Q&A Hero

Q: Which of the following statements about gross profit is correct? A) Gross profit = Net sales Cost of goods sold. B) Gross profit is recorded by a credit to the Gross Profit account. C) A company sells $10,000 of goods. If the gross profit percentage is 32%, net income would be $3,200. D) If net sales are $100 and cost of goods sold is $50 then the gross profit percentage is 100%.

Q: Group insurance policies are very popular for employers and employees.​ a. True b. False

Q: Use the above information to answer the following question. What is the amount of income before income taxes? A) $9,500 B) $32,700 C) $13,000 D) $17,500

Q: Bond insurance is available only for corporate bonds and not for municipal securities.​ a. True b. False

Q: Real estate values usually have little impact on the market value of a life insurance company's asset portfolio and only affect property and casualty insurance companies.​ a. True b. False

Q: Use the above information to answer the following question. What is the amount of gross profit? A) $94,200 B) $98,700 C) $105,000 D) $32,700

Q: Property and casualty insurance and life insurance are similar in terms of the predictability of payouts to cover claims.​ a. True b. False

Q: The gross profit equation is: A) (Sales Revenue + Sales Returns & Allowances) Cost of Goods Sold B) (Sales + Sales Discounts) Cost of Goods Sold C) (Sales Revenue Sales Returns & Allowances Sales Discounts) Cost of Goods Sold D) (Sales Revenue Sales Returns & Allowances Sales Discounts) + Cost of Goods Sold

Q: ​Individuals who are insured under a managed health care plan can usually choose any provider of health care services. a. True b. False

Q: Sales revenue equals $367,810, sales returns & allowances are $10,000, and sales discounts total $14,180. The cost of goods sold is $216,490, operating expenses are $28,500, and the company incurs $31,640 of income tax expense. Which of the following statements is correct? A) Net sales equal $343,630 and gross profit is $98,640. B) Net sales equal $67,000 and gross profit is $98,640. C) Net sales equal $343,630 and gross profit is $127,140. D) Net sales equal $367,810 and gross profit is $67,000.

Q: Indicate whether the statement is true or false.​The moral hazard problem as related to the insurance industry means that some people take more risks once they are insured.a. Trueb. False

Q: Your store buys ice cream at a cost of $1.50 a half gallon and sells it for $4 a half gallon. Selling, general, and administrative expenses are $0.75 per half gallon. Which of the following statements is correct? A) Your gross profit per half gallon is $2.50. B) Your gross profit per half gallon is $1.75. C) The difference between the selling price and the cost is recorded in the gross profit account. D) The difference between the selling price and the cost is recorded in the Net Profit account.

Q: Which of the following is NOT a service that is commonly performed by a securities firm? a. setting regulatory rules for stock exchanges b. origination c. underwriting d. distribution of stock or bond offerings

Q: Which of the following statements about the multistep income statement is not correct? A) The multistep income statement provides a subtotal of Income before Income Tax Expense. B) Income from Operations is the amount of revenues minus expenses from the companys main business activities. C) Any revenues and/expenses from activities other than the companys main business are peripheral results and are included in Income from Operations. D) Income before Income Tax Expense and Income from Operations are different if there are any peripheral revenues and expenses.

Q: Securities firms that converted to bank holding companies during the credit crisis a. gained more flexibility to obtain financing from the Federal Reserve. b. had to give up their traditional securities function of underwriting. c. came under greater regulatory oversight by the Securities Investor Protection Corporation. d. were prohibited from investing in or selling mortgage-backed securities.

Q: Which of the following statements about a multistep income statement is not correct? A) Income before income taxes = Net income + Income tax expense B) Depreciation is subtracted in the calculation of core operating results. C) Income from operations = Income before income tax expense + Other revenues (expenses), net D) Income from operations = Net income + Income tax expense Other revenues (expenses), net

Q: ​The ____ can liquidate failing brokerage firms. a. ​Securities and Exchange Commission b. ​Financial Industry Regulatory Authority c. ​Federal Reserve Board d. ​Securities Investor Protection Corporation

Q: Which of the following would generally be considered an operating revenue or expense? A) Income from renting out extra warehouse space B) Interest on a note payable C) Dividends earned on an investment is another companys stock D) Depreciation

Q: Securities firms commonly engage in all of the following EXCEPT a. proprietary trading. b. underwriting stock. c. operating mutual funds. d. providing brokerage services. e. operating credit unions.

Q: The value of a securities firm is typically ____ related to interest rate movements. a. Positively b. Not c. Inversely d. either Positively or Inversely, depending on the direction of the interest rate movements.

