会计学原理练习题

True/FalseQuestions1.Accountingrecordsarealsoreferredtoasthebooks.TRUEPreparationofatrialbalanceisthefirststepintheanalyzingandrecordingprocess.FALSESourcedocumentsprovideevidenceofbusinesstransactionsandarethebasisforaccountingentries.TRUEItemssuchassalestickets,bankstatements,andpurchaseordersaresourcedocuments.TRUEAnaccountisarecordofincreasesanddecreasesinaspecificasset,liability,equity,revenue,orexpenseitem.TRUEAcustomer'spromisetopayiscalledanaccountpayabletotheseller.FALSE9.Asprepaidexpensesareused,theexpiredcostsoftheassetsbecomeexpenses.TRUE10.Landandbuildingsaregenerallyrecordedinthesameledgeraccount.FALSe13.Cashwithdrawnbytheownerofaproprietorshipshouldbetreatedasanexpenseofthebusiness.FALSEThechartofaccountsisalistofalltheaccountsusedbyacompanyandincludesanidentificationassignedtoeachaccount.TRUEAnaccountbalanceisthedifferencebetweendebitsandcreditsforanaccountincludinganybeginningbalance.TRUEInadouble-entryaccountingsystem,thetotalamountdebitedmustalwaysequalthetotalamountcredited.TRUEIncreasesinliabilityaccountsarerecordedasdebits.FALSEDebitsincreaseassetandexpenseaccounts.TRUE21.Creditsalwaysincreaseaccountbalances.FALSDoubleentryaccountingrequiresthateachtransactionaffect,andberecordedin,atleasttwoaccounts.TRUEArevenueaccountnormallyhasadebitbalance.FALSEAccountsarenormallydecreasedbydebits.FALSETheowner'swithdrawalaccountnormallyhasacreditbalancesinceitisanequityaccount.FALSEAnowner'scapitalaccountnormallyhasabalance.FALSEAdebitentryisalwaysfavorable.FALSEAtransactionthatdecreasesanassetaccountincreasesaliabilityaccountmustalsoaffectoneormoreotheraccounts.TRUEAtransactionthatincreasesanassetanddecreasesaliabilitymustalsoaffectoneormoreotheraccounts.TRUE34.Ifacompanypurchaseslandpayingcash,thejournalentrytorecordthistransactionwillincludeadebittoCash.FALSEIfacompanyprovidesservicestoacustomeroncreditthesellingcompanyshouldcreditAccountsReceivable.FALSEWhenacompanybillsacustomerfor$600forservicesrendered,thejournalentrytorecordthistransactionwillincludea$600debittoServicesRevenue.FALSE37.Thedebtratiohelpstoassesstheriskacompanyoffailingtopayitsdebtsandishelpfultobothitsownersandcreditors.TRUE38.38.Thehigheracompany'sdebtratiois,thehighertheriskofacompanynotbeingabletomeetobligations.TRUEThedebtratioiscalculatedbydividingtotalassetstotalliabilities.FALSE40. Acompanythatfinancesarelativelylargeportionofitsassetswithliabilitiesissaidtohaveahighdegreeoffinancialleverage.TRUEIfacompanyishighlyleveraged,thismeansthathasrelativelylowriskofnotbeingabletorepayitsdebt.FALSEHamiltonIndustrieshasliabilitiesof$105andtotalassetsof$350million.Itsdebtratiois40.0%.FALSE$105million/$350million=30.0%Highfinancialleverageisalwaysbadforacompany'sowners.FALSEAcompoundjournalentryaffectsnomorethanaccounts.FALSEPostingisthetransferofjournalentryinformationtotheledger.TRUETransactionsarefirstrecordedintheledger.FALSEThejournalisknownasabookoforiginalentry.TRUEAjournalgivesacompleterecordoftransactioninoneplace,andshowsthedebitsandcreditsforeachtransaction.TRUEAICPAFN:DecisionMakingDifficulty:EasyLearningObjective:C1Thejournalisknownasthebookoffinalbecausefinancialstatementsarepreparedfromit.FALSEAICPAFN:DecisionMakingDifficulty:HardLearningObjective:C1Atrialbalancethatbalancesisnotproofcompleteaccuracyinrecordingtransactions.TRUEAICPAFN:DecisionMakingDifficulty:EasyLearningObjective:P2Thetrialbalanceisalistofallaccountsandtheirbalancesatapointintimetakenfromtheledger.TRUEAICPAFN:DecisionMakingDifficulty:EasyLearningObjective:P2Generally,theorderingofaccountsinatrialbalancetypicallyfollowstheiridentificationnumberfromchartofaccounts,thatis,assetsfirst,thenliabilities,thenowner'scapitalandwithdrawals,followedbyrevenuesandexpenses.TRUEAACSB:AnalyticAICPAFN:DecisionMakingDifficulty:MediumLearningObjective:P2Thetrialbalancecanserveasareplacementforbalancesheet,sincedebitsmustequalwithcredits.FALSEAACSB:AnalyticAICPAFN:DecisionMakingDifficulty:MediumLearningObjective:P2Atrialbalancethatisinbalanceisproofthatnoerrorsweremadeinjournalizingthetransactions,postingtotheledger,andpreparingthetrialbalance.FALSEAICPAFN:DecisionMakingDifficulty:MediumLearningObjective:P2Ifcashwasincorrectlydebitedfor$100insteadcorrectlycreditedfor$100,thecashaccountisoutbalanceby$100.FALSEAACSB:AnalyticAICPAFN:DecisionMakingDifficulty:MediumLearningObjective:P2Thebalancesheetprovidesalinkbetweenbeginningandendingincomestatements.FALSEAICPAFN:DecisionMakingDifficulty:MediumLearningObjective:P3TheheadingoneachfinancialstatementliststhreeW's–Who(thenameoftheorganization),What(thenameofthestatement),andWhere(theorganization'saddress)FALSEDifficulty:MediumLearningObjective:P3Anincomestatementreportstherevenuesearnedexpensesincurredbyabusinessoveraperiodoftime.TRUEDifficulty:MediumLearningObjective:P3Thebalancesheetreportsthefinancialpositionofacompanyatapointintime.TRUEDifficulty:MediumLearningObjective:P3MultipleChoiceQuestionsTheaccountingprocessbeginswith:A.Analysisofbusinesstransactionsandsourcedocuments.B.Preparingfinancialstatementsandotherreports.C.Summarizingtherecordedeffectofbusinesstransactions.D.Presentationoffinancialinformationtodecision-makers.E.Preparationofthetrialbalance.AICPAFN:DecisionMakingDifficulty:EasyLearningObjective:C1Asalesinvoice:Isatypeofsourcedocument.Isusedbysellerstorecordthesale.Isusedbybuyerstorecordpurchases.D.Givesrisetoanentryintheaccountingprocess.E.Allofthese.AICPAFN:DecisionMakingDifficulty:EasyLearningObjective:C262.AICPAFN:DecisionMakingDifficulty:MediumLearningObjective:C2Sourcedocuments:A.Includetheledger.B.Arethesourcesofaccountinginformation.C.Mustbeinelectronicform.Arebasedonaccountingentries.Includethechartofaccounts.AICPAFN:DecisionMakingDifficulty:MediumLearningObjective:C2Varioustypesofdocumentsandotherpaperscompaniesusewhentheyconducttheirbusiness:Arecalledsourcedocuments.Canincludesalestickets.Arethesourceofinformationforrecordingaccountingentries.Canbeinelectronicform.Allofthese.AICPAFN:DecisionMakingDifficulty:MediumLearningObjective:C2Arecordoftheincreasesanddecreasesinspecificasset,liability,equity,revenue,orexpenseisa(n):A.Journal.B.Posting.C.Trialbalance.D.Account.E.Chartofaccounts.AICPAFN:DecisionDifficulty:EasyLearningObjective:C367.Theaccountusedtorecordthetransfersofassetsfromabusinesstoitsowneris:Arevenueaccount.Theowner'swithdrawalsaccount.Theowner'scapitalaccount.Anexpenseaccount.Aliabilityaccount.AICPAFN:DecisionDifficulty:MediumLearningObjective:C3Unearnedrevenuesare:Revenuesthathavebeenearnedandreceivedincash.Revenuesthathavebeenearnedbutnotyetcollectedincash.C.Liabilitiescreatedwhenacustomerpaysinadvanceforproductsorservicesbeforetherevenueisearned.D.Recordedasanassetintheaccountingrecords.E.Increasestoowners'capital.AICPAFN:DecisionMakingDifficulty:MediumLearningObjective:C3Prepaidexpensesare:Paymentsmadeforproductsandservicesthatdonoteverexpire.Classifiedasliabilitiesonthebalancesheet.C.Decreasesinequity.D.Assetsthatrepresentprepaymentsoffutureexpenses.E.Promisesofpaymentsbycustomers.AICPAFN:DecisionMakingDifficulty:MediumLearningObjective:C3Awrittenpromisetopayadefinitesumofmoneyonaspecifiedfuturedateisa(n):Unearnedrevenue.Prepaidexpense.Creditaccount.Notepayable.Accountreceivable.AICPAFN:DecisionDifficulty:MediumLearningObjective:C3Acollectionofallaccountsandtheirbalancesusedbyabusinessiscalleda:A.Journal.Bookoforiginalentry.GeneralJournal.Balancecolumnjournal.E.Ledger.AICPAFN:DecisionMakingDifficulty:MediumLearningObjective:C3Aledgeris:Arecordcontainingincreasesanddecreasesinspecificasset,liability,equity,revenue,orexpenseitem.Ajournalinwhichtransactionsarefirstrecorded.Acollectionofdocumentsthatdescribetransactionsandeventsenteringtheaccountingprocess.Alistofallaccountswiththeirdebitbalancesatapointintime.Arecordcontainingallaccountsandtheirbalancesusedbyacompany.AICPAFN:DecisionMakingDifficulty:MediumLearningObjective:Alistofallaccountsandtheidentificationnumberassignedtoeachaccountusedbyacompanycalleda:A.Sourcedocument.B.Journal.Trialbalance.Chartofaccounts.GeneralJournal.AICPAFN:DecisionMakingDifficulty:MediumLearningObjective:C4Thenumberingsystemusedinacompany'schartaccounts:Isthesameforallcompanies.Is determined by generally accepted principles.Dependsonthesourcedocumentsusedintheaccountingprocess.Typicallybeginswithbalancesheetaccounts.E.Typicallybeginswithincomestatementaccounts.AICPAFN:DecisionMakingDifficulty:MediumLearningObjective:C4Adebitis:Anincreaseinanaccount.Theright-handsideofaT-account.Adecreaseinanaccount.Theleft-handsideofaT-account.Anincreasetoaliabilityaccount.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:EasyLearningObjective:C5TherightsideofaT-accountisa(n):A.Debit.B.Increase.C.Credit.D.Decrease.E.Accountbalance.79.Acreditisusedtorecord:A.Adecreaseinanexpenseaccount.B.Adecreaseinanassetaccount.Anincreaseinanunearnedrevenueaccount.Anincreaseinarevenueaccount.AllofAACSB:AnalyticAICPAFN:DecisionMakingDifficulty:MediumLearningObjective:C580. Asimpleaccountformwidelyusedinaccountingasatooltounderstandhowdebitsandcreditsaffectanaccountbalanceiscalleda:A.Withdrawalsaccount.B.Capitalaccount.C.Drawingaccount.D.T-account.E.Balancecolumnsheet.AICPAFN:DecisionMakingDifficulty:EasyLearningObjective:C5AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:EasyLearningObjective:C582.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:MediumLearningObjective:C5Ofthefollowingaccounts,theonethatnormallyhasacreditbalanceis:A.Cash.OfficeEquipment.SalesSalariesPayable.Owner,Withdrawals.SalesSalariesExpense.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:MediumLearningObjective:C5Adebitisusedtorecord:Adecreaseinanassetaccount.Adecreaseinanexpenseaccount.Anincreaseinarevenueaccount.Anincreaseinthebalanceofanowner'scapitalaccount.Anincreaseinthebalanceoftheowner'swithdrawalsaccount.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:MediumLearningObjective:C5Acreditentry:Increasesassetandexpenseaccounts,anddecreasesliability,owner'scapital,andrevenueaccounts.Isalwaysadecreaseinanaccount.Decreasesassetandexpenseaccounts,andincreasesliability,owner'scapital,andrevenueaccounts.IsrecordedontheleftsideofaT-account.Isalwaysanincreaseinanaccount.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:MediumLearningObjective:C5Double-entryaccountingisanaccountingsystem:A.Thatrecordseachtransactiontwice.Thatrecordstheeffectsoftransactionsandeventsinatleasttwoaccountswithequaldebitscredits.Inwhicheachtransactionaffectsandisrecordedintwoormoreaccountsbutthatcouldincludetwodebitsandnocredits.ThatmayonlybeusedifT-accountsareused.E.Thatinsuresthaterrorsneveroccur.