10 Finance Multiple Choice Quiz Questions

An analyst has collected the following information regarding Ouyang Inc. What is the total amount for Total Shareholders' Equity?

Table: Ouyang Inc. Financial Information
Financial Information Amount
Liabilities 2,000
Contributed capital 400
Beginning retained earnings 200
Dividends -300
Net income 1,500

A) $3,800.
B) $2,300.
C) $2,100.
D) $1,800.
E) None of the above.

2. Assume Ouyang Inc. borrows $1,200,000 on December 31, 2011, and the terms of the loan require repayment of the loan plus all five-year interests on December 31, 2016 with an annual interest rate of 10%. On December 31, 2012, Ouyang Inc. should recognize a(an):
A) interest revenue of $120,000.
B) interest payable of $120,000.
C) decrease of revenue of $120,000.
D) increase of shareholders' equity of $120,000.
E) nothing to be recognized.

3. Ouyang Inc. has made a hotel reservation on Jan 10, 2013 by paying $400 to the hotel. What should Ouyang Inc. recognize on Jan 10, 2013?
A) an increase of cash of $400.
B) an increase of expense of $400.
C) an increase of revenue of $400.
D) an increase of liability of $400.
E) an increase of prepaid expense of $400.

4. Ouyang Inc. has made a hotel reservation on Jan 10, 2013 by paying $400 to the hotel. What should the hotel recognize on Jan 10, 2013?
A) a decrease of cash of $400.
B) an increase of expense of $400.
C) an increase of revenue of $400.
D) an increase of liability of $400.
E) an increase of prepaid expense of $400.

5. The relationship between shareholders and managers of a public firm can be characterized as a relationship between:
A) negativity and positivity.
B) principal and agent.
C) novel and fiction.
D) U.S. and Canada.
E) cat and mouse.

1. Ouyang Inc. on January 1, 2012 sold equipment worth $40 million to Huang Inc. The equipment cost $10 million in manufacturing costs. The cash receipts from Huang Inc. in FY 2012 were as follows:

First Quarter: $3 million
Second Quarter: $6 million
Third Quarter: $4 million
Fourth Quarter: $7 million

Under the cost recovery method, when can Ouyang Inc. recognize profit?
A) First quarter.
B) Second quarter.
C) Third quarter.
D) No profit can be recognized until the end of the year.
E) No profit can be recognized for the whole 2012.

2. Ouyang Inc. spent $400,000 improving an apartment. He sold the property for $500,000 but the buyer makes two installment payments. On the first payment due date, Ouyang Inc. receives a check for $200,000. How much profit can Ouyang Inc. recognize from this $200,000 check if the installment method of revenue recognition is used?
A) $20,000
B) $40,000
C) $80,000
D) $100,000
E) $200,000

3. Ouyang Inc. has a machine costing $11,000 with an estimated life of five years and a salvage value of $1,000. How much annual depreciation expense should Ouyang Inc. recognize, if straight-line depreciation method is used?
A) $0
B) $1,000
C) $2,000
D) $4,000
E) $5,000

4.Ouyang Inc. has a machine costing $11,000 with an estimated life of five years and a salvage value of $1,000. How much annual depreciation expense should Ouyang Inc. recognize for the first year, if double-declining balance depreciation method is used?
A) $800
B) $1,200
C) $2,400
D) $4,400
E) $5,600

5.
Holding everything else constant, managers normally:
A) prefer a higher amount of depreciation;
B) prefer a lower amount of depreciation;
C) are indifferent to the amount of depreciation;
D) change depreciation method every year;
E) do not depreciate fixed asset at all.