Q: Which of the following statements about a multistep income statement is correct? A) It groups all revenues together. B) It reports a different amount of net income than a single-step income statement. C) It includes expenses that would not appear on a single-step income statement. D) A key measure available on a multistep income statement is the amount of profit earned over the cost of goods sold.

Q: Multiple-step income statements: A) separate core results from peripheral results. B) includes one subtotal for revenues and one for expenses. C) exclude certain significant items from net income. D) only report core results.

Q: Which of the following is NOT a function that a securities firm commonly performs when facilitating a secondary stock offering? a. origination b. underwriting the stock c. distribution of the stock d. purchasing at least 20 percent of the offering

Q: ​The ____ determines margin requirements on securities purchased. a. ​Securities and Exchange Commission b. ​Financial Industry Regulatory Authority c. ​Federal Reserve Board d. ​Securities Investor Protection Corporation

Q: When inventory is sold, the cost of the inventory is removed from inventory and reported on a multistep the income statement as: A) inventory expense. B) cost of goods sold. C) selling, general, and administrative expenses. D) operating expenses.

Q: Which of the following is NOT an SEC rule? a. Analysts at a securities firm underwriting an IPO cannot promote the stock for the first 40 days after the IPO. b. An analyst's compensation should be directly aligned with the amount of business that the analyst brings to the securities firm. c. Analysts cannot be supervised by the investment banking department within the securities firm. d. When rating a security, an analyst must divulge any recent investment banking business provided by the analysts securities firm to the firm that issued the security.

Q: Multistep income statements: A) are required for merchandise companies. B) contain more detail than just listing revenues and expenses. C) are required when the perpetual inventory method is used. D) classify Cost of Goods Sold as a selling expense.

Q: Inventory costing $3,000 is sold for $4,000 on terms 2/10, n/30. If the buyer pays within the discount period, what amount will be reported on the income statement as net sales? A) $3,920 B) $4,000 C) $1,000 D) $3,200

Q: ​The ____ offers insurance on cash and securities deposited at brokerage firms. a. ​Federal Reserve b. ​New York Stock Exchange c. ​Securities Investor Protection Corporation (SIPC) d. ​Securities and Exchange Commission (SEC)

Q: ​The ____ regulates the issuance of securities. a. ​Securities and Exchange Commission b. ​National Association of Securities Dealers c. ​Federal Reserve Board d. ​Securities Investor Protection Corporation

Q: A companys trial balance included the following account balances at year-end: Accounts Receivable $ 18,000 Sales Returns & Allowances 1,000 Sales Discounts 1,400 Sales Revenue 114,400 Selling, General, and Administrative Expenses 600 The amount of net sales reported on the income statement would be: A) $114,400. B) $128,400. C) $112,000. D) $111,400.

Q: Which of the following is NOT an example of a securities firm that experienced financial problems as a result of taking on excessive risk when engaging in proprietary trading? a. Washington Mutual b. Socit Gnrale c. Bear Stearns d. Barings Bank

Q: The following account balances appeared on the companys trial balance at year-end: Sales Returns & Allowances $ 500 Accounts Receivable 9,000 Sales Discounts 700 Sales Revenue 57,200 Selling, General, and Administrative Expenses 300 The amount of net sales reported on the income statement would be: A) $57,200. B) $64,200. C) $56,000. D) $55,700.

Q: A bridge loan provided by a securities firm would most likely be made to a. an acquirer that needs temporary financing to complete a merger. b. a commercial bank in the federal funds market. c. a mutual fund that needs to cover share redemptions. d. an institutional investor that has received a margin call and needs to add cash to its margin account.

Q: Contra-revenue accounts: A) are balance sheet accounts. B) increase net income. C) are increased with a debit. D) increase net sales.

Q: ​As a result of the Financial Services Modernization Act a. ​securities firms had to search for loopholes to expand into other types of financial services. b. ​firms that formed a special finance holding company were regulated by the SEC. c. ​banking, securities activities, and insurance services could be consolidated in a single financial institution. d. ​securities firms were prohibited from expanding into other types of financial services.

Q: The ________ places limits on proprietary trading by commercial banks and securities firms that have become bank holding companies. a. Bernanke Rule b. Financial Safety Rule c. Volcker Rule d. Securities Reform Act

Q: If a perpetual inventory system is in use, which of the following statements about transactions with customers is correct? A) When a customer pays within the discount period, Accounts Receivable is credited for the full amount. B) If a customer pays within the discount period, Sales Discounts is credited. C) A sales return is recorded with entries that include a credit to Sales Returns & Allowances. D) Sales of inventory are recorded by entries that include a credit to Cost of Goods Sold.

