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Harborview Co. reports current assets of $450,000 and current liabilities of $300,000 at year end. What is the current ratio?
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Q1. Harborview Co. reports current assets of $450,000 and current liabilities of $300,000 at year end. What is the current ratio?
Correct answer: C. 1.5
Current ratio equals current assets divided by current liabilities: $450,000 / $300,000 = 1.5.
Q2. A company reports cash of $50,000, accounts receivable of $80,000, inventory of $120,000, and prepaid expenses of $10,000, against current liabilities of $130,000. What is the quick (acid-test) ratio?
Correct answer: B. 1.0
Quick assets exclude inventory and prepaids: ($50,000 + $80,000) / $130,000 = $130,000 / $130,000 = 1.0.
Q3. A company has total liabilities of $600,000 and total stockholders' equity of $400,000. What is its debt-to-equity ratio?
Correct answer: B. 1.5
Debt-to-equity equals total liabilities divided by total equity: $600,000 / $400,000 = 1.5.
Q4. Using the DuPont framework, a company has net income of $80,000, sales of $1,000,000, total assets of $500,000, and total equity of $400,000. What is the company's return on equity?
Correct answer: C. 20%
Net profit margin (80,000/1,000,000 = 8%) x asset turnover (1,000,000/500,000 = 2.0) x equity multiplier (500,000/400,000 = 1.25) = 20%.
Q5. A company's cost of goods sold is $900,000 and its average inventory balance is $150,000. Approximately how many days of sales are held in inventory (using a 365-day year)?
Correct answer: B. 61 days
Inventory turnover = $900,000 / $150,000 = 6.0 times. Days in inventory = 365 / 6.0 = approximately 61 days.
Q6. The standard price for direct material is $5.00 per pound. During the period, the company purchased 20,000 pounds at an actual price of $5.30 per pound. What is the direct materials price variance?
Correct answer: B. $6,000 unfavorable
Price variance = (actual price - standard price) x actual quantity purchased = ($5.30 - $5.00) x 20,000 = $6,000 unfavorable, since actual cost exceeded standard.
Q7. Standard hours allowed for actual production are 4,000 direct labor hours, but 4,300 hours were actually worked. The standard labor rate is $18 per hour. What is the direct labor efficiency variance?
Correct answer: B. $5,400 unfavorable
Efficiency variance = (actual hours - standard hours allowed) x standard rate = (4,300 - 4,000) x $18 = $5,400 unfavorable, since more hours were used than allowed.
Q8. A product sells for $50 per unit and has a variable cost of $30 per unit. Fixed costs total $200,000 per period. How many units must be sold to break even?
Correct answer: C. 10,000
Contribution margin per unit = $50 - $30 = $20. Break-even units = $200,000 / $20 = 10,000 units.
Q9. A company has total contribution margin of $400,000 and operating income of $100,000. What is the degree of operating leverage?
Correct answer: C. 4.0
Degree of operating leverage = contribution margin / operating income = $400,000 / $100,000 = 4.0.
Q10. A company's revenue was $2,000,000 in Year 1, $2,300,000 in Year 2, and $2,600,000 in Year 3. Using the average of the Year 1-to-Year 2 and Year 2-to-Year 3 percentage growth rates, what is the forecasted Year 4 revenue, rounded to the nearest thousand?
Correct answer: B. $2,965,000
Growth rates are 15.00% (Year 1 to 2) and 13.04% (Year 2 to 3), averaging 14.02%. Applying this to Year 3 revenue: $2,600,000 x 1.1402 = approximately $2,965,000.
Exam facts and objectives sourced from the official AICPA certification page. Last reviewed June 2026.
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