MGMT 200 EXAM 3 QUESTIONS WITH
100% CORRECT ANSWERS
Which of the following is an example of vertical analysis?
A. Comparing operating income across companies
B. Comparing debt with industry averages
C. Comparing the change in income over time
D. Comparing income statement items as a percentage of sales - Answer-D. Comparing
income statement items as a percentage of sales
In horizontal analysis, the base year is the most current year being examined.
A. True
B. False - Answer-B. False
Horizontal analysis will reveal, for example, the percentage of net sales consumed by
salaries expense.
A. True
B. False - Answer-B. False
Which of the following is an example of horizontal analysis?
A. Comparing the change in stockholders' equity over time
B. Comparing gross profit across companies
C. Comparing gross profit with operating expenses
D. Comparing assets with equity - Answer-A. Comparing the change in stockholders'
equity over time
The current ratio on the Balance Sheet is
A. 2.0.
B. 1.5.
C. 1.0.
D. 0.5. - Answer-B. 1.5.
A company with a current ratio of 1.5 is considered more liquid than one with a current
ratio of 1.0.
A. True
B. False - Answer-A. True
Assuming a current ratio of 1.5, how will the collection of an accounts receivable affect
the ratio?
A. No change to the current ratio
B. Increase the current ratio
,C. Decrease the current ratio
D. Could either increase or decrease the current ratio - Answer-A. No change to the
current ratio
Will the profit margin of a business be higher than its gross margin?
A. Yes
B. No - Answer-B. No
Allegheny Corporation's 2017 gross margin ratio on the following schedule is:
A. 30.0%.
B. 25.0%.
C. 15.0%.
D. 10.0%. - Answer-B. 25.0%
A disadvantage of the corporate form of business is
A. centralized authority and responsibility.
B. its status as a separate legal entity.
C. government regulation.
D. continuous existence. - Answer-C. government regulation.
When a corporation is formed what documents are filed with the state jurisdiction?
a) Articles of incorporation & by‐laws
b) State entity registration form & common stock certificate form
c) Articles of incorporation & common stock certificate form
d) By‐laws & state entity registration form - Answer-a) Articles of incorporation & by‐
laws
Advantages of the corporate form of business include which of the following?
I. Double taxation
II. Ability to raise capital
III. Ability to transfer ownership
IV. More paperwork
V. Limited liability
a. II
b. I., II., III
c. II., IV., V
d. II., III., V - Answer-d. II., III., V
Limited liability means that even in the event of bankruptcy, stockholders in a
corporation can lose no more than the amount they invested in the company
a. True
b. False - Answer-a. True
Treasury shares plus outstanding shares equal
A. unissued shares.
B. available shares.
, C. authorized shares.
D. issued shares. - Answer-D. issued shares.
Contributed capital is the amount
stockholders have invested in the company.
a. true
b. false - Answer-a. true (external funds)
The par value of shares issued is normally
recorded in the
a. Additional Paid‐in Capital account.
b. Retained Earnings account.
c. Common Stock account.
d. asset account Common Stock. - Answer-c. Common Stock account.
Meadows Racetrack, Inc. issues 1,000 shares of $1 par
value common stock for $20 per share, what would be the
effect on the accounting equation?
a. Increase assets and increase liabilities
b. Increase assets and increase revenue
c. Increase assets and decrease stockholders'
equity
d. Increase assets and increase stockholders'
equity - Answer-d. Increase assets and increase stockholders'
equity
Brighton, Inc. borrowed $50,000 from a bank and signed
a note agreement. What journal entry should Brighton
record?
A. Debit Notes Receivable, $50,000; Credit Cash,
$50,000.
B. Debit Notes Payable, $50,000; Credit Cash,
$50,000.
C. Debit Cash, $50,000; Credit Notes Payable,
$50,000.
D. Debit Cash, $50,000; Credit Notes Receivable,
$50,000. - Answer-C. Debit Cash, $50,000; Credit Notes Payable,
$50,000.
On November 1, 2017, Burlingame, Inc. signed a $100,000,
6%, six‐month note payable with the amount borrowed
plus accrued interest due six months later on May 1, 2018.
What is the amount of the adjusting entry for interest
expense on the note at December 31, 2017?
