31. Pear Inc declared and paid a $10,000 dividend at the end of the year. How would the transaction be recorded?
A. An increase in expense of $10,000 and a decrease in cash of $10,000.
B. An increase in expense of $10,000 and a decrease in retained earnings of $10,000.
C. A decrease in retained earnings of $10,000 and a decrease in expenses of $10,000.
D. A decrease in retained earnings of $10,000 and a decrease in cash of $10,000.
32. Pear Inc declared and paid a $10,000 dividend at the end of the year. How would the transaction be recorded?
A. Dr. Expense $10,000, Cr. Cash $10,000
B. Dr. Expense $10,000, Cr. Retained earnings $10,000
C. Dr. Retained earnings $10,000, Cr. Expenses $10,000
D. Dr. Retained earnings $10,000 Cr. Cash $10,000
33. A company made the following entry in their books: Dr. Cash $25,000, Cr. Accounts receivable $25,000. What is the event that most likely occurred?
A. The company collected monies owing from a customer.
B. The company made a sale on credit.
C. The company paid a bill that was due.
D. The company borrowed money.
34. A company made the following entry in their books: Dr. Accounts receivable $25,000, Cr. Sales $25,000. What is the event that most likely occurred?
A. The company collected monies owing from a customer.
B. The company made a sale on credit.
C. The company paid a bill that was due.
D. The company borrowed money.
35. A company made the following entry in their books: Dr. Depreciation expense $15,000, Cr. Accumulated depreciation $15,000. What is the event that most likely occurred?
A. The company bought a capital asset.
B. The company sold a capital asset.
C. The company recorded that a portion of the capital asset that had been used during the period.
D. The company adjusted the capital asset to reflect the change in market value.
36. Which of the following statements about straight-line depreciation is not true?
A. Straight-line depreciation results in an equal amount of depreciation each period.
B. Straight-line depreciation is an application of the matching principle.
C. Straight-line depreciation results in the cost of the asset being expensed in the first year.
D. Straight-line depreciation requires estimates to be made by managers.
37. Which of the following statements best describes the term "return on equity" (ROE)?
A. ROE is a measure of the effectiveness of the entity in using the assets provided by owners to generate net income.
B. ROE is the measure of the amount of dividends that have been returned to the shareholders.
C. ROE is measure of how effective the entity is at controlling expenses.
D. ROE is the measure of the risk and liquidity of an entity.
38. A company reported net income of $22,500, had capital stock of $200,000 and retained earnings of $150,000. The ROE would be closest to?
A. 6.4%
B. 11.25%
C. 15%
D. 75%
(22,500/350,000)
39. Which of the following best describes the profit margin ratio?
A. It is a measure of the risk and liquidity of the entity.
B. It measures how much revenue is available after paying for the cost of goods sold to meet other expenses.
C. It is a measure of the effectiveness of the entity at controlling costs.
D. It is a measure of the amount of dividends to be paid to the shareholders.
40. The following information comes from Simon Company's year-end financial statements: Sales $250,000, Cost of goods sold $100,000, Net income $12,500 and Total assets $187,500. The profit margin ratio for the year is closest to?
A. 5%
B. 6.6%
C. 40 %
D. 12.5%
(12,500/250,000)