Q: Central Company sold goods for $5,000 to Western Company on March 12 on credit. Terms of the sale were 2/10, n/30. At the time of the sale, Central recorded the transaction by debiting Accounts Receivable for $5,000 and crediting Sales Revenue for $5,000. Western paid the balance due, less the discount, on March 21. Centrals journal entry on March 21 would include a debit to: A) Cash for $4,900. B) Accounts Receivable for $4,900. C) Cash for $5,000. D) Accounts Receivable for $5,000.

Q: The price of newly issued stock should be ____ the market price of the firm's outstanding stock. a. about the same as b. much more than c. much less than d. either much more than or much less than, depending on the amount of stock issued

Q: Inventory was sold on credit for $3,000, terms 1/10, n/30. How should the seller record the cash collection? A) Debit Cash for $3,000 and credit Accounts Receivable for $3,000, if collected within the discount period. B) Debit Cash for $3,000, credit Accounts Receivable for $2,970, and credit Sales Discounts for$30, if collected within the discount period. C) Debit Cash for $3,000, credit Accounts Receivable for $2,970, and credit Sales Discounts for$30, if collected after the discount period. D) Debit Cash for $3,000 and credit Accounts Receivable for $3,000, if collected after the discount period.

Q: ​In a ____ of stock, all of the shares issued may be held by a small number of institutional investors. a. ​market placement b. ​public placement c. ​shelf placement d. ​private placement

Q: When a company collects from a customer who pays within the discount period, the company: A) debits a contra-revenue account. B) debits a liability account. C) credits a liability account. D) debits a revenue account.

Q: Which of the following does NOT play a role in regulating securities trading? a. Financial Industry Regulatory Authority b. Resolution Trust Corporation c. New York Stock Exchange d. Federal Reserve

Q: Which of the following is a correct statement? A) The Sales Discounts account is a contra-asset account. B) The Sales Returns & Allowances account is a contra-revenue account. C) The Sales Returns & Allowances account is a credit balance account. D) The Sales Discounts account is a contra-asset account.

Q: The SECs Regulation Fair Disclosure (FD) a. requires firms to disclose any significant information to the SEC before making public announcements. b. requires firms to disclose any significant information to the Federal Reserve before releasing it to the public. c. requires firms to disclose any significant information simultaneously to all market participants. d. prohibits insiders at firms from trading on significant inside information.

Q: On June 15, Oakley Inc. sells inventory on account to Sunglass Hut (SH) for $1,000, terms 2/10, n/30. On June 20, SH returns to Oakley inventory that SH had purchased for $300. On June 24, SH completely fulfills its obligation to Oakley by making a cash payment. What is the amount of cash paid by SH to Oakley? A) $680 B) $686 C) $700 D) $1,000

Q: When securities firms facilitate an IPO, they attempt to price the stock a. at a level that will enable institutional investors who invest in the IPO to earn reasonable returns. b. high enough to satisfy the issuing firm. c. at a level that will enable the securities firms to place the entire issue. d. All of these are correct.

Q: If a company that uses a perpetual inventory system sold inventory which cost $1,000 for a selling price of $3,000, the accounting equation would show a net: A) increase in assets and net increase in stockholders equity. B) increase in assets and net decrease in liabilities. C) decrease in assets and net increase in liabilities. D) decrease in assets and net decrease in stockholders equity.

Q: Securities firms serve as intermediaries for all of the following, EXCEPT a. stock offerings. b. bond offerings. c. IPOs. d. Securities firms serve as intermediaries for all of the these.

Q: BetterBuy sells $50,000 of TVs to a customer. The credit terms state a 2% discount if paid in 7 days and a 1% discount if paid in 8-14 days. The customer pays in 12 days. How would BetterBuy record the customers payment? A) Debit Cash for $50,000 and credit Accounts Receivable for $50,000 B) Debit Accounts Receivable for $50,000, credit Cash for $49,500, and credit Inventory for $500 C) Debit Cash for $49,500, credit Accounts Receivable for $50,000, and debit Sales Discounts for $500 D) Debit Cash for $49,500, credit Accounts Receivable for $49,000, and credit Sales Returns & Allowances for $500

Q: Research indicates that securities firms tend to a. overprice IPOs. b. underprice IPOs. c. price IPOs correctly. d. None of these are correct.

