Module 2

Quiz Multiple Choice

1. A fiscal year

a. ends on December 31.

b. always ends at the end of the month.
c. ends on June 30.
d. is any 12 consecutive months.

2. The key components in measuring income are

a. revenue and assets.

b. assets and liabilities.
c. revenue and expenses.
d. retained earnings and expenses.
e. revenue and liabilities.
f. expenses and assets.

3. Which of the following help(s) determine when a sale should be included in the income statement?

a. Recognition principle
b. Cost recovery principle
c. Matching principle
d. Both a and c

4. The recording of expenses in the same time period as the related revenues is called

a. matching.
b. recognition.
c. allocation.
d. accuracy.

5. Given the following information at the end of the year, what was the balance in retained earnings at
the beginning of the year?

Total Assets = $190,000

Total Liabilities = 110,000
Contributed Capital = 30,000
Revenues = 85,000
Expenses = 70,000

Assets Liabilities

Total Liabilities $110,000

Shareholders equity
Capital $30,000
R.E. $50,000
Total $190,000 Total Liabilities and $190,000
 O.E.

a. $25,000
b. $35,000
c. $45,000
d. $80,000

6. Which of the following accounts is not an expense? a. depreciation b. salaries c. dividends d. delivery
expense

7. Given the following information at the end of the year, how much was net income for the year?
Beginning retained earnings = $54,000
Dividends = $20,000
Ending retained earnings = $69,000

= 54,000+35,000 -20,000= $69,000

a. $(5,000)
b. $15,000
c. $35,000
d. $40,000

8. Declaration of dividends to stockholders

a. increases paid-in capital.

b. decreases paid-in capital.
c. increases retained earnings.
d. decreases retained earnings.
e. increases assets.
f. increases liabilities.

9. The ratio that is sometimes referred to as the earnings multiple is the

a. earnings-per-share ratio.
b. dividend-yield ratio.
c. price-earnings ratio.
d. dividend-payment ratio.

10. The only financial ratio required to be a part of the financial statements is

a. price-earnings.
b. earnings per share.
c. dividend-yield.
d. dividend-payout.

11. Which of the following formulas is used to calculate dividend-yield ratio?

a. Net income / average number of shares outstanding
b. Common dividends per share / market price per share
c. Market price per share / gross profit per share
d. Revenue / average number of shares outstanding