Question 1

Vertical analysis is useful in making comparisons of companies of different sizes.

Accepted Answer

A) True 
 B)False

Question 2

Vertical analysis (common-size) percentages for Austin Company's sales, cost of goods sold, and expenses are listed here. $\begin{array}{lccc}\text { Vertical Analysis }&2015&2014&2013\
\text { Sales revenue } & 100.0 \% & 100.0 \% & 100.0 \% \
\text { Cost of goods sold } & 61.2 & 62.4 & 63.5 \
\text { Expenses } & 26.5 & 27.4 & 28.5
\end{array}$ Did Austin Company's net income as a percent of sales increase, decrease, or remain unchanged over the 3-year period? Provide numerical support for your answer.

Accepted Answer

@#IMG-DLM& Net income as a percent of sa

Question 3

If Year 1 equals $780, Year 2 equals $858, and Year 3 equals $896, the percentage to be assigned for Year 2 in a trend analysis, assuming that Year 1 is the base year, is

Accepted Answer

A)  100%. 
B)  115%. 
C)  110%. 
D)  115% 
A)  100%. 
B)  115%. 
C)  110%. 
D)  115%

Question 4

Under IFRS, the statement of comprehensive income can be prepared under

Accepted Answer

A)  the one-statement approach only. 
B)  the two-statement approach only. 
C)  either the one-statement approach or the two-statement approach. 
D)  either the two-statement approach or the stockholders' equity statement approach. 
A)  the one-statement approach only. 
B)  the two-statement approach only. 
C)  either the one-statement approach or the two-statement approach. 
D)  either the two-statement approach or the stockholders' equity statement approach.

Question 5

Shambhala Spice Company has experienced a $60,000 loss due to tornado damage to their inventory. Tornados have never before occurred in this area. Assuming that the company's tax rate is 30%, what amount will be reported for this loss on the income statement?

Accepted Answer

A)  $60,000 
B)  $42,000 
C)  $18,000 
D)  $36,000 
A)  $60,000 
B)  $42,000 
C)  $18,000 
D)  $36,000

Question 6

Match the ratios with their formulas by entering the appropriate letter in the space provided. 
-$\frac{\text {Cost of goods sold }}{\text {Average inventory }}$

Accepted Answer

A) Current ratio 
B) Current cash debt coverage 
C) Profit margin 
D) Asset turnover 
E) Price-earnings ratio
F)Times interest earned
G)Inventory turnover
H)Average collection period
I)Average days in inventory
J)Payout ratio 
A) Current ratio 
B) Current cash debt coverage 
C) Profit margin 
D) Asset turnover 
E) Price-earnings ratio
F)Times interest earned
G)Inventory turnover
H)Average collection period
I)Average days in inventory
J)Payout ratio

Question 7

Match the ratios with their formulas by entering the appropriate letter in the space provided. 
-$\frac{\text {Net income }}{\text { Net sales}}$

Accepted Answer

A) Current ratio 
B) Current cash debt coverage 
C) Profit margin 
D) Asset turnover 
E) Price-earnings ratio
F)Times interest earned
G)Inventory turnover
H)Average collection period
I)Average days in inventory
J)Payout ratio 
A) Current ratio 
B) Current cash debt coverage 
C) Profit margin 
D) Asset turnover 
E) Price-earnings ratio
F)Times interest earned
G)Inventory turnover
H)Average collection period
I)Average days in inventory
J)Payout ratio

Question 8

Armada Company has these comparative balance sheet data: $\begin{array}{c}
\text { ARMADA COMPANY}\
\text {  Balance Sheets }\
\text { December 31 .}\\begin{array}{lrr}
&\underline{2014}&\underline{2013}\
\text { Cash } & \$ 40,000 & \$ 30,000 \
\text { Accounts receivable (net) } & 65,000 & 60,000 \
\text { nnventories } & 60,000 & 50,000 \
\text { Plant assets (net) } & \underline{185,000} &\underline{180,000} \
&\underline{\$ 350,000}&\underline{\$ 320,000}\ 
\text { Accounts payable } & \underline{\$ 50,000} & \$ 60,000 \
\text { Mortgage payable (15\%, due in 15 years) } & 100,000 & 100,000 \
\text { Common stock, } \$ 10 \text { par } & 140,000 & 120,000 \
\text { Retained earnings } & \underline{60,000 }&\underline{40,000} \
&\underline{\$350,000}&\underline{\$320,000}
\end{array}\end{array}$ Additional information for 2014:
1. Net income was $25,000.
2. Sales on account were $450,000. Sales returns and allowances amounted to $25,000.
3. Cost of goods sold was $275,000.
4. Net cash provided by operating activities was $49,000.
5. Capital expenditures were $23,000, and cash dividends were $18,000.
Instructions
Compute the following ratios at December 31, 2014.
(a) Current. (e) Days in inventory
(b) Accounts receivable turnover. (f) Cash debt coverage.
(c) Average collection period. (g) Current cash debt coverage.
(d) Inventory turnover. (h) Free cash flow.

