Page 710 - Accounting Principles (A Business Perspective)

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short-term
Accrued liabilities 64,000
Bonds payable, long-term 400,000
The current ratio is:
a. 1:2.
b. 2:1.
c. 1.2:1.
d. 3:1.
The acid-test ratio is:
a. 1:2.

b. 2:1.
c. 1.2:1.
d. 3:1.
Benson Company shows the following data on its 2011 financial statements (use for the rest of the questions ):
Accounts receivable, January 1 $720,000
Accounts receivable, December 31 960,000
Merchandise inventory, January 1 900,000
Merchandise inventory, December 1,020,000
31
Gross sales 4,800,000
Sales returns and allowances 180,000
Net sales 4,620,000
Cost of goods sold 3,360,000
Income before interest and taxes 720,000
Interest on bonds 192,000
Net income 384,000
The accounts receivable turnover is:
a. 5.5 times per year.
b. 5.714 times per year.

c. 5 times per year.
d. 6.667 times per year.
The inventory turnover is:
a. 5 times per year.
b. 4.8125 times per year.
c. 3.5 times per year.
d. 4 times per year.
The times interest earned ratio is:
a. 4.75 times per year.

b. 3.75 times per year.
c. 2 times per year.
d. 3 times per year.
Now turn to “Answers to self-test” at the end of the chapter to check your answers.

Questions
➢ What are the major sources of financial information for publicly owned corporations?
➢ The higher the accounts receivable turnover rate, the better off the company is. Do you agree? Why?

Accounting Principles: A Business Perspective 711 A Global Text