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If a company repurchases shares for a price less than the average price of the shares then the difference in price will be a
debit to retained earnings.
O credit to contributed surplus.
debit to contributed surplus. O credit to retained earnings.
Question 59 (2 points) ✔Saved
Listen
Limited liability of shareholders means
dividends will be paid regardless of net income.
the life of the corporation is limited.
deferral or reduction of taxes.
creditors have no legal claim on a shareholder’s personal assets.
Question 58 (2 points)
Listen
Cash dividends are declared out of
Preferred Shares.
Retained Earnings.
Dividends Payable.
Common Shares.
Question 59 (2 points)
Listen
Limited liability of shareholders means
O dividends will be paid regardless of net income.
the life of the corporation is limited.
deferral or reduction of taxes.
creditors have no legal claim on a shareholder’s personal assets.
Question 56 (2 points)
Listen
Which one of the following would not be considered an advantage of the corporate form of organization?
separate legal existence
limited liability of shareholders
government regulation
continuous life
Question 57 (2 points)
Listen
The number of shares that may be issued according to the corporation’s articles of incorporation is referred to as the
issued shares.
unissued shares.
redeemable shares.
authorized shares.
Question 55 (2 points)
Listen
Shareholders directly elect the corporation’s
board of directors.
chief executive officer.
controller.
president.
Question 53 (2 points)
Listen
A disadvantage of the corporate form of organization is
government regulation.
ease of transfer of ownership.
its status as a separate legal entity.
continuous existence.
Question 54 (2 points)
Listen
Dividends in arrears are dividends on
cumulative preferred shares that have been declared but have not been paid. cumulative preferred shares that have not been declared for a given period of time.
common dividends that have been declared but have not been paid.
noncumulative preferred shares that have not been declared for a given period of time.
Question 51 (2 points)
Listen
The two ways that a corporation can be classified by ownership are
shares and non-shares.
publicly held and privately held.
majority and minority.
federal and provincial.
Question 52 (2 points)
4Listen
Return on common shareholders’ equity is a ratio that
shows the relationship between net income available for common shareholders and average common shareholders’ equity.
cannot be calculated if the company has preferred shares in addition to common shares.
is calculated by dividing net income plus preferred dividends by average common shareholders’ equity.
is calculated by dividing net income plus preferred dividends by average common shareholders’ equity and shows the relationship between net income available for common shareholders and average common shareholders’ equity.
Question 50 (2 points)
Listen
Under the corporate form of business organization
a shareholder’s acts can bind the corporation even though they have not been appointed as an agent of the corporation.
a shareholder is personally liable for the debts of the corporation.
the corporation’s life is continuous.
shareholders wishing to sell their shares must get the approval of other shareholders.
The statement of cash flows
summarizes the operating, financing, and investing activities of a company.
is a special section of the statement of income.
is another name for the statement of income.
must be prepared on a daily basis.
Question 49 (2 points)
Listen
Retractable preferred shares are
included in shareholders’ equity on the statement of retained earnings.
very rare in Canada.
never issued.
callable at the corporation’s option.
Question 40 (4 points)
Listen
The acquisition of land by issuing common shares is
a cash transaction and would be reported in the body of a statement of cash flows.
only reported if the statement of cash flows is prepared using the direct method. a noncash transaction but would be reported in the body of a statement of cash flows.
a noncash transaction that is not reported in the body of a statement of cash flows.
Question 47 (2 points)
Listen
The primary purpose of the statement of cash flows is to
prove that revenues exceed expenses if there is a net income.
provide information about the investing and financing activities during a period.
provide information about cash receipts and cash payments during a period.
report to the Canada Revenue Agency.
Question 45 (2 points)
Listen
Use the following information to answer the question(s) below.
Ingles Corp., a private company reporting under ASPE, engaged in the following transactions. For each transaction, indicate where, if at all, it would be classified on the statement of cash flows.
Purchase of land and building with a mortgage:
operating activities section
investing activities section
financing activities section
Does not represent a cash flow.
Question 43 (2 points)
4Listen
The typical order of presentation of activities on the statement of cash flows is
financing, operating, and investing.
operating, financing, and investing.
financing, investing, and operating.
operating, investing, and financing.
Question 44 (2 points)
Listen
In preparing a statement of cash flows, the conversion of bonds into common shares will be reported in the
notes to the financial statements.
investing activities section.
financing activities section.
shareholders’ equity section.
