Question 1

Blasco Printing has net income of $26,310 for the year. At the beginning of the year, the firm had common stock of $35,000, paid-in surplus of $11,200, and retained earnings of $48,420. At the end of the year, the firm had total equity of $142,430. The firm does not pay dividends. What is the amount of the net new equity raised during the year?

Accepted Answer

A)   $18,000
B)   $21,500
C)   $32,700
D)   $48,900
E)   $48,310F) B) and C)
G) D) and E)

Question 2

Tressler Industries opted to repurchase 5,000 shares of stock last year in lieu of paying a dividend. The cash flow statement for last year must have which one of the following assuming that no new shares were issued?

Accepted Answer

A)   Positive operating cash flow
B)   Negative cash flow from assets
C)   Negative cash flow to stockholders
D)   Negative operating cash flow
E)   Positive cash flow to stockholdersF) All of the above
G) None of the above

Question 3

Paddle Fans & More has a marginal tax rate of 34 percent and an average tax rate of 23.7 percent. If the firm earns $138,500 in taxable income, how much will it owe in taxes?

Accepted Answer

A)   $31,366.67
B)   $31,500.00
C)   $32,824.50
D)   $39,957.25
E)   $47,090.00F) A) and B)
G) A) and C)

Question 4

The owners' equity for The Buck Store was $58,900 at the beginning of the year. During the year, the company had aftertax income of $34,200, of which $2,200 was paid in dividends. Also during the year, the company repurchased $6,500 of stock from one of the shareholders. What is the value of the owners' equity at year end?

Accepted Answer

A)   $54,500
B)   $56,700
C)   $82,200
D)   $84,400
E)   $90,900F) A) and E)
G) A) and B)

Question 5

Shareholders' equity is equal to:

Accepted Answer

A)   total assets plus total liabilities.
B)   net fixed assets minus total liabilities.
C)   net fixed assets minus long-term debt plus net working capital.
D)   net working capital plus total assets.
E)   total assets minus net working capital.F) All of the above
G) None of the above

Question 6

Which one of the following statements is correct?

Accepted Answer

A)   Shareholders' equity is the residual value of a firm.
B)   Net working capital must be a positive value.
C)   An increase in cash reduces the liquidity of a firm.
D)   Equipment is generally considered a highly liquid asset.
E)   Depreciation increases total assets.F) All of the above
G) C) and D)

Question 7

Which one of the following statements related to the income statement is correct?

Accepted Answer

A)   Depreciation has no effect on taxes.
B)   Interest paid is a noncash item.
C)   Taxable income must be a positive value.
D)   Net income is distributed either to dividends or retained earnings.
E)   Taxable income plus interest and depreciation equals earnings before interest and taxes.F) A) and B)
G) D) and E)

Question 8

The Import Store has cash of $34,600 and accounts receivable of $54,200. The inventory cost $92,300 and can be sold today for $146,900. The fixed assets were purchased at a cost of $234,500 of which $87,900 has been depreciated. The fixed assets can be sold today for $199,000. What is the total book value of the firm's assets?

Accepted Answer

A)   $309,900
B)   $327,700
C)   $346,800
D)   $382,300
E)   $434,700F) B) and D)
G) A) and D)

Question 9

Gino's Winery has net working capital of $29,800, net fixed assets of $64,800, current liabilities of $34,700, and long-term debt of $23,000. What is the value of the owners' equity?

Accepted Answer

A)   $36,900
B)   $66,700
C)   $71,600
D)   $89,400
E)   $106,300F) All of the above
G) A) and B)

Question 10

Which one of the following will increase cash flow from assets but not affect the operating cash flow?

Accepted Answer

A)   Increase in depreciation
B)   Increase in accounts receivable
C)   Sale of a fixed asset
D)   Decrease in cost of goods sold
E)   Increase in salesF) A) and C)
G) All of the above

Question 11

Which one of the following is included in net working capital?

Accepted Answer

A)   Newly purchased equipment with a useful life of six years
B)   Mortgage on a building payable over the next 12 years
C)   Interest on a long-term debt
D)   10-year bonds issued to the general public
E)   Invoice from a supplier for inventory purchasedF) D) and E)
G) A) and B)

Question 12

Which one of the following indicates that a firm has generated sufficient internal cash flow to finance its entire operations for the period?