Q: Use the information above to answer the following question. What journal entry will be prepared by Darin Company on October 8 to record the receipt of payment from Dee? A) Debit Cash and credit Accounts Receivable for $6,500 B) Debit Cash for $5,880, debit Sales Discount for $120, and credit Accounts Receivable for $6,000 C) Debit Cash for $6,370, debit Sales Discount for $130, and credit Accounts Receivable for $6,500 D) Debit Cash for $6,300, debit Sales Returns & Allowances for $200, and credit Accounts Receivable for $6,500

Q: Asset stripping refers to a. acquiring shares in a firm and then causing the firm to repurchase the shares at a premium to prevent a takeover. b. financing provided by a securities firm to help support an acquisition. c. investing in the shares of a firm that is expected to experience a leveraged buyout (LBO). d. selling off individual divisions of an acquired firm that are not compatible with the acquirers business.

Q: ____ are NOT included in flotation costs. a. Issue costs b. Fees paid to the underwriters c. Taxes paid on income earned from the stock offering d. Registration expenses

Q: Use the information above to answer the following question. What journal entry (entries) will Darin Company make on October 4 to record the sales return? A) Debit Sales Returns & Allowances and credit Accounts Receivable for $500; debit Inventory and credit Cost of Goods Sold for $200 B) Debit Sales Returns & Allowances for $200 and credit Accounts Receivable for $200 C) Debit Sales for $500 and credit Inventory for $500 D) Debit Accounts Receivable and credit Sales Returns & Allowances for $500; debit Cost of Goods Sold and credit Inventory for $200

Q: Use the information above to answer the following question. What journal entry (entries) will Darin prepare on October 1 to record this sale? A) Debit Accounts receivable and credit Sales Revenue for $6,500 B) Debit Sales Revenue for $6,500 and credit Accounts Receivable and credit for $6,500; debit Cost of Goods Sold and credit Inventory for $4,200 C Debit Cost of Goods Sold for $4,200, debit Gross Profit for $2,300, and credit Sales Revenue for $6,500 D) Debit Accounts Receivable and credit Sales Revenue for $6,500; debit Cost of Goods Sold and credit Inventory for $4,200

Q: When securities firms help corporations issue bonds, their primary role is as a(n) a. intermediary. b. lender (creditor). c. investor. d. lendor (creditor) AND investor.

Q: BetterBuy uses a perpetual inventory system. BetterBuy sells a computer from inventory for $599 on credit. BetterBuy originally bought the computer from IBM for $395. What journal entry (entries) will BetterBuy prepare to record the sale? A) Debit Cash and credit Sales Revenue for $599; debit Cost of Goods Sold and credit Inventory for $395 B) Debit Accounts Receivable for $599, credit Inventory for $395, and credit Gross Profit for $204 C) Debit Accounts Receivable and credit Sales Revenue for $599; debit Cost of Goods Sold and credit Inventory for $395 D) Debit Inventory for $395, debit Cost of Goods Sold for $204, and credit Accounts Receivable for $599

Q: ​The one-day return to investors who purchase IPO shares at the IPO offer price are ____, and the returns to investors who purchase the shares a day after the IPO are generally ____. a. ​high; high b. ​high; low c. ​low; high d. ​low; low

Q: A company sells goods at a selling price of $20,000. The cost of the goods is $15,000. Under a perpetual inventory system, the journal entries prepared to record the sale will include one with a debit to: A) Inventory and a credit to Sales Revenue for $15,000. B) Cost of Goods Sold and a credit to Inventory for $15,000. C) Inventory and credit to Sales Revenue for $20,000. D) Cost of Goods Sold and a credit to Sales Revenue for $15,000.

Q: Flotation costs as a percentage of the value of securities issued are ____ for ____ issues. a. lower; small b. lower; large c. higher; large d. lower; small AND higher; large

Q: When goods are sold to a customer with credit terms of 2/15, n/30, the customer will receive a: A) 15% discount if they pay within 2 days. B) 2% discount if they pay 15% of the amount due within 30 days. C) 15% discount if they pay within 30 days. D) 2% discount if they pay within 15 days.

Q: When an IPO is planned, all information relevant to the security, as well as the agreement between the issuer and the securities firm, must be included in the ___________ that is submitted to the Securities and Exchange Commission. a. origination b. registration statement c. best-efforts agreement d. None of these are correct.

