Multiple choice

1. (TCO 4) Which of the following statements is not true? (Points : 4) 

Comparability means using the same accounting principles from year to year within a company.

Reliability is the quality of information that gives assurance that it is free of error or bias.

Relevant accounting information must be capable of making a difference in a decision.

The FASB’s overriding criterion is that the accounting rule adopted should be the one that generates the most useful financial information for making a decision. 

2. (TCO 4) Using the following balance sheet and income statement data, what is the current ratio?

Current assets $9,000 Net income $12,000

Current liabilities 4,000 Stockholders’ equity 24,000

Total assets 30,000 Total liabilities 6,000

Average common shares outstanding was 10,000 (Points : 4) 

1.75:1

2.00:1

0.44:1

2.25:1

3. (TCO4) Using the following balance sheet and income statement data, what is the total amount of working capital?

Current assets $12,000 Net income $12,000

Current liabilities 8,000 Stockholders’ equity 24,000

Total assets 32,000 Total liabilities 8,000

Average common shares outstanding was 10,000 (Points : 4) 

$4,000

$24,000

$3,000

$10,000

4. (TCO 4) Using the following balance sheet and income statement data, what is the debt to total assets ratio?

Current assets $7,000 Net income $12,000

Current liabilities 4,000 Stockholders’ equity 21,000

Total assets 30,000 Total liabilities 9,000

Average common shares outstanding was 10,000 (Points : 4) 

75%

19%

57%

30%