available-for-sale securities.At the end of the current year,the company's portfolio had a $162,000 cost and $164,000 market value. What is the current year's adjustment to market value given the following account balances at the end of the prior year?

A) 
B) 
C) 
D) 
E)

Accepted Answer

The answer of A company had investments in long-term available-for-sale...

Question 15

A company had net income of $2,785,000,net sales of $250,000,000,average total assets of $6,000,000,and equity investments of $40,000.Its return on total assets equals:
A)$3,215,000
B)41.67%
C)21.54%
D)69.63%
E)46.42%

Accepted Answer

The answer of A company had net income of $2,785,000,net...

Question 16

A company had net income of $40,000,net sales of $300,000,and average total assets of $200,000.Its profit margin and total asset turnover were respectively:
A)13.3%; 0.2
B)13.3%; 1.5
C)2.0%; 1.5
D)1.5%; 0.2
E)1.5%; 13.3

Accepted Answer

Profit margin is calculated by dividing net income by net sales. Therefore, profit margin = ($40,000/$300,000) x 100% = 13.3%.

Total asset turnover is calculated by dividing net sales by average total assets. Therefore, total asset turnover = $300,000/$200,000 = 1.5.

Only option B matches both values correctly. Therefore, the answer is B.

Question 17

Return on total assets measures a company's ability to:
A)Produce net income from net sales.
B)Produce sales from net assets.
C)Produce net income from net assets.
D)Increase its asset base from sales.
E)Increase its asset base from net income.

Accepted Answer

Return on total assets measures a company's ability to generate net income from its total assets. This ratio is calculated by dividing net income by total assets. It indicates the efficiency with which a company uses its assets to generate profits. A higher return on total assets means that the company is more efficient in generating profit from its asset base.

Question 18

A company has net income of $250,000,net sales of $2,000,000,and average total assets of $1,500,000.Its return on total assets is equal to:
A)12.5%
B)13.3%
C)16.7%
D)75.0%
E)600.0%

Accepted Answer

The answer of A company has net income of $250,000,net...

Question 19

A company had net income of $2,660,000,net sales of $25,000,000,and average total assets of $8,000,000.Its return on total assets is equal to:
A)3.01%
B)10.64%
C)32.00%
D)33.25%
E)300.75%

Accepted Answer

The answer of A company had net income of $2,660,000,net...

Question 20

A decrease in the fair market value of a security that has not yet been realized through an actual sale of the security is called a(n):
A)Contingent loss
B)Realizable loss
C)Unrealized loss
D)Capitalized loss
E)Market loss

Accepted Answer

An unrealized loss is a decrease in the fair market value of a security that has not yet been realized through an actual sale of the security.

Quiz 15: Investments and International Operations

A company's return on total assets equals 28%.If total assets and net sales are $4,500,000 and $10,000,000 respectively,how much is net income?

A company's return on total assets equals 30%.If net income and net sales are $900,000 and $8,900,000 respectively,what is the amount of total assets?

Investments in trading securities:

Investments in debt and equity securities that the company actively manages and trades for profit are referred to as short-term investments in:

Micron owns 3,000 shares of JVT.JVT has 25,000 total shares of stock outstanding.JVT paid $3 per share in cash dividends to its stockholders.Micron should record a:

Morgan Company purchased 2,000 shares of Asta's common stock for $143,000 as a long-term investment and is considered available-for-sale.The par value of the stock was $1 per share.Morgan paid $375 in commissions on the transaction.The entry to record the transaction would include a:

A company had net income of $43,000,net sales of $380,500,and average total assets of $220,000.Its profit margin and total asset turnover were,respectively:

Acme owns 4,000 shares of XYZ.XYZ has 50,000 total shares of stock outstanding.XYZ paid $0.82 per share in cash dividends to its stockholders.Acme should record a:

Six months ago,a company purchased an investment in stock for $65,000.This investment is considered available-for-sale.The current market value of the stock is $68,500.The company should record a:

Doherty Corporation had net income of $30,000,net sales of $1,000,000,and average total assets of $500,000.Its return on total assets is equal to:

Available-for-sale debt securities are:

A company had net income of $82,000,net sales of $781,000,and average total assets of $300,000.Its profit margin and total asset turnover were respectively:

Held-to-maturity securities are:

A company had investments in long-term available-for-sale securities.At the end of the current year,the company's portfolio had a $162,000 cost and $164,000 market value. What is the current year's adjustment to market value given the following account balances at the end of the prior year?

A company had net income of $2,785,000,net sales of $250,000,000,average total assets of $6,000,000,and equity investments of $40,000.Its return on total assets equals:

A company had net income of $40,000,net sales of $300,000,and average total assets of $200,000.Its profit margin and total asset turnover were respectively:

Return on total assets measures a company's ability to:

A company has net income of $250,000,net sales of $2,000,000,and average total assets of $1,500,000.Its return on total assets is equal to:

A company had net income of $2,660,000,net sales of $25,000,000,and average total assets of $8,000,000.Its return on total assets is equal to:

A decrease in the fair market value of a security that has not yet been realized through an actual sale of the security is called a(n) :