Solved by verified expert :98. Andrea Conaway opened Wonderland Photography on
January 1 of the current year. During January, the following transactions
occurred and were recorded in the company’s books:
1. Conaway invested $13,500 cash in the
business.
2. Conaway contributed $20,000 of
photography equipment to the business.
3. The company paid $2,100 cash for an
insurance policy covering the next 24 months.
4. The company received $5,700 cash for
services provided during January.
5. The company purchased $6,200 of
office equipment on credit.
6. The company provided $2,750 of
services to customers on account.
7. The company paid cash of $1,500 for
monthly rent.
8. The company paid $3,100 on the office
equipment purchased in transaction #5 above.
9. Paid $275 cash for January utilities.
Based on this information, the balance
in the Andrea Conaway, Capital account reported on the Statement of Owner’s
Equity at the end of the month would be:
A. $31,400.
B. $39,200.
C. $31,150.
D. $40,175.
E. $30,875.
99. The debt ratio
is used:
A. To measure the ratio of equity to expenses.
B. To assess the risk
associated with a company’s use of liabilities.
C. Only by banks when a business applies for a loan.
D. To determine how much debt a firm should pay off.
E. To determine how much debt a company should borrow.
101. Which
of the following statements is incorrect?
A. Higher financial leverage involves higher risk.
B. Risk is higher if a company has more liabilities.
C. Risk is higher if a
company has higher assets.
D. The debt ratio is one measure of financial risk.
E. Lower financial leverage involves lower risk.
102. Stride
Along has total assets of $425 million.
Its total liabilities are $110 million.
Its equity is $315 million. Calculate the debt ratio.
A. 38.6%.
B. 13.4%.
C. 34.9%.
D. 25.9%.
E. 14.9%.
103. Stride Along has total assets of $385 million.
Its total liabilities are $100 million and its equity is $285 million.
Calculate its debt ratio.
A. 35.1%.
B. 26.0%.
C. 38.5%.
D. 28.5%.
E. 58.8%.
104. Which of the following statements describing the
debt ratio is false?
A. It is of use to both internal and external users of
accounting information.
B. A relatively high ratio
is always desirable.
C. The dividing line for a high and low ratio varies
from industry to industry.
D. Many factors such as a company’s age, stability,
profitability and cash flow influence the determination of what would be
interpreted as a high versus a low ratio.
E. The ratio might be used to help determine if a
company is capable of increasing its income by obtaining further debt.105. At the end of the current year, Norman Company
reported total liabilities of $300,000 and total equity of $100,000. The company’s debt ratio on the last year-end
was:A. 300%.
B. 33.3%
C. 75.0%.
D. $400,000.
E. Cannot be determined from the information provided.
