Question

2018 2017 Accounts receivable $40,000 $36,000 Inventory 28,000 35,000 Net sales 190,000 186,000 Cost of goods sold 114,000 108,000 Total assets 425,000 405,000 Total stockholders’ equity 240,000 225,000 Net income 32,500 28,000

101) The 2018 debt to equity ratio is (rounded to one decimal place):

A) 80.0%.                         B) 40.0%.                         C) 77.1%.                         D) 60.0%.

Sales revenue $440,000 Advertising expense 60,000 Interest expense 10,000 Salaries expense 55,000 Utilities expense 25,000 Income tax expense 45,000 Cost of goods sold 180,000

102)

What is operating income?

A) $120,000.                    B) $65,000.                      C) $110,000.                    D) $260,000.

103. In a perpetual inventory system, the entry at the time of a sale to record the cost of the inventory sold includes a:
     1. Not recorded at the time of the sale.                     B) Debit to Cost of Goods Sold.

C) Credit to Cost of Goods Sold.                              D) Debit to Accounts Receivable.

104. Goodwill is:
     1. Only recorded by the seller of a business.
     2. Recorded when created internally through advertising expense.
     3. Amortized over the greater of its estimated life or forty years.
     4. The value of a business as a whole, over and above the value of its net identifiable assets.

105. ABC purchased equipment for $60,000 on January 1, 2018. The equipment is expected to have a five-year life, with a residual value of $5,000 at the end of five years.

Using the straight-line method, the book value at December 31, 2018 would be:

A) $44,000.                      B) $55,000.                      C) $49,000.                      D) $60,000.

Answer 1

1) Debt equity ratio= Total debt/ Total equity

= 185000/ 240000

= 77.1%

So, the answer is option C) 77.1%

2)

Sales revenue	440000
Less: Cost of goods sold	(180000)
Gross profit	260000
Less: Operating expenses
Advertising expense	(60000)
Salaries expense	(55000)
Utilities expense	(25000)
Operating income	120000

So, the answer is option A) $120000

3)

Date	Account & explanation	Debit	Credit
	Cost of goods sold
	Inventory

So, the answer is option B) Debit to Cost of goods sold

4) Goodwill is an intangible asset. It increases the value of the business.

So, the answer is option D) The value of a business as a whole, over and above the value of its net identifiable assets

5) Depreciation using straight-line method= (60000-5000)/ 5= 11000

Book value at December 31, 2018= 60000-11000= 49000

So, the answer is option C) $ 49000