ACC 240 Fundamental of Accounting Exam
Review Questions & Answers 2024/2025
Graded A+ (GCU)
For Year 2, sales were $1,000,000, and cost of goods sold was $500,000. Inventories
amounted to $100,000 at the end of Year 1 and $140,000 at the end of Year 2. The
days' sales in inventory for Year 2 (rounded to one decimal) was: - ANS✔✔--
$140,000 / ($500,) = 102.2 days
Which statements are true regarding the price/earning (P/E) ratio? - ANS✔✔---Low
P/E ratios usually indicate poor earnings expectations.
-A high P/E ratio usually means that investors expect the firm to have strong future
earnings and dividend growth.
-Firms with high P/E ratios generally have strong investor confidence.
Firm A's common stock has a par value per share of $1, market value per share of $90,
earnings per share of $5, dividends per share of $2, and a book value per share of $60.
What is Firm A's price/earnings ratio? - ANS✔✔--$90 / $5 = $18 per share
Firm B's common stock has a par value per share of $1, market value per share of $72,
dividends per share of $4, earnings per share of $8, and a book value per share of $64.
What is Firm B's dividend yield (rounded to one decimal)? - ANS✔✔--$4 / $72 = 5.6%
Suppliers or potential suppliers/creditors of a firm consider which of the following to be
more important than the aggregate working capital or liquidity ratios of the firm? -
ANS✔✔---Cash discounts availed by the firm for prompt payments made
-Current and recent payment experience of the firm
The use of an accelerated depreciation method and the LIFO inventory cost flow
assumption will usually (increase/decrease) a company's total asset turnover relative to
using the straight-line method and FIFO. - ANS✔✔--Increase
Identify the true statements about credit-rating firms.
Multiple select question.
-They evaluate the common and preferred stock issues of publicly traded companies.
-They usually have a rating system and assign a credit risk value based on that system.
-They do not allow the companies being reported on to see the data in their files.
-They assign ratings to only speculative bonds and stocks. - ANS✔✔--They evaluate
the common and preferred stock issues of publicly traded companies.
They usually have a rating system and assign a credit risk value based on that system.
, The ratios used to facilitate the interpretation of an entity's financial position and results
of operations can be grouped into which four categories?
Multiple select question.
Per share
Activity
Cash flow
Profitability
Liquidity
Debt (or financial leverage) - ANS✔✔--liquidity
profitability
debt
activity
Sales were $500,000 in Year 1 and $600,000 in Year 2. Accounts receivable was
$50,000 at the end of Year 1 and $30,000 at the end of Year 2. The accounts receivable
turnover for Year 2 (rounded to one decimal) was: - ANS✔✔--$600,000 / (($50,000 +
$30,000) / 2) = 15.0 times
Multiple choice question.
-the straight-line depreciation method and the FIFO cost-flow assumption.
-an accelerated depreciation method and the LIFO cost flow assumption.
-an accelerated depreciation method and the FIFO cost flow assumption.
-the straight-line depreciation method and the LIFO cost flow assumption. - ANS✔✔--
an accelerated depreciation method and the LIFO cost flow assumption.
To calculate the inventory turnover, you would normally divide: - ANS✔✔--cost of
goods sold by the average inventory.
Credit-rating firms gather and report data about which of the following? - ANS✔✔--
Individual companies
Segments of the economy
Industries
Sales for Year 2 were $2,400,000. Accounts receivable was $200,000 at the end of
Year 1 and $300,000 at the end of Year 2. The accounts receivable turnover for Year 2
(rounded to one decimal) was: - ANS✔✔--$2,400,000 / (($200,000 + $300,000) / 2) =
9.6 times
Cost of goods sold for Year 2 was $900,000. Sales for Year 2 was $1,500,000. Plant
and equipment was $500,000 at the end of Year 1 and $750,000 at the end of Year 2.
The plant and equipment turnover for Year 2 (rounded to one decimal) was: -
ANS✔✔--$1,500,000 / (($500,000 + $750,000) / 2) = 2.4 times
The LIFO reserve is the difference between the inventory valuation as reported under: -
ANS✔✔--LIFO and the amount that would have been reported under FIFO.