Question 41 (2 points)
Listen
Free cash flow is a measure of
liquidity.
profitability.
solvency.
creativity.
Question 42 (2 points)
Listen ‣
In preparing a statement of cash flows, preferred shares issued in exchange for land would be reported in the
financing activities section.
operating activities section.
notes to the financial statements.
investing activities section.
Question 40 (2 points)
4 Listen
Use the following information to answer the question(s) below.
Ingles Corp., a private company reporting under ASPE, engaged in the following transactions. For each transaction, indicate where, if at all, it would be classified on the statement of cash flows.
Issue of common shares in exchange for equipment:
operating activities section
investing activities section
financing activities section
Does not represent a cash flow.
Question 39 (2 points)
Listen
At December 31, 2024, Reign Industry reported $40,000 in cash provided by operating activities, paid $8,000 in dividends, and spent $30,000 for new equipment. The company also had a receipt of $18,000 for long-term debt. Its free cash flow for 2024 was
$2,000.
$10,000.
$20,000.
$32,000.
Question 38 (2 points)
Listen
Generally, the first category shown on the statement of cash flows is cash flows provided (used) by
operating activities.
investing activities.
financing activities.
significant noncash activities.
Question 38 (2 points)
Listen
Generally, the first category shown on the statement of cash flows is cash flows provided (used) by
operating activities.
investing activities.
financing activities.
significant noncash activities.
Use the following information to answer the question(s) below.
Ingles Corp., a private company reporting under ASPE, engaged in the following transactions. For each transaction, indicate where, if at all, it would be classified on the statement of cash flows.
Issue of preferred shares for cash:
operating activities section
investing activities section
financing activities section
Does not represent a cash flow.
Question 28.12 cintal
Question 35 (2 points)
Listen
A long-term note secured by collateral may be referred to as a
premium.
debenture.
bond.
mortgage.
Question 36 (2 points)
Listen
Last year, Hadley Bakery’s statement of income reported the following: net income, $325,600; interest expense, $81,400; and income tax expense, $113,960. The company’s times interest earned ratio is
4.0 times.
5.0 times.
4.6 times.
6.4 times.
Question 33 (2 points)
Listen
The relationship between current assets and current liabilities is
useful in determining the amount of a company’s non-current debt.
useful in evaluating a company’s solvency.
useful in determining profitability.
useful in evaluating a company’s liquidity.
Question 34 (2 points)
Listen
Which of the following statements is false?
000
With equal instalment loans, the equal periodic payments result in the interest portion increasing each period.
With equal instalment loans, the equal periodic payments result in the interest portion decreasing each period.
With equal instalment payments, the reduction of principal increases.
With equal instalment loans, the equal periodic payments are constant each period.
Question 32 (2 points)
Listen
Failure to record a liability will probably
have no effect on net income.
result in overstated total liabilities and shareholders’ equity.
result in overstated net income.
result in overstated total assets.
Question 31 (2 points)
Listen
A measure of a company’s solvency is the
inventory turnover ratio.
asset turnover ratio.
times interest earned ratio.
current ratio.
Use the following information to answer the question(s) below.
On January 1 of this year, Gertoni Lenders agrees to lend Ester Corp. $150,000. Ester Corp. signs a $150,000, 6%, 9-month loan. Ester Corp. has a June 30 year end. Interest is due at maturity.
The entry made by Ester Corp. on January 1 to record the receipt of the loan is
Cash
Interest Expense
150,000
6,750
Bank Loan Payable
Interest Payable
150,000
6,750
Cash
150,000
Bank Loan Payable
150,000
Interest Expense
6,750
Cash
145,500
Bank Loan Payable
150,000
Cash
150,000
Interest Expense
6,750
Bank Loan Payable
156,750
Question 29 (2 points)
Listen
Which of the following statements is true?
With instalment payments on a non-current note payable, the principal portion decreases each period.
With instalment payments on a non-current note payable, the interest portion does not change each period.
With instalment payments on a non-current note payable, the interest portion increases each period.
With instalment payments on a non-current note payable, the interest portion decreases each period.
Question 27 (2 points)
Listen
Which of the following statements is false?
Notes payable are sometimes used instead of accounts payable.
Notes payable reflect a promise to repay a specified amount of money either at a fixed future date or on demand.