Accepted Answer

None

Question 9

The order of presentation of items that may appear on the income statement is

Accepted Answer

A)  Extraordinary items, Discontinued operations, Income before income taxes. 
B)  Discontinued operations, Extraordinary items, Income before income taxes. 
C)  Income before income taxes, Discontinued operations, Extraordinary items. 
D)  Income before income taxes, Extraordinary items, Discontinued operations. 
A)  Extraordinary items, Discontinued operations, Income before income taxes. 
B)  Discontinued operations, Extraordinary items, Income before income taxes. 
C)  Income before income taxes, Discontinued operations, Extraordinary items. 
D)  Income before income taxes, Extraordinary items, Discontinued operations.

Question 10

If the inventory turnover is 7.3 times, and the average inventory was $600,000, the cost of goods sold during the year was $______________ and the average days to sell the inventory was ______________ days.

Accepted Answer

The answer of If the inventory turnover is 7.3 times,...

Question 11

Exeter Corporation had net income of $3,000,000 in 2013. Using 2013 as the base year, net income decreased by 40% in 2014 and increased by 110% in 2015.
Instructions
Compute the net income reported by Exeter Corporation for 2014 and 2015.

Accepted Answer

\[\begin{array} { ll } 
\text { 2014: }

Question 12

In performing a vertical analysis, the base for cost of goods sold is

Accepted Answer

A)  total selling expenses. 
B)  net sales. 
C)  total revenues. 
D)  total expenses. 
A)  total selling expenses. 
B)  net sales. 
C)  total revenues. 
D)  total expenses.

Question 13

In performing a vertical analysis, the base for sales returns and allowances is

Accepted Answer

A)  sales revenue. 
B)  sales discounts. 
C)  net sales. 
D)  total revenues. 
A)  sales revenue. 
B)  sales discounts. 
C)  net sales. 
D)  total revenues.

Question 14

Which of the following is the best definition of sustainable income?

Accepted Answer

A)  Sustainable income is a measure of solvency that does not include capital expenditure. 
B)  Sustainable income is the same as net income. 
C)  Sustainable income is income that is unusual in nature and infrequent in occurrence. 
D)  Sustainable income is the most likely level of income to be obtained in the future. 
A)  Sustainable income is a measure of solvency that does not include capital expenditure. 
B)  Sustainable income is the same as net income. 
C)  Sustainable income is income that is unusual in nature and infrequent in occurrence. 
D)  Sustainable income is the most likely level of income to be obtained in the future.

Question 15

Sophie's Dog Supplies has income before taxes of $550,000 and an extraordinary loss of $170,000. If the income tax rate is 30% on all items, the income statement should show income before irregular items and an extraordinary loss, respectively, of

Accepted Answer

A)  $550,000 and ($170,000). 
B)  $385,000 and ($86,700). 
C)  $385,000 and ($119,000). 
D)  $165,000 and ($51,000). 
A)  $550,000 and ($170,000). 
B)  $385,000 and ($86,700). 
C)  $385,000 and ($119,000). 
D)  $165,000 and ($51,000).

Question 16

The ratios that are used to determine a company's short-term debt paying ability are

Accepted Answer

A)  asset turnover, times interest earned, current ratio, and accounts receivables turnover. 
B)  times interest earned, inventory turnover, current ratio, and receivables turnover. 
C)  times interest earned, accounts receivable turnover ratio, current ratio, and inventory turnover. 
D)  current ratio, current debt coverage, receivable turnover, and inventory turnover. 
A)  asset turnover, times interest earned, current ratio, and accounts receivables turnover. 
B)  times interest earned, inventory turnover, current ratio, and receivables turnover. 
C)  times interest earned, accounts receivable turnover ratio, current ratio, and inventory turnover. 
D)  current ratio, current debt coverage, receivable turnover, and inventory turnover.

Question 17

Comprehensive income would not include

Accepted Answer

A)  dividends declared. 
B)  unrealized gains on available-for-sale securities. 
C)  discontinued operations. 
D)  extraordinary gains and losses. 
A)  dividends declared. 
B)  unrealized gains on available-for-sale securities. 
C)  discontinued operations. 
D)  extraordinary gains and losses.

Question 18

Comparative balance sheets

Accepted Answer

A)  are usually prepared for at least one year. 
B)  are usually prepared for at least two years. 
C)  do not show both dollar amount and percentage changes. 
D)  do not show a comparison of total stockholders' equity. 
A)  are usually prepared for at least one year. 
B)  are usually prepared for at least two years. 
C)  do not show both dollar amount and percentage changes. 
D)  do not show a comparison of total stockholders' equity.