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:HardLearningObjective:C587.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:EasyLearningObjective:A1ManagementServices,Ividesservicestoclients.OnMay1,aclientprepaidManagementServices$60,000for6-monthsservicesinadvance.ManagementServices'generaljournalentrytorecordthistransactionwillincludeaA.DebittoUnearnedManagementFeesfor$60,000.B.CredittoManagementFeesEarnedfor$60,000.C.CredittoCashfor$60,000.D.CredittoUnearnedManagementFeesfor$60,000.DebittoManagementFeesEarnedfor$60,000.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:EasyLearningObjective:A1WisconsinRentalspurchasedofficesuppliesoncredit.ThegeneraljournalentrymadebyWisconsinRentalsincludea:DebittoAccountsPayable.DebittoAccountsReceivable.CredittoCash.CredittoAccountsPayable.CredittoWisconsinRentals,Capital.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:EasyLearningObjective:A1Anassetcreatedbyprepaymentofanexpenseis:A.Recordedasadebittoanunearnedrevenueaccount.Recordedasadebittoaprepaidexpenseaccount.Recordedasacredittoanunearnedrevenueaccount.Recordedasacredittoaprepaidexpenseaccount.Notrecordedintheaccountingrecordsuntilearningsprocessiscomplete.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:MediumLearningObjective:A1RobertHaddoncontributed$70,000incashandworth$130,000toopenanewbusiness,RHConsulting.WhichofthefollowinggeneraljournalentrieswillRHConsultingmaketorecordthistransaction?A.B.C.D.E.AACSB:AnalyticAICPAFN:DecisionDifficulty:MediumLearningObjective:A192.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:HardLearningObjective:A1OnSeptember30,theCashaccountofValueCompanyhadanormalbalanceof$5,000.DuringSeptember,theaccountwasdebitedforatotalof$12,200andcreditedfortotalof$11,500.WhatwasthebalanceintheCashaccountatthebeginningofSeptember?A.A$0balance.B. A$4,300debitbalance.C. A$4,300creditbalance.D. A$5,700debitbalance.E. A$5,700creditbalance.Beg.Bal.+$12,200-$11,500=$5,000Beg.Bal.$4,300debitAACSB:AnalyticAICPAFN:DecisionMakingDifficulty:HardLearningObjective:A1OnApril30,HoldenCompanyhadanAccountsReceivablebalanceof$18,000.DuringthemonthofMay,totalcreditstoAccountsReceivablewere$52,000fromcustomerpayments.TheMay31AccountsReceivablebalancewas$13,000.WhatwastheamountofcreditsalesduringMay?A.$B.$47,000.C.$52,000.D.$57,000.E.$32,000.$18,000+CreditSales-$52,000=$13,000CreditSales=$47,000AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:HardLearningObjective:A1DuringthemonthofFebruary,HofferCompanyhadcashreceiptsof$7,500andcashdisbursementsof$8,600.February28cashbalancewas$1,800.WhatwastheJanuary31beginningcashbalance?A.$700.B.$1,100.C.$2,900.D.$0.E.$4,300.Beg.Bal.+$7,500-$8,600=$1,800Beg.Bal.=$2,900AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:HardLearningObjective:A1ThefollowingtransactionsoccurredduringJuly:Received$900cashforservicesprovidedtoacustomerduringJuly.Received$2,200cashinvestmentfromBarbaratheownerofthebusiness.Received$750fromacustomerinpartialpaymentofhisaccountreceivablewhicharosefromsalesinJune.Providedservicestoacustomeroncredit,$375.Borrowed$6,000fromthebankbysigningapromissorynote.Received$1,250cashfromacustomerforservicestoberenderednextyear.WhatwastheamountofrevenueforJuly?A.$900.B.$1,275.C.$2,525.D.$3,275.E.