Accepted Answer

A)   Positive operating cash flow
B)   Negative cash flow to creditors
C)   Positive cash flow to stockholders
D)   Negative net capital spending
E)   Positive cash flow from assetsF) A) and B)
G) B) and D)

Question 13

The financial statements of Edgewater Marina reflect depreciation expenses of $21,600 and interest expenses of $27,900 for the year. The current assets increased by $31,800 and the net fixed assets increased by $28,600. What is the amount of the net capital spending for the year?

Accepted Answer

A)   $7,000
B)   $21,600
C)   $28,600
D)   $50,200
E)   $53,400F) C) and D)
G) D) and E)

Question 14

The December 31, 2009 balance sheet of Suzette's Market showed long-term debt of $638,100 and the December 31, 2010 balance sheet showed long-term debt of $574,600. The 2010 income statement showed an interest expense of $42,300. What was the firm's cash flow to creditors during 2010?

Accepted Answer

A)   $21,200
B)   $26,700
C)   $54,900
D)   $102,400
E)   $105,800F) C) and E)
G) A) and C)

Question 15

The Pizza Parlor paid $3,500 in dividends and $17,600 in interest over the past year. Sales totaled $211,800 with costs of $167,900. The depreciation expense was $16,500. The applicable tax rate is 34 percent. What is the amount of the operating cash flow?

Accepted Answer

A)   $14,232
B)   $15,306
C)   $28,222
D)   $39,988
E)   $40,568F) C) and D)
G) A) and E)

Question 16

Depreciation does which one of the following for a profitable firm?

Accepted Answer

A)   Increases net income
B)   Increases net fixed assets
C)   Decreases net working capital
D)   Lowers taxes
E)   Has no effect on net incomeF) A) and C)
G) B) and C)

Question 17

Green Roofs, Inc. has current liabilities of $14,300 and accounts receivable of $7,800. The firm has total assets of $43,100 and net fixed assets of $23,700. The owners' equity has a book value of $21,400. What is the amount of the net working capital?

Accepted Answer

A)   $5,100
B)   $5,700
C)   $6,500
D)   $8,200
E)   $9,400F) A) and B)
G) D) and E)

Question 18

The Embroidery Shoppe had beginning retained earnings of $18,670. During the year, the company reported sales of $83,490, costs of $68,407, depreciation of $8,200, dividends of $950, and interest paid of $478. The tax rate is 35 percent. What is the retained earnings balance at the end of the year?

Accepted Answer

A)   $21,883.25
B)   $22,193.95
C)   $22,833.24
D)   $23,783.24
E)   $30,393.95F) C) and D)
G) A) and E)

Question 19

During the past year, Ernst Electrical Services paid $36,800 in interest along with $48,000 in dividends. The company issued $130,000 of stock and $100,000 of new debt. The company reduced the balance due on the old debt by $225,000. What is the amount of the cash flow to creditors?

Accepted Answer

A)   -$88,200
B)   -$51,400
C)   $161,800
D)   $211,600
E)   $231,500F) A) and B)
G) A) and C)

Question 20

Cash flow to creditors is defined as:

Accepted Answer

A)   interest paid minus net new borrowing.
B)   interest paid plus net new borrowing.
C)   the operating cash flow minus net capital spending minus change in net working capital.
D)   dividends paid plus net new borrowing.
E)   cash flow from assets plus net new equity.F) B) and C)
G) None of the above

Exam 2: Financial Statements, Taxes, and Cash Flow

Paddle Fans & More has a marginal tax rate of 34 percent and an average tax rate of 23.7 percent. If the firm earns $138,500 in taxable income, how much will it owe in taxes?

Correct Answer
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The Pizza Parlor paid $3,500 in dividends and $17,600 in interest over the past year. Sales totaled $211,800 with costs of $167,900. The depreciation expense was $16,500. The applicable tax rate is 34 percent. What is the amount of the operating cash flow?

Correct Answer
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Which one of the following indicates that a firm has generated sufficient internal cash flow to finance its entire operations for the period?

Correct Answer
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Shareholders' equity is equal to:

Correct Answer
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The financial statements of Edgewater Marina reflect depreciation expenses of $21,600 and interest expenses of $27,900 for the year. The current assets increased by $31,800 and the net fixed assets increased by $28,600. What is the amount of the net capital spending for the year?

Correct Answer
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The Embroidery Shoppe had beginning retained earnings of $18,670. During the year, the company reported sales of $83,490, costs of $68,407, depreciation of $8,200, dividends of $950, and interest paid of $478. The tax rate is 35 percent. What is the retained earnings balance at the end of the year?

Correct Answer
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Green Roofs, Inc. has current liabilities of $14,300 and accounts receivable of $7,800. The firm has total assets of $43,100 and net fixed assets of $23,700. The owners' equity has a book value of $21,400. What is the amount of the net working capital?