A. Credit $1,000.
100% CORRECT ANSWERS
Which of the following is an example of vertical analysis?
A. Comparing operating income across companies
B. Comparing debt with industry averages
C. Comparing the change in income over time
D. Comparing income statement items as a percentage of sales - Answer-D. Comparing
income statement items as a percentage of sales
In horizontal analysis, the base year is the most current year being examined.
A. True
B. False - Answer-B. False
Horizontal analysis will reveal, for example, the percentage of net sales consumed by
salaries expense.
A. True
B. False - Answer-B. False
Which of the following is an example of horizontal analysis?
A. Comparing the change in stockholders' equity over time
B. Comparing gross profit across companies
C. Comparing gross profit with operating expenses
D. Comparing assets with equity - Answer-A. Comparing the change in stockholders'
equity over time
The current ratio on the Balance Sheet is
A. 2.0.
B. 1.5.
C. 1.0.
D. 0.5. - Answer-B. 1.5.
A company with a current ratio of 1.5 is considered more liquid than one with a current
ratio of 1.0.
A. True
B. False - Answer-A. True
Assuming a current ratio of 1.5, how will the collection of an accounts receivable affect
the ratio?
A. No change to the current ratio
B. Increase the current ratio
,C. Decrease the current ratio
D. Could either increase or decrease the current ratio - Answer-A. No change to the
current ratio
Will the profit margin of a business be higher than its gross margin?
A. Yes
B. No - Answer-B. No
Allegheny Corporation's 2017 gross margin ratio on the following schedule is:
A. 30.0%.
B. 25.0%.
C. 15.0%.
D. 10.0%. - Answer-B. 25.0%
A disadvantage of the corporate form of business is
A. centralized authority and responsibility.
B. its status as a separate legal entity.
C. government regulation.
D. continuous existence. - Answer-C. government regulation.
When a corporation is formed what documents are filed with the state jurisdiction?
a) Articles of incorporation & by‐laws
b) State entity registration form & common stock certificate form
c) Articles of incorporation & common stock certificate form
d) By‐laws & state entity registration form - Answer-a) Articles of incorporation & by‐
laws
Advantages of the corporate form of business include which of the following?
I. Double taxation
II. Ability to raise capital
III. Ability to transfer ownership
IV. More paperwork
V. Limited liability
a. II
b. I., II., III
c. II., IV., V
d. II., III., V - Answer-d. II., III., V
Limited liability means that even in the event of bankruptcy, stockholders in a
corporation can lose no more than the amount they invested in the company
a. True
b. False - Answer-a. True
Treasury shares plus outstanding shares equal
A. unissued shares.
B. available shares.
, C. authorized shares.
D. issued shares. - Answer-D. issued shares.
Contributed capital is the amount
stockholders have invested in the company.
a. true
b. false - Answer-a. true (external funds)
The par value of shares issued is normally
recorded in the
a. Additional Paid‐in Capital account.
b. Retained Earnings account.
c. Common Stock account.
d. asset account Common Stock. - Answer-c. Common Stock account.
Meadows Racetrack, Inc. issues 1,000 shares of $1 par
value common stock for $20 per share, what would be the
effect on the accounting equation?
a. Increase assets and increase liabilities
b. Increase assets and increase revenue
c. Increase assets and decrease stockholders'
equity
d. Increase assets and increase stockholders'
equity - Answer-d. Increase assets and increase stockholders'
equity
Brighton, Inc. borrowed $50,000 from a bank and signed
a note agreement. What journal entry should Brighton
record?
A. Debit Notes Receivable, $50,000; Credit Cash,
$50,000.
B. Debit Notes Payable, $50,000; Credit Cash,
$50,000.
C. Debit Cash, $50,000; Credit Notes Payable,
$50,000.
D. Debit Cash, $50,000; Credit Notes Receivable,
$50,000. - Answer-C. Debit Cash, $50,000; Credit Notes Payable,
$50,000.
On November 1, 2017, Burlingame, Inc. signed a $100,000,
6%, six‐month note payable with the amount borrowed
plus accrued interest due six months later on May 1, 2018.
What is the amount of the adjusting entry for interest
expense on the note at December 31, 2017?
A. Credit $1,000.
