Question

1) Cardinal Company has current assets of $4,140 and current liabilities of $2,300. What is the value of Cardinals current ratio?

a) 1.08

b) .56 (rounded)

c) 1.80

d) Not enough information is given to compute the current ratio.

2) The sale of gift cards by a company is a direct example of:

a) deferred revenues

b) sales tax payable

c) current portion of long-term debt

d) installment notes

3) Flamingo Company borrows $30,000 using a five-year, long-term installment note payable. The rate on the note is 5 percent and Flamingo agrees to make monthly payments of $566.14. Which of the following statements is correct about Flamingo’s first payment?

a) Note payable reduction is $442.98 and interest is $123.16.

b) Note payable reduction is $441.14 and interest is $125.00.

c) Note payable reduction is $123.16 and interest is $442.98

d) Note payable reduction is $125.00 and interest is $441.14.

4) Sales taxes collected by the retailer are recorded as a(n):

a) liability

b) revenue

c) asset

d) expense

5) When Flamingo records it first payment on the note payable in question 29, what will the journal entry look like (without the numbers).

a) Debit Interest Expense
Credit Notes Payable
Credit Cash

b) Debit Interest Expense

Debit Notes Payable

Credit Cash

c) Debit Cash

Debit Interest Expense

Credit Notes Payable

d) Debit Notes Payable

Credit Cash

Credit Interest Payable

Answer 1

Solution to QUESTION-1

Cardinals Current Ratio

Cardinals Current Ratio = Total current Assets / Total Current Liabilities

= $4,140 / $2,300

= 1.80

“Hence, the Cardinals Current Ratio will be (c). 1.80”