Q: Which one of the following statements regarding sales discounts is correct? A) If a company offers a discount to encourage prompt payment and the discount is taken, the discount reduces the amount of net sales. B) Credit terms of 2/10, n/30 mean that if payment is made in two days, a 10% discount may be taken; if not paid within two days, the full invoice price will be due in thirty days. C) The terms sales discounts and sales credits are used interchangeably by a company. D) The Sales Discounts account is an expense account.

Q: ____ is NOT a service that a securities firm provides in placing bonds. a. Divestiture b. Underwriting c. Distribution d. Advising e. All of these are services that securities firms provide in placing bonds

Q: Which of the following statements is not correct about sales returns and allowances? A) Sales returns and allowances can provide useful information about the quality of inventory and the possibility of unsatisfied customers. B) Sales returns and allowances are recorded in a separate contra-revenue account. C) Sales returns and allowances are always disclosed in external financial statements. D) Sales returns and allowance are subtracted to determine net sales.

Q: Which of the following is NOT a way that a securities firm might advise a corporation to restructure its operations? a. a stock pass-through b. a spinoff of a unit c. a carve-out d. a divestiture

Q: If a company returns an item to a supplier, the supplier will record the return as: A) a sales return. B) shrinkage. C) a sales discount. D) a purchase return.

Q: The ____ is NOT involved in the regulation of the securities industry. a. Deposit Insurance Fund b. Financial Industry Regulatory Authority c. Securities and Exchange Commission d. Federal Reserve Board e. All of these are involved in the regulation of the securities industry.

Q: B-Mart has a perpetual inventory system. B-Mart sells $5,000 of blue jeans. The customer later brings $600 of blue jeans back to B-Mart because they are defective. Those blue jeans had a cost of $200. The customer agrees to keep the blue jeans and B-Mart agrees to a $200 allowance. Which of the following is one of the entries that B-Mart will use to record the return? A) Debit Accounts Receivable for $200 and credit Inventory for $200 B) Debit Inventory for $200 and credit Accounts Receivable for $200 C) Debit Accounts Receivable for $200 and credit Sales Returns & Allowances for $200 D) Debit Sales Returns & Allowances for $200 and credit Accounts Receivable for $200

Q: When a customer returns for credit a defective product it had purchased, the seller would record the transaction using which of the following accounts? A) Purchase Returns & Allowances B) Sales Returns & Allowances C) Sales Revenue D) Sales Discounts

Q: Many of the fees that securities firms charge for advising clients on a possible merger are typically dependent on whether the merger takes place.a. Trueb. False

Q: Which of the following statements regarding sales returns and allowances is correct? A) Recording sales returns and allowances in a separate account is an important internal control that allows management to evaluate the volume of returns and allowances as a potential indicator of the quality of their products. B) The Sales Returns & Allowances account balance should be added to the Sales account balance when computing net sales. C) The Sales Returns & Allowances account is an example of a contra-asset account. D) Recording a sales allowance requires two entries.

Q: In a perpetual inventory system, paying transportation charges on goods purchased FOB shipping point would have which of the following effects? A) Decrease Operating Expenses B) Increase Selling, General, and Administrative Expenses C) Decrease Cost of Goods Sold D) Increase Inventory

Q: One reason for the financial problems of securities firms during the credit crisis was that they used a high degree of financial leverage. a. True b. False

Q: One of the main functions of securities firms is helping corporations and governments raise funds. a. True b. False

Q: On July 1, Darin Company sold inventory costing $4,500 to Dee Company for $6,000, terms 2/10, n/30. Both companies use the perpetual inventory system. Dee Company pays the invoice on July 8 and takes the appropriate discount. What journal entry will be recorded by Dee Company on July 8? A) Debit Accounts Payable and credit Cash for $6,000 B) Debit Accounts Payable for $5,880, credit Inventory for $120, and credit Cash for $6,000 C) Debit Accounts Payable for $6,000, credit Cash for $5,880, and credit Inventory for $120 D) Debit Cost of Goods Sold and credit Cash for $4,500

Q: On July 1, Darin Company sold inventory costing $4,500 to Dee Company for $6,000, terms 2/10, n/30. Both companies use a perpetual inventory system. What journal entry will be recorded by Dee Company on July 1? A) Debit Purchases and credit Accounts Payable for $6,000 B) Debit Inventory and credit Accounts Receivable for $6,000 C) Debit Inventory and credit Accounts Payable for $6,000 D) Debit Cost of Goods Sold and credit Inventory for $4,500

Q: The compensation paid to securities firms for helping a firm raise funds is typically in the form of interest income. a. True b. False