Chapter 2: Financial Statements and the Annual Report

Transcription

1 Using Financial Accounting Information Th Altrnativ to Dbits and Crdits 8th Edition Portr Tst Bank Full Download: Chaptr 2: Financial Statmnts and th Annual Rport Studnt: 1. What is th primary objctiv of financial rporting? A. To hlp invstors mak crdit dcisions. B. To hlp managmnt assss cash flows. C. To protct usrs from fraudulnt financial information. D. To provid usful information for dcision making 2. Claims to conomic rsourcs ar known as A. Assts and liabilitis B. Liabilitis and stockholdrs quity C. Ownrs quity and stockholdrs quity D. Rtaind arnings and rvnus 3. Which of th following is not an objctiv of financial rporting? A. To rflct prospctiv cash rcipts to invstors and crditors. B. To rflct prospctiv cash flows to an ntrpris. C. To rflct rsourcs and claim to rsourcs. D. To rflct currnt stock prics and information concrning stock markts. 4. Which of th following statmnts is tru concrning xtrnal usrs of financial information? A. Extrnal usrs nd dtaild rcords of th businss to mak informd dcisions. B. Extrnal usrs ar primarily rsponsibl for th prparation of financial statmnts. C. Extrnal usrs rly on th financial statmnts to hlp mak informd dcisions. D. Extrnal usrs rly on managmnt to tll thm whthr th company is a good invstmnt 5. Rlvant information can b quantitativ or qualitativ. In dciding whthr to go to collg part-tim or full-tim, which of th following is a qualitativ factor for a studnt? A. Th cost of tuition B. Th opportunity to mak frinds C. Th pric of football tickts D. Good Studnt discounts on auto insuranc rats. Full download all chaptrs instantly plas go to Solutions Manual, Tst Bank sit: tstbankliv.com

2 6. Th prparation of financial statmnts rquirs that th information b undrstandabl A. Only to CPAs. B. To thos willing to spnd th tim to undrstand it. C. Only to thos who tak an accounting cours. D. Only to financial analysts and brokrs. 7. Schnidr, Inc., a manufacturr of tirs, has givn you its most rcnt annual rport in an ffort to obtain a sizabl loan. Th company is vry profitabl and appars to hav a sound financial position. Basd on a rport prsntd on prim-tim tlvision last night, you ar awar that Schnidr is a dfndant in svral lawsuits rlatd to its dfctiv tirs that caus vhicls to ovrturn. Th information prsntd on tlvision is an xampl of financial information that is A. Rlvant B. Consistnt C. Prdictabl D. Comparabl 8. If an invstor can us accounting information for two diffrnt companis to valuat th typs and amounts of xpnss, th information is said to hav th quality of A. Comparability B. Consistncy C. Nutrality D. Undrstandability 9. Chil Transportation purchass many pics of offic furnitur with an individual cost blow $200 ach. Chil chooss to account for ths xpnditurs as xpnss whn acquird rathr than rporting thm as proprty, plant, and quipmnt on its balanc sht. Th company's accountant and indpndnt CPA agr that no accounting principl has bn violatd. What accounting justification allows Chil to xpns th furnitur? A. Consrvatism B. Matching C. Matriality D. Vrifiability 10. Crous Company applis th consistncy convntion. What dos this man? A. Crous Co. uss th sam nams for all its xpnss as its comptitors. B. Crous Co. has slctd crtain accounting principls that can nvr b changd. C. Crous Co. applis th sam accounting principls ach accounting priod. D. Crous Co. applis th sam accounting principls as it comptitors.