Correct Answer
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Correct Answer
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The December 31, 2009 balance sheet of Suzette's Market showed long-term debt of $638,100 and the December 31, 2010 balance sheet showed long-term debt of $574,600. The 2010 income statement showed an interest expense of $42,300. What was the firm's cash flow to creditors during 2010?

Correct Answer
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Depreciation does which one of the following for a profitable firm?

Correct Answer
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Which one of the following statements is correct?

Correct Answer
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Tressler Industries opted to repurchase 5,000 shares of stock last year in lieu of paying a dividend. The cash flow statement for last year must have which one of the following assuming that no new shares were issued?

Correct Answer
verified

Cash flow to creditors is defined as:

Correct Answer
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Correct Answer
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Correct Answer
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Which one of the following will increase cash flow from assets but not affect the operating cash flow?

Correct Answer
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Which one of the following is included in net working capital?

Correct Answer
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Which one of the following statements related to the income statement is correct?

Correct Answer
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During the past year, Ernst Electrical Services paid $36,800 in interest along with $48,000 in dividends. The company issued $130,000 of stock and $100,000 of new debt. The company reduced the balance due on the old debt by $225,000. What is the amount of the cash flow to creditors?

Correct Answer
verified

Gino's Winery has net working capital of $29,800, net fixed assets of $64,800, current liabilities of $34,700, and long-term debt of $23,000. What is the value of the owners' equity?

Correct Answer
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Exam 2: Financial Statements, Taxes, and Cash Flow

Paddle Fans & More has a marginal tax rate of 34 percent and an average tax rate of 23.7 percent. If the firm earns $138,500 in taxable income, how much will it owe in taxes?

Correct AnswerverifiedShow Answer

The Pizza Parlor paid $3,500 in dividends and $17,600 in interest over the past year. Sales totaled $211,800 with costs of $167,900. The depreciation expense was $16,500. The applicable tax rate is 34 percent. What is the amount of the operating cash flow?

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Which one of the following indicates that a firm has generated sufficient internal cash flow to finance its entire operations for the period?

Correct AnswerverifiedShow Answer

Shareholders' equity is equal to:

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The financial statements of Edgewater Marina reflect depreciation expenses of $21,600 and interest expenses of $27,900 for the year. The current assets increased by $31,800 and the net fixed assets increased by $28,600. What is the amount of the net capital spending for the year?

Correct AnswerverifiedShow Answer

The Embroidery Shoppe had beginning retained earnings of $18,670. During the year, the company reported sales of $83,490, costs of $68,407, depreciation of $8,200, dividends of $950, and interest paid of $478. The tax rate is 35 percent. What is the retained earnings balance at the end of the year?

Correct AnswerverifiedShow Answer

Green Roofs, Inc. has current liabilities of $14,300 and accounts receivable of $7,800. The firm has total assets of $43,100 and net fixed assets of $23,700. The owners' equity has a book value of $21,400. What is the amount of the net working capital?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The December 31, 2009 balance sheet of Suzette's Market showed long-term debt of $638,100 and the December 31, 2010 balance sheet showed long-term debt of $574,600. The 2010 income statement showed an interest expense of $42,300. What was the firm's cash flow to creditors during 2010?

Correct AnswerverifiedShow Answer

Depreciation does which one of the following for a profitable firm?

Correct AnswerverifiedShow Answer

Which one of the following statements is correct?

Correct AnswerverifiedShow Answer

Tressler Industries opted to repurchase 5,000 shares of stock last year in lieu of paying a dividend. The cash flow statement for last year must have which one of the following assuming that no new shares were issued?

Correct AnswerverifiedShow Answer

Cash flow to creditors is defined as:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following will increase cash flow from assets but not affect the operating cash flow?

Correct AnswerverifiedShow Answer

Which one of the following is included in net working capital?

Correct AnswerverifiedShow Answer

Which one of the following statements related to the income statement is correct?

Correct AnswerverifiedShow Answer

During the past year, Ernst Electrical Services paid $36,800 in interest along with $48,000 in dividends. The company issued $130,000 of stock and $100,000 of new debt. The company reduced the balance due on the old debt by $225,000. What is the amount of the cash flow to creditors?

Correct AnswerverifiedShow Answer

Gino's Winery has net working capital of $29,800, net fixed assets of $64,800, current liabilities of $34,700, and long-term debt of $23,000. What is the value of the owners' equity?

Correct AnswerverifiedShow Answer

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