Most notes and bank loans are non-interest bearing.
Notes payable usually require the borrower to pay interest.
Question 28 (2 points)
Listen
Last year, Hadley Bakery’s statement of financial position reported the following: cash $22,000, accounts payable $41,200, accounts receivable $2,500, common shares $50,000, deferred revenue $1,300, equipment (net) $168.900, bonds payable $84,600, inventory $16.300, and retained earnings $32,600. The company’s debt to total assets ratio is
59.6%.
60.0%.
78.8%.
60.6%.
Listen
Giraffe reported the following information for 2024:
Statement of income for 2024
Sales
$95,000
Cost of goods sold
45,000
Gross profit
50,000
Operating expenses
15,000
Income before income tax
35,000
Income tax expense
5,000
Net income
$30,000
Share data for 2024
Weighted average number of common shares 6,000
Market price per common share
$40
$0.90
Dividends per share
What is the dividend yield for 2024?
Question 25 (2 points)
Listen
The entry to record interest expense on a bank loan payable is a
debit to note payable and credit to interest income.
debit to interest expense and credit to note payable.
debit to interest payable and credit to interest income.
debit to interest expense and credit to interest payable.
Question 26 (2 points)
Listen
Interest rates on notes and loans are usually stated as a(n)
semi-annual rate.
annual rate.
daily rate.
monthly rate.
Listen
Enmerick Corporation purchases a new delivery truck for $45,000. The company logo is painted on the side of the truck for $1,500. The motor vehicle licence is $175. Annual insurance is $1,500. At what amount does Enmerick record the cost of the new truck?
$45,175
$46,675
$45,000
$46,500
Question 24 (2 points)
Listen
The return on assets ratio is calculated as
net sales divided by net income times asset turnover.
profit margin times asset turnover.
average total assets divided by net income.
net income divided by sales times profit margin.
– Question 21 (2 points)
Listen
The asset turnover ratio is calculated by
multiplying sales by average total assets.
dividing average total assets by sales.
dividing net income by average total assets.
I dividing sales by average total assets.
Question 22 (2 points)
Listen ▸
The carrying amount of an asset is equal to the
asset’s cost less residual value less accumulated depreciation.
asset’s fair value less its original cost.
asset’s cost less residual value.
asset’s cost less accumulated depreciation.
Question 20 (2 points)
Listen
On July 1, 2024, Happy Hound Kennels Inc. sells equipment for $20,000. The equipment originally cost $80,000, had an estimated five-year life and an expected residual value of $10,000. The Accumulated Depreciation account had a balance of $49,000 on January 1, 2024, using the straight-line method. The gain or loss on disposal is
$4,000 loss.
$11,000 loss.
$11,000 gain.
$4,000 gain.
Question 19 (2 points)
Listen
On April 1, 2024, a machine was purchased for $33,600. It was estimated that it would have a $3,200 residual value at the end of its five-year useful life. It was also estimated that the machine would be used for a total of 80,000 hours over the five years. If the actual number of machine hours used in 2024 was 12,000 hours and the company uses the units-of-production method of depreciation, the depreciation expense for 2024 would be
$4,560.
$3,420.
$5,040.
$3,780.
12
Rocky Industries Ltd. offers
a one-year warranty for
every tent it sells. On
average for the past 2
years, 3% of all tents are
returned under warranty. The cost to fix an average repair is $35.
LIVEIUN
Under IFRS, identify whether each of the following is a provision or contingent liability.
1
2
Exciting Ride Inc. provides
boarding and coaching
services. Recently a prize
horse was injured while
under its care. The owner
has negotiated that Exciting
Ride will need to pay 50%
of the veterinary bills. The vet has not yet given Exciting Ride, or the owner, a quote for services.
1. Contingent liability
2. Provision
What are the basic earnings per share for 2024?
$2.50
$15.83
$5.00
$0.90
Giraffe reported the following information for 2024:
Statement of income for 2024
Sales
$95,000
Cost of goods sold
45,000
Gross profit
50,000
Operating expenses
15,000
Income before income tax
35,000
Income tax expense
5,000
Net income
$30,000
Share data for 2024
Weighted average number of common shares 6,000
Market price per common share
Dividends per share
$40
$0.90
What are the basic earnings per share for 2024?