Question 19

Selected information from the comparative financial statements of Barcelona Company for the year ended December 31 appears below: $\begin{array}{lrr}&2014&2013\
\text { Accounts receivable (net) } & 175,000 & \$ 200,000 \
\text { Inventory } & 130,000 & 170,000 \
\text { Total assets } & 1,100,000 & 800,000 \
\text { Current liabilities } & 140,000 & 110,000 \
\text { Long-term debt } & 410,000 & 300,000 \
\text { Net credit sales } & 900,000 & 700,000 \
\text { Cost of goods sold } & 600,000 & 530,000 \
\text { Interest expense } & 40,000 & 25,000 \
\text { Income tax expense } & 60,000 & 29,000 \
\text { Net income } & 120,000 & 85,000 \
\text { Net cash provided by operating activities } & 250,000 & 135,000
\end{array}$ Instructions
Answer the following questions relating to the year ended December 31, 2014. Show computations.
1. The inventory turnover for 2014 is __________.
2. The number of times interest earned in 2014 is __________.
3. The accounts receivable turnover for 2014 is __________.
4. The return on assets for 2014 is __________.
5. The current cash debt coverage for 2014 is __________.

Accepted Answer

The answer of Selected information from the comparative financial statements...

Question 20

The loss on disposal of a significant component of a business is disclosed in the statement of retained earnings.

Accepted Answer

A) True 
 B)False

Vertical analysis is useful in making comparisons of companies of different sizes.

If Year 1 equals $780, Year 2 equals $858, and Year 3 equals $896, the percentage to be assigned for Year 2 in a trend analysis, assuming that Year 1 is the base year, is

Under IFRS, the statement of comprehensive income can be prepared under

Shambhala Spice Company has experienced a $60,000 loss due to tornado damage to their inventory. Tornados have never before occurred in this area. Assuming that the company's tax rate is 30%, what amount will be reported for this loss on the income statement?

Match the ratios with their formulas by entering the appropriate letter in the space provided. - $\frac{\text {Cost of goods sold }}{\text {Average inventory }}$

Match the ratios with their formulas by entering the appropriate letter in the space provided. - $\frac{\text {Net income }}{\text { Net sales}}$

The order of presentation of items that may appear on the income statement is

If the inventory turnover is 7.3 times, and the average inventory was $600,000, the cost of goods sold during the year was $ and the average days to sell the inventory was days.

Exeter Corporation had net income of $3,000,000 in 2013. Using 2013 as the base year, net income decreased by 40% in 2014 and increased by 110% in 2015. Instructions Compute the net income reported by Exeter Corporation for 2014 and 2015.

In performing a vertical analysis, the base for cost of goods sold is

In performing a vertical analysis, the base for sales returns and allowances is

Which of the following is the best definition of sustainable income?

Sophie's Dog Supplies has income before taxes of $550,000 and an extraordinary loss of $170,000. If the income tax rate is 30% on all items, the income statement should show income before irregular items and an extraordinary loss, respectively, of

The ratios that are used to determine a company's short-term debt paying ability are

Comprehensive income would not include

Comparative balance sheets

The loss on disposal of a significant component of a business is disclosed in the statement of retained earnings.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Understanding Investments and Acquisitions in Accounting

Filters

Exam 13: Financial Analysis: The Big Picture

Vertical analysis is useful in making comparisons of companies of different sizes.

If Year 1 equals $780, Year 2 equals $858, and Year 3 equals $896, the percentage to be assigned for Year 2 in a trend analysis, assuming that Year 1 is the base year, is

Under IFRS, the statement of comprehensive income can be prepared under

Shambhala Spice Company has experienced a $60,000 loss due to tornado damage to their inventory. Tornados have never before occurred in this area. Assuming that the company's tax rate is 30%, what amount will be reported for this loss on the income statement?

Match the ratios with their formulas by entering the appropriate letter in the space provided. - Cost of goods sold Average inventory \frac{\text {Cost of goods sold }}{\text {Average inventory }}Average inventory Cost of goods sold ​

Match the ratios with their formulas by entering the appropriate letter in the space provided. - Net income Net sales\frac{\text {Net income }}{\text { Net sales}} Net salesNet income ​

The order of presentation of items that may appear on the income statement is

If the inventory turnover is 7.3 times, and the average inventory was $600,000, the cost of goods sold during the year was $______________ and the average days to sell the inventory was ______________ days.

Exeter Corporation had net income of $3,000,000 in 2013. Using 2013 as the base year, net income decreased by 40% in 2014 and increased by 110% in 2015. Instructions Compute the net income reported by Exeter Corporation for 2014 and 2015.

In performing a vertical analysis, the base for cost of goods sold is

In performing a vertical analysis, the base for sales returns and allowances is

Which of the following is the best definition of sustainable income?

Sophie's Dog Supplies has income before taxes of $550,000 and an extraordinary loss of $170,000. If the income tax rate is 30% on all items, the income statement should show income before irregular items and an extraordinary loss, respectively, of

The ratios that are used to determine a company's short-term debt paying ability are

Comprehensive income would not include

Comparative balance sheets

The loss on disposal of a significant component of a business is disclosed in the statement of retained earnings.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Understanding Investments and Acquisitions in Accounting

Filters

Match the ratios with their formulas by entering the appropriate letter in the space provided. - $\frac{\text {Cost of goods sold }}{\text {Average inventory }}$

Match the ratios with their formulas by entering the appropriate letter in the space provided. - $\frac{\text {Net income }}{\text { Net sales}}$

If the inventory turnover is 7.3 times, and the average inventory was $600,000, the cost of goods sold during the year was $ and the average days to sell the inventory was days.