Calculate the Effective Tax Rate for a Company That Reports Income Tax Expense Of

Accounting 284 Dr. Clem

Spring 2006 – 15 points - Take Home Quiz 2

Name:______

University ID:______

Row # ______

Multiple Choice (2 points each)

1. Calculate the effective tax rate for a company that reports income tax expense of $142.5 million, net income of $357.5 million, and income before taxes of $500 million.

A) 33 1/3%

B) 25%

C) 28.5%

D) None of the above.

2. If Papa John's reports an asset turnover ratio of 2.57 for 2003 and their competitor Domino's reports 2.89 for their 2003 ratio, it means that Papa John's

A) is better able to pay their current obligations with their current assets.

B) has been more effective in managing the use and level of its assets.

C) has been less effective in managing the use and level of its assets.

D) is less able to pay off their current obligations with their current assets.

3. Which of the following expenses is usually listed last on the income statement?

A) Cost of sales

B) Salaries and benefits expense

C) Advertising expense

D) General administrative expenses

E) Income tax expense

4. Two basic accounting principles determine when revenues and expenses are to be recorded under accrual basis accounting. They are

A) revenue recognition and matching principles.

B) revenue recognition and measurement principles.

C) cost and matching principles.

D) none of the above.

5. What would be the effect on December's income statement of a utility bill received on December 27, 2006 but which will not be paid until January 10, 2007?

A) No expense will be recognized until the bill is paid in January

B) We would cause an increase in income by recording the expense in December

C) Recording the expense in December when it is incurred will increase expenses

D) Income will be decreased when we pay the bill in January

Workout Problem (5 points)

Complete the chart below for Monticello Corporation by entering check marks in the appropriate spaces.

Transaction or Event* / Assets / Liabilities / Stockholders’ Equity
+ / - / + / - / + / -
A. / Monticello issues common stock.
B. / Used supplies previously acquired.
C. / Earned service revenue.
D. / Purchased equipment on account.
E. / Paid expenses for the month.
F. / Paid a liability.
G. / Recorded utility bill, but did not pay it.