Question 8 (2 points)
Listen
Griffin Inc. purchased supplies costing $4,250 and debited Supplies for the full amount. At the end of the accounting period, a physical count of supplies revealed $2,100 still on hand. The appropriate adjusting entry to be made at the end of the period would be
debit Supplies, $4,250; credit Supplies Expense, $4,250.
debit Supplies Expense, $2,150; credit Supplies, $2,150.
debit Supplies, $2,100; credit Supplies Expense, $2,100.
debit Supplies Expense, $2,100; credit Supplies, $2,100.
All of the following are advantages of the corporate form of organization except
government regulation.
ease of transfer of ownership.
continuous life.
reduced income tax.
An inventory turnover ratio
that is significantly lower than the industry average usually indicates difficulty with selling that inventory and the likelihood of incurring lower than average storage costs.
that is significantly higher than the industry average may indicate that a company is maintaining inventory levels that are too high.
measures the number of times, on average, the inventory was sold during the period.
is a measure of solvency that focuses on efficient use of inventory.
What is the current ratio for 2024?
1.6:1
2.0:1
1.7:1
0.6:1
Question 5 (2 points)
Cash
Accounts receivable Inventory
$ 45,000
50,000
35,000
25,000
25,000 20,000
Property, plant, and equipment 240,000 210,000 Total assets
$350,000 $300,000
Liabilities and Shareholders’ Equity
Current liabilities
$ 60,000
65,000
Non-current liabilities
Shareholders’ equity-common
110,000 90,000
175,000 150,000
Total liabilities and shareholders’
equity
$350,000 $300,000
Statement of income for 2024
Sales
$95,000
Cost of goods sold
45,000
Gross profit
50,000
Operating expenses
15,000
Income before income tax
35,000
Income tax expense
5,000
Net income
$30,000
Equipment with a cost of $160,000, an estimated residual value of $10,000, and an estimated life of four years, was purchased on April 1, 2024. If the straight-line method is used, the depreciation expense for calendar 2024 is
Listen
The cost of land does NOT include
$40,000.
removal costs of an old building.
$30,000.
closing costs.
$37,500.
annual property taxes.
$28,125.
title fees.
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Question 3 (2 points)
Listen
If Dog Corporation issues 5,000 common shares for $200,000, which account will be
credited?
Contributed Surplus
Retained Earnings
Common Shares
Cash
Page 4 of 29
Statement of income for 2024
Sales
$95,000
Cost of goods sold
45,000
Gross profit
50,000
Operating expenses
15,000
Income before income tax
35,000
Income tax expense
5,000
Net income
$30,000
What is the receivables turnover ratio for 2024?
3.8 times
2.7 times
3.2 times
2.0 times
Use the following information to answer the question(s) below.
Green Thumb Garden Supplies reported the following information for 2023 and 2024.
Assets
Cash
Accounts receivable
Inventory
2024
2023
$
$ 45,000
50,000
35,000
25,000
25,000
20,000
Property, plant, and equipment 240,000 210,000
Total assets
$350,000 $300,000
Liabilities and Shareholders’ Equity
$
Current liabilities
$60,000
65,000
Non-current liabilities
110,000 90,000
Shareholders’ equity-common 175,000 150,000
Total liabilities and shareholders’
equity
$350,000 $300,000
A decrease in accounts receivable from year one to year two:
investing activities section
financing activities section
Does not represent a cash flow.
operating activities section
Under a perpetual inventory system, purchase of inventory is recorded as a debit to the
Purchases account.
Cost of Goods Sold account.
Inventory account.
Supplies account.
Question 15 (2 points)
Listen
Profit margin is calculated by dividing
net income by shareholders’ equity.
net income by sales.
gross profit by sales.
sales by cost of goods sold.
Question 16 (2 points)
Listen
Short-term creditors are usually most interested in assessing
liquidity.
profitability.
marketability.
solvency.
Question 13 (2 points)
Listen
A common measure of liquidity is
debt to total assets.
receivables turnover.
profit margin.
return on assets.
Question 14 (2 points)
Listen
Asset turnover ratio is calculated as
average total assets divided by net income.
sales divided by average total assets.
average total assets divided by sales.
sales divided by net income.
What is the inventory turnover ratio for 2024?
