Question 1

Which of the following accounts does not belong in the liability section of a balance sheet?

Accepted Answer

A)  accruals 
B)  short-term debt 
C)  additional paid-in capital 
D)  long-term debt

Question 2

Finished goods held for sale are inventory,but raw materials to be used in the production process are considered other assets.

Accepted Answer

A) True 
 B)False

Question 3

Prepare a balance sheet using the information given below.Make sure to identify current assets,net fixed assets,total assets,current liabilities,long-term debt,total equity,and total liabilities and equity.

Accepted Answer

The answer of Prepare a balance sheet using the information...

Question 4

Wheeler Corporation had retained earnings as of 12/31/10 of $15 million.During 2011,Wheeler's net income was $7 million.The retained earnings balance at the end of 2011 was equal to $20 million.Therefore,

Accepted Answer

A)  Wheeler paid a dividend in 2010 of $5 million. 
B)  Wheeler paid a dividend in 2010 of $2 million. 
C)  Wheeler sold common stock during 2010 for $5 million. 
D)  Wheeler purchased treasury stock in 2010 for $2 million.

Question 5

A corporation has annual sales of $18 million,total assets of $4 million,a debt ratio of 40%,depreciation expense of $200,000,and a tax rate of 40%.The corporation's total stockholders' equity is equal to

Accepted Answer

A)  $5,600,000. 
B)  $2,800,000. 
C)  $2,400,000. 
D)  $1,800,000.

Question 6

Net working capital is equal to

Accepted Answer

A)  total assets minus total liabilities. 
B)  current assets minus total liabilities. 
C)  total operating capital minus net income. 
D)  current assets minus current liabilities.

Question 7

Mr.Wizard's Magic Shoppe had the following condensed balance sheet at the end of operation for 2010:
  During 2011,the following occurred
a.Mr.Wizard's sold some of its investments for $13,000 which resulted in a gain of $300 after taxes.The gain (net of taxes)has been included in the company's 2011 net income.
b.Additional land for a plant expansion was purchased for $25,000.
c.Bonds payable were paid in the amount of $10,000.
d.An additional $35,000 in capital stock was issued.
e.Dividends of $15,000 were paid to stockholders.
f.Net income for 2011 was $48,000 after allowing for $15,000 in depreciation.
g.A second parcel of land was purchased through the issuance of $10,000 in bonds,and $5,000 in long-term notes payable.
Required:
a.Prepare a statement of cash flows for the year ended 12/31/2011.(check figure:
 ending cash balance = $72,500)
b.Prepare a condensed balance sheet for Mr.Wizard's at December 31,2011.

Accepted Answer

The answer of Mr.Wizard's Magic Shoppe had the following condensed...

Question 8

The A corporation has an operating profit margin of 20%,operating expenses of $500,000,and financing costs of $15,000.Therefore,

Accepted Answer

A)  the corporation's gross profit margin is less than 20%. 
B)  the corporation's net profit margin is greater than 20%. 
C)  the corporation's gross profit margin is greater than 20%. 
D)  the corporation's gross profit margin is equal to 20% because gross profit is not affected by operating expenses or financing costs.

Question 9

Global.Com has cash of $75,000; short-term notes payable of $100,000; accounts receivables of $275,000; accounts payable of $135,000: inventories of $350,000; and accrued expenses of $75,000.What is Global's net working capital?

Accepted Answer

A)  $390,000 
B)  $175,000 
C)  $700,000 
D)  $210,000

Question 10

If a company's cash balance increases during the year,and the company also reports positive net income,then the company's retained earnings balance must increase.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following accounts does not belong on the asset side of a balance sheet?

Accepted Answer

A)  accounts receivable 
B)  marketable securities 
C)  cash 
D)  common stock

Question 12

Use the following information to calculate the change in the company's cash balance for the year.

Accepted Answer

A)  $145,000 
B)  $180,000 
C)  $260,000 
D)  $365,000

Question 13

What information does a firm's statement of cash flows provide to the viewing public?

Accepted Answer

A)  a report of investments made and their cost for a specific period of time 
B)  a report documenting a firm's cash inflows and cash outflows from operating, financing, and investing activities for a defined period of time 
C)  a report of revenues and expenses for a defined period of time 
D)  an itemization of all of a firm's assets, liabilities, and equity for a defined period of time

Question 14

Net working capital is equal to gross working capital minus depreciation.

Accepted Answer

A) True 
 B)False

Question 15

PDQ Corp.has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000.What is PDQ's EBIT?

Accepted Answer

A)  $850,000 
B)  $875,000 
C)  $900,000 
D)  $1,300,000

Question 16

The balance sheet equation is Total Assets = Total Revenues - Total Liabilities.

Accepted Answer

A) True 
 B)False

Question 17

Earnings available to common shareholders represents income that may be reinvested in the firm or distributed to its owners.

Accepted Answer

A) True 
 B)False

Question 18

Examples of uses of cash include

Accepted Answer

A)  paying cash dividends to stockholders. 
B)  borrowing an additional amount using a secured loan. 
C)  selling machinery. 
D)  all of the above

Question 19

Profits-to-Sales relationships are defined as profit margins.

Accepted Answer

A) True 
 B)False

Question 20

Given the following financial statements for ACME Corporation,and assuming that ACME paid a common dividend of $80,000 in 2010,what is the company's financing cash flow for 2010?

Accepted Answer

A)  -$10,000 
B)  -$15,000 
C)  -$65,000 
D)  -$70,000

Exam 3: Understanding Financial Statements and Cash Flows

Which of the following accounts does not belong in the liability section of a balance sheet?

Finished goods held for sale are inventory,but raw materials to be used in the production process are considered other assets.

Prepare a balance sheet using the information given below.Make sure to identify current assets,net fixed assets,total assets,current liabilities,long-term debt,total equity,and total liabilities and equity.

Wheeler Corporation had retained earnings as of 12/31/10 of $15 million.During 2011,Wheeler's net income was $7 million.The retained earnings balance at the end of 2011 was equal to $20 million.Therefore,

A corporation has annual sales of $18 million,total assets of $4 million,a debt ratio of 40%,depreciation expense of $200,000,and a tax rate of 40%.The corporation's total stockholders' equity is equal to

Net working capital is equal to

The A corporation has an operating profit margin of 20%,operating expenses of $500,000,and financing costs of $15,000.Therefore,

Global.Com has cash of $75,000; short-term notes payable of $100,000; accounts receivables of $275,000; accounts payable of $135,000: inventories of $350,000; and accrued expenses of $75,000.What is Global's net working capital?

If a company's cash balance increases during the year,and the company also reports positive net income,then the company's retained earnings balance must increase.

Which of the following accounts does not belong on the asset side of a balance sheet?

Use the following information to calculate the change in the company's cash balance for the year.

What information does a firm's statement of cash flows provide to the viewing public?

Net working capital is equal to gross working capital minus depreciation.

PDQ Corp.has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000.What is PDQ's EBIT?

The balance sheet equation is Total Assets = Total Revenues - Total Liabilities.

Earnings available to common shareholders represents income that may be reinvested in the firm or distributed to its owners.

Examples of uses of cash include

Profits-to-Sales relationships are defined as profit margins.

Given the following financial statements for ACME Corporation,and assuming that ACME paid a common dividend of $80,000 in 2010,what is the company's financing cash flow for 2010?