Review Questions & Answers 2024/2025
Graded A+ (GCU)
For Year 2, sales were $1,000,000, and cost of goods sold was $500,000. Inventories
amounted to $100,000 at the end of Year 1 and $140,000 at the end of Year 2. The
days' sales in inventory for Year 2 (rounded to one decimal) was: - ANS✔✔--
$140,000 / ($500,) = 102.2 days
Which statements are true regarding the price/earning (P/E) ratio? - ANS✔✔---Low
P/E ratios usually indicate poor earnings expectations.
-A high P/E ratio usually means that investors expect the firm to have strong future
earnings and dividend growth.
-Firms with high P/E ratios generally have strong investor confidence.
Firm A's common stock has a par value per share of $1, market value per share of $90,
earnings per share of $5, dividends per share of $2, and a book value per share of $60.
What is Firm A's price/earnings ratio? - ANS✔✔--$90 / $5 = $18 per share
Firm B's common stock has a par value per share of $1, market value per share of $72,
dividends per share of $4, earnings per share of $8, and a book value per share of $64.
What is Firm B's dividend yield (rounded to one decimal)? - ANS✔✔--$4 / $72 = 5.6%
Suppliers or potential suppliers/creditors of a firm consider which of the following to be
more important than the aggregate working capital or liquidity ratios of the firm? -
ANS✔✔---Cash discounts availed by the firm for prompt payments made
-Current and recent payment experience of the firm
The use of an accelerated depreciation method and the LIFO inventory cost flow
assumption will usually (increase/decrease) a company's total asset turnover relative to
using the straight-line method and FIFO. - ANS✔✔--Increase
Identify the true statements about credit-rating firms.
Multiple select question.
-They evaluate the common and preferred stock issues of publicly traded companies.
-They usually have a rating system and assign a credit risk value based on that system.
-They do not allow the companies being reported on to see the data in their files.
-They assign ratings to only speculative bonds and stocks. - ANS✔✔--They evaluate
the common and preferred stock issues of publicly traded companies.
They usually have a rating system and assign a credit risk value based on that system.
, The ratios used to facilitate the interpretation of an entity's financial position and results
of operations can be grouped into which four categories?
Multiple select question.
Per share
Activity
Cash flow
Profitability
Liquidity
Debt (or financial leverage) - ANS✔✔--liquidity
profitability
debt
activity
Sales were $500,000 in Year 1 and $600,000 in Year 2. Accounts receivable was
$50,000 at the end of Year 1 and $30,000 at the end of Year 2. The accounts receivable
turnover for Year 2 (rounded to one decimal) was: - ANS✔✔--$600,000 / (($50,000 +
$30,000) / 2) = 15.0 times
Multiple choice question.
-the straight-line depreciation method and the FIFO cost-flow assumption.
-an accelerated depreciation method and the LIFO cost flow assumption.
-an accelerated depreciation method and the FIFO cost flow assumption.
-the straight-line depreciation method and the LIFO cost flow assumption. - ANS✔✔--
an accelerated depreciation method and the LIFO cost flow assumption.
To calculate the inventory turnover, you would normally divide: - ANS✔✔--cost of
goods sold by the average inventory.
Credit-rating firms gather and report data about which of the following? - ANS✔✔--
Individual companies
Segments of the economy
Industries
Sales for Year 2 were $2,400,000. Accounts receivable was $200,000 at the end of
Year 1 and $300,000 at the end of Year 2. The accounts receivable turnover for Year 2
(rounded to one decimal) was: - ANS✔✔--$2,400,000 / (($200,000 + $300,000) / 2) =
9.6 times
Cost of goods sold for Year 2 was $900,000. Sales for Year 2 was $1,500,000. Plant
and equipment was $500,000 at the end of Year 1 and $750,000 at the end of Year 2.
The plant and equipment turnover for Year 2 (rounded to one decimal) was: -
ANS✔✔--$1,500,000 / (($500,000 + $750,000) / 2) = 2.4 times
The LIFO reserve is the difference between the inventory valuation as reported under: -
ANS✔✔--LIFO and the amount that would have been reported under FIFO.