$11,100.Revenues=$900(1)+$375(4)=$1,275AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:HardLearningObjective:A1IfTimJones,theownerofJonesHardwareproprietorship,usescashofthebusinesstopurchaseafamilyautomobile,thebusinessshouldrecordthisusecashwithanentryto:DebitSalaryExpenseandcreditCash.DebitTimJones,SalaryandcreditCash.DebitCashandcreditTimJones,Withdrawals.DebitTimJones,WithdrawalsandcreditCash.DebitAutomobilesandcreditAACSB:AnalyticAICPAFN:DecisionMakingDifficulty:HardLearningObjective:A1ZedBennettopenedanartgalleryandasadealercompletedthesetransactions:Startedthegallery,Artery,byinvesting$40,000andequipmentvaluedat$18,000.Purchased$70ofofficesuppliesoncredit.Paid$1,200cashforthereceptionist'ssalary.Soldapaintingforanartistandcollecteda$4,500cashcommissiononthesale.Completedanartappraisalandbilledtheclient$200.Whatwasthebalanceofthecashaccountaftertransactionswereposted?A.$12,230.B.$12,430.C.$43,300.D.$43,430.E.$61,430.$40,000(1)-$1,200(3)+$4,500(4)=$43,300AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:HardLearningObjective:A1AtthebeginningofJanuaryofthecurrentThomasLawCenter'sledgerreflectedanormalbalance$52,000foraccountsreceivable.DuringJanuary,companycollected$14,800fromcustomersonaccountandprovidedadditionalservicestocustomersonaccounttotaling $12,500. Additionally, during January onecustomerpaidThomas$5,000forservicestobeprovidedinthefuture.AttheendofJanuary,thebalanceintheaccountsreceivableaccountshouldbe:A.$54,700.B.$49,700.C.$2,300.D.$54,300.E.$49,300.$52,000beginningbalance-$14,800ofcollections+$12,500ofadditionalservicesoncredit=$49,700.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:HardLearningObjective:A1DuringthemonthofMarch,CooleyComputerServicesmadepurchasesonaccounttotaling$43,500.AlsothemonthofMarch,Cooleywaspaid$8,000byacustomerforservicestobeprovidedinthefutureandpaid$36,900ofcashonitsaccountspayablebalance.IfthebalanceintheaccountspayableaccountatthebeginningofMarchwas$77,300,whatisthebalanceinaccountspayableatendofMarch?A.$83,900.B.$91,900.C.$6,600.D.$75,900.E.$4,900.Beginningbalanceof$77,300+$43,500ofpurchasesonaccount-$36,900ofpaymentsonaccount=$83,900.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:HardLearningObjective:A1OnJanuary1ofthecurrentyear,Bob'sLawnCareServicereportedowner'scapitaltotaling$122,500.Duringthecurrentyear,totalrevenueswere$96,000whiletotalexpenseswere$85,500.Also,duringthecurrentyearBobwithdrew$20,000fromthecompany.Nootherchangesinequityoccurredduringtheyear.If,onDecember31ofthecurrentyear,totalassetsare$196,000,thechangeowner'scapitalduringtheyearwas:Adecreaseof$9,500.Anincreaseof$9,500.Anincreaseof$30,500.Adecreaseof$30,500Impossibletodeterminefromtheinformationprovided.Duringtheyear,revenueswere$96,000whileexpenses$85,500andwithdrawalswere$20,000.Sincetherewereotherchangesinequity,equitymusthavedecreasedby$9,500.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:HardLearningObjective:A1AndreaConawayopenedWonderlandPhotographyJanuary1ofthecurrentyear.DuringJanuary,followingtransactionsoccurredandwererecordedinthecompany'sbooks:Conawayinvested$13,500cashinthebusiness.Conawaycontributed$20,000ofphotographyequipmentthebusiness.Thecompanypaid$2,100cashforaninsurancepolicycoveringthenext24months.Thecompanyreceived$5,700cashforservicesprovidedduringJanuary.Thecompanypurchased$6,200ofofficeequipmentcredit.Thecompanyprovided$2,750ofservicestocustomersonaccount.Thecompanypaidcashof$1,500formonthlyrent.Thecompanypaid$3,100ontheofficeequipmentpurchasedintransaction#5above.Paid$275cashforJanuaryutilities.Basedonthisinformation,thebalanceinthecashaccountattheendofJanuarywouldbe:A.$41,450.B.$12,225C.$18,700.D.$15,250.E.$13,500.