2.0 times
0.5 times
1.8 times
2.3 times
Statement of income for 2024
Sales
$95,000
Cost of goods sold
45,000
Gross profit
50,000
Operating expenses
15,000
Income before income tax
35,000
Income tax expense
5,000
Net income
$30,000
Question 12 (2 points)
Listen
Use the following information to answer the question(s) below.
Green Thumb Garden Supplies reported the following information for 2023 and 2024.
Assets
Cash
Accounts receivable
Inventory
2024
2023
$
$ 45,000
50,000
35,000
25,000
25,000 20,000
Property, plant, and equipment 240,000 210,000
Total assets
$350,000 $300,000
Liabilities and Shareholders’ Equity.
Current liabilities
Non-current liabilities
$60,000
65,000
110,000 90,000
Shareholders’ equity-common
175,000 150,000
Total liabilities and shareholders’
equity
$350,000 $300,000
Question 12 (2 points)
Listen
Use the following information to answer the question(s) below.
Green Thumb Garden Supplies reported the following information for 2023 and
2024.
Assets
Cash
Accounts receivable
Inventory
2024
2023
$
$ 45,000
50,000
35,000
25,000
25,000
20,000
Property, plant, and equipment 240,000 210,000
Total assets
$350,000 $300,000
Liabilities and Shareholders’ Equity
$
Current liabilities
$ 60,000
65,000
Non-current liabilities
110,000
90,000
Shareholders’ equity-common
Total liabilities and shareholders’
equity
175,000 150,000
$350,000 $300,000
Use the following information to answer the question(s) below.
Nelly Inc. reported credit sales of $24,000,000 and cost of goods sold of $18,000,000 for the year. The average inventory for the year was $6,000,000.
The inventory turnover ratio for the year was
4.0 times.
25.0 times.
3.0 times.
33.3 times.
Cost of goods sold
45,000
Gross profit
50,000
Operating expenses
15,000
Income before income tax
35,000
Income tax expense
5,000
Net income
$30,000
Share data for 2024
Weighted average number of
6,000
common shares
Market price per common share
$40
Dividends per share
$0.90
What is the return on common shareholders’ equity for 2024?
20.0%
18.5%
17.1%
4.5%
Use the following information to answer the question(s) below.
Green Thumb Garden Supplies reported the following information for 2023 and
2024:
Assets
Cash
2024
2023
$
$ 45,000
50,000
Accounts receivable
Inventory
35,000 25,000
25,000 20,000
Property, plant, and equipment.
Total assets
Liabilities and Shareholders’ Equity
210,000
240,000
$350,000 $300,000
$
Current liabilities
Non-current liabilities
$60,000
65,000
110,000 90,000
Shareholders’ equity-common
150,000
175,000
Total liabilities and shareholders’
$350,000 $300,000
equity
Statement of income for 2024
Sales
$95,000
Sales
Cost of goods sold
45,000
Gross profit
50,000
Operating expenses
15,000
Income before income tax
35,000
Income tax expense
5,000
What is the return on assets for 2024?
Net income
$30,000
9.2%
Share data for 2024
8.6%
Weighted average number of
6,000
common shares
10.0%
27.1%
Market price per common share Dividends per share
$40
$0.90
Use the following information to answer the question(s) below.
Green Thumb Garden Supplies reported the following information for 2023 and
2024:
Assets
Cash
Accounts receivable
Inventory
2024
2023
$ 45,000
50,000
35,000 25,000
25,000 20,000
210,000
240,000
$350,000 $300,000
Property, plant, and equipment
Total assets
Liabilities and Shareholders’ Equity
Question / (2 points)
Listen
The current ratio is a
liquidity ratio.
profitability ratio.
cash flow ratio.
solvency ratio.
Listen
Under the aging of a company’s accounts receivable, the uncollectible accounts are estimated to be $26,000. If the unadjusted balance for the Allowance for Expected Credit Losses is $9,000 debit, what is the amount of credit losses for the year?
$35,000
$18,000
$26,000
$17,000
Question 6 (2 points)
Listen
If a company fails to record estimated credit losses,
the carrying amount is understated.
receivables are understated.
revenues are understated.
expenses are understated.
Question 4 (2 points)
◄ Listen
Use the following information to answer the question(s) below.
The financial statements of Andreo Manufacturing Inc. report credit sales of $600,000 and accounts receivable of $60,000 and $40,000 at the beginning of the year and end of the year, respectively.
What is the average collection period for accounts receivable in days (rounded)?
16
32
30
49