3 11. Information that is matrial mans that an rror or altrnativ mthod of handling a transaction A. Would possibly affct th judgmnt of somon rlying on th financial statmnts B. Would not affct th dcisions of usrs C. Might caus a company to undrstat its arnings for th accounting priod D. Could incras th profitability of a company 12. An accountant is uncrtain about th bst stimat of an amount for a businss transaction. If two amounts ar about qually likly, th amount last likly to ovrstat assts and incom is slctd. Which of th following qualitis is charactrizd by this action? A. Comparability B. Consrvatism C. Matriality D. Nutrality 13. Th qualitativ charactristics of accounting data includ A. Assts rportd on th balanc sht B. All accounting information C. Cash flows D. Rliability 14. Which of th following is a noncurrnt asst? A. Invntoris B. Offic supplis C. Land D. Accounts rcivabl 15. Which of th following is a currnt asst? A. Land B. Buildings C. Stor fixturs D. Prpaid insuranc 16. Which of th following includ only currnt assts? A. Accounts rcivabl, cash, invntory, offic supplis B. Cash, accounts payabl, invntory, offic supplis C. Cash, land, accounts rcivabl, invntory D. Accounts rcivabl, cash, furnitur, offic supplis

4 17. To dtrmin th sourc of a company's assts, on which financial statmnt will you look? A. Balanc sht only B. Incom statmnt only C. Both th balanc sht and th incom statmnt D. Both th incom statmnt and th statmnt of rtaind arnings 18. Wood Company Wood Company has providd th following information from its accounting rcords for th currnt yar: Cash $ 50,000 Accounts rcivabl $ 40,000 Invntory 60,000 Land 75,000 Accounts payabl 45,000 Nots payabl (du 2020) 150,000 Rtaind arnings? Rad th information for Wood Corporation. What ar Wood s currnt assts? A. $ 90,000 B. $ 150,000 C. $ 195,000 D. $ 225, Rad th information for Wood Company. What ar Wood s currnt liabilitis? A. $ 45,000 B. $ 120,000 C. $ 195,000 D. $ 225, Which on of th following itms is rportd as a currnt asst on a classifid balanc sht? A. Invntory B. Accounts payabl C. Land D. Common stock 21. Th following information is givn for Wagnr Company: Cash $ 50,000 Invntory $ 45,000 Land 75,000 Accumulatd Dprciation 40,000 Plant & Equipmnt 150,000 Accounts Payabl 60,000

5 What ar th company s currnt assts? A. $220,000 B. $155,000 C. $130,000 D. $ 95, Which of th following accounts ar normally rportd as currnt liabilitis on a classifid balanc sht? A. Accounts payabl and bonds payabl B. Intrst payabl and mortgag payabl C. Incom taxs payabl and salaris payabl D. Capital stock and accounts payabl 23. Which on of th following is not a major catgory for long-trm assts? A. Intangibls B. Proprty, plant, and quipmnt C. Rcivabls D. Goodwill 24. Which of th following would not b considrd to b an intangibl asst? A. Franchiss B. Copyrights C. Invstmnts D. Goodwill 25. Which of th following statmnts is truconcrning intangibl assts? A. Intangibl assts hav no conomic substanc. B. Intangibl assts lack physical xistnc. C. Intangibl assts ar listd in th stockholdrs quity sction of th balanc sht. D. Intangibl assts appar in th currnt assts sction of th balanc sht. 26. How ar assts which ar xpctd to b ralizd in cash, sold, or consumd within th normal oprating cycl of a businss or within on yar (if th oprating cycl is shortr than on yar) rportd on a classifid balanc sht? A. Proprty, plant, and quipmnt B. Currnt assts C. Intangibl assts D. Currnt liabilitis

6 27. Which of th following trms charactrizs th tim priod btwn th invstmnt of cash in mrchandis and th collction of cash from th sal of that mrchandis? A. Oprating cycl B. Natural businss yar C. Accounting priod D. Fiscal priod 28. Which st of itms blow ar currnt assts? A. Accounts rcivabl, nt incom, invntory, and dividnds B. Cash, accounts rcivabl, capital stock, and sals C. Nt incom, cash, offic supplis, and invntory D. Cash, accounts rcivabl, invntory, and offic supplis 29. On significant diffrnc btwn a classifid and a non-classifid balanc sht is th distinction btwn which of th following itms? A. Assts and liabilitis B. Currnt and noncurrnt itms C. Liabilitis and ownrs quity D. Rsourcs invstd by th ownrs and amounts borrowd from crditors 30. For svral yars, Shaun Corporation has had a currnt ratio that was consistnt with othr companis in its industry. For th most rcnt yar, Shaun s currnt ratio was significantly highr than that for th industry. What is th bst possibl xplanation for this situation? A. Th othr companis in th industry wr not as profitabl. B. Shaun s liquidity has improvd or is not lvraging financial rsourcs ffctivly. C. Shaun has lss proprty, plant and quipmnt than othr companis. D. Shaun has too much dbt. 31. Guinthr & Sons, Inc. Guinthr & Sons, Inc. a rtailr of mn s clothing, arnd a nt profit of $77,000 for Th balanc sht for Guinthr & Sons includs th following itms: Cash $29,000 Accounts rcivabl $39,000 Invntory 79,000 Prpaid insuranc $ 3,000 Land 90,000 Accounts payabl $21,000 Taxs payabl 29,000 Capital stock $50,000 Rtaind arnings 97,000 Long-trm nots payabl $43,000

7 Rad th information for Guinthr & Sons. Calculat th total amount of currnt assts for Guinthr & Sons. A. $ 100,000 B. $ 147,000 C. $ 150,000 D. $ 249, Guinthr & Sons, Inc. Guinthr & Sons, Inc. a rtailr of mn s clothing, arnd a nt profit of $77,000 for Th balanc sht for Guinthr & Sons includs th following itms: Cash $29,000 Accounts rcivabl $39,000 Invntory 79,000 Prpaid insuranc $ 3,000 Land 90,000 Accounts payabl $21,000 Taxs payabl 29,000 Capital stock $50,000 Rtaind arnings 97,000 Long-trm nots payabl $43,000 Rad th information for Guinthr & Sons, Inc. Calculat th currnt ratio for Guinthr & Sons. A to 1 B to 1 C to 1 D to Guinthr & Sons, Inc. Guinthr & Sons, Inc. a rtailr of mn s clothing, arnd a nt profit of $77,000 for Th balanc sht for Guinthr & Sons includs th following itms: Cash $29,000 Accounts rcivabl $39,000 Invntory 79,000 Prpaid insuranc $ 3,000 Land 90,000 Accounts payabl $21,000 Taxs payabl 29,000 Capital stock $50,000 Rtaind arnings 97,000 Long-trm nots payabl $43,000 Rad th information for Guinthr & Sons, Inc. Th avrag currnt ratio for stors such as Guinthr & Sons is 2.4 to 1. What dos this comparison tll you about its liquidity? A. It is mor liquid than its comptitors B. It has mor long-trm assts than its comptitors C. Sinc a rul of thumb for currnt ratios is 2 to 1, nithr Nadia & Sistrs nor its comptitors is liquid. D. Nadia & Sistrs is mor profitabl than its comptitors.

8 34. Rosu Company has total currnt assts of $120,000 and total currnt liabilitis of $50,000. What is th amount of working capital for Rosu Company? A. $ 27,000 B. $ 67,000 C. $ 70,000 D. $ 91, What is th corrct mthod for calculating working capital? A. Total Assts minus Total Liabilitis B. Currnt Assts minus Total Liabilitis C. Currnt Assts minus Currnt Liabilitis D. Currnt Assts plus Currnt Liabilitis 36. Oro Company has currnt assts of $20,000, currnt liabilitis of $8,000, and long-trm liabilitis of $3,000. Oro wants to buy nw quipmnt. How much of its xisting cash can Oro us to acquir quipmnt without allowing its currnt ratio to dclin blow 2.0 to 1? A. $ 4,000 B. $ 8,000 C. $ 10,000 D. $ 12, Excursion Corp. incrasd its dollar amount of working capital ovr th past svral yars. To furthr valuat th company's short-run liquidity, which on of th following masurs should b usd? A. Th currnt ratio B. An analysis of th company s long-trm dbt C. An analysis of th rturn on stockholdrs quity D. An analysis of rtaind arnings 38. Which financial statmnt rports information hlpful in assssing working capital? A. Incom statmnt B. Balanc sht C. Statmnt of rtaind arnings D. Statmnt of cash flows

9 39. Us Rizwi Corporation s list of accounts at Dcmbr 31, 2014 to