(1)$13,500-(3)$2,100+(4)5,700-(7)$1,500-(8)$3,100-(9)$275=$12,225AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:MediumLearningObjective:A1BasedontheinformationincludedinQuestionthebalanceintheAndreaConaway,CapitalaccountreportedontheStatementofOwner'sEquityattheendofthemonthwouldbe:A.$31,400.B.$39,200.C.$31,150.D.$40,175.E.$30,875.(1)$13,500+(2)$20,000+(4)$5,700+(6)$2,750-(7)$1,500-(9)$275=$40,175.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:HardLearningObjective:A1Thedebtratioisused:Tomeasuretherelationofequitytoexpenses.Toreflecttheriskassociatedwithacompany'sdebts.Onlybybankswhenabusinessappliesforaloan.Todeterminehowmuchdebtafirmshouldpayoff.AllofAACSB:AnalyticAICPAFN:DecisionMakingDifficulty:MediumLearningObjective:A2Whichofthefollowingistheformulausedcalculatethedebtratio?TotalEquity/TotalLiabilities.TotalLiabilities/TotalEquity.TotalLiabilities/TotalAssets.TotalAssets/TotalLiabilities.TotalEquity/TotalAACSB:AnalyticAICPAFN:DecisionMakingDifficulty:MediumLearningObjective:A2Whichofthefollowingstatementsisincorrect?A.Higherfinancialleverageinvolveshigherrisk.B.Riskishigherifacompanyhasmoreliabilities.C.Riskishigherifacompanyhashigherassets.D.Thedebtratioisonemeasureoffinancialrisk.E.Lowerfinancialleverageinvolveslowerrisk.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:MediumLearningObjective:A2StrideRitehastotalassetsof$425million.totalliabilitiesare$110million.Itsequityis$315million.Calculatethedebtratio.A.38.6%.B.13.4%.C.34.9%.D.25.9%.E.14.9%.$110million/$425million=25.9%AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:MediumLearningObjective:A2StrideRitehastotalassetsof$385million.totalliabilitiesare$100millionanditsequityis$285million.Calculateitsdebtratio.A.35.1%.B.26.0%.C.38.5%.D.28.5%.E.58.8%.$100million/$385million=26.0%AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:MediumLearningObjective:A2Whichofthefollowingstatementsdescribingtheratioisfalse?Itisofusetobothinternalandexternalusersaccountinginformation.Arelativelyhighratioisalwaysdesirable.Thedividinglineforahighandlowratiovariesindustrytoindustry.Manyfactorssuchasacompany'sage,stability,profitabilityandcashflowinfluencethedeterminationofwhatwouldbeinterpretedasahighversusalowratio.Theratiomightbeusedtohelpdetermineifacompanyiscapableofincreasingitsincomebyobtainingfurtherdebt.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:HardLearningObjective:A2Attheendofthecurrentyear,NormanCompanyreportedtotalliabilitiesof$300,000andtotalequityof$100,000.Thecompany'sdebtratioonthelastyear-endwas:A.300%.B.33.3%C.75.0%.D.$400,000.E.Cannotbedeterminedfromtheinformationprovided.Onthelastyear-end,totalliabilitieswere$300,000totalequitywas$100,000.Thatmeanstotalassetswere$400,000.Therefore,thedebttoassetsratiowas$300,000/$400,000or75.0%.AACSB:AnalyticAICPAFN:DecisionMakingDifficulty:HardLearningObjective:A2Atthebeginningofthecurrentyear,TauntonCompany'stotalassetswere$248,000anditstotalliabilitieswere$175,000.Duringtheyear,thecompanyreportedtotalrevenuesof$93,000,totalexpenses$76,000andownerwithdrawalsof$5,000.Therewereotherchangesinowner'scapitalduringtheyearandtotalassetsattheendoftheyearwere$260,000.TauntonCompany'sdebtratioattheendofthecurrentyearis:A.70.6%.B.67.3%.C.32.7%.D.48.6%.E.Cannotbedeterminedfromtheinformationprovided.Iftotalassetswere$248,000andtotalliabilitieswere$175,000,totalequitywas$73,000atthebeginningoftheperiod.Addtothatfigure$93,000ofrevenuesduringtheyearandsubtract$76,000ofexpensesand$5,000withdrawalsduringtheyearandequityobviouslyendedtheyearat$85,000.Iftotalassetsattheendoftheyearwere$260,000andtotalequitywas$85,000,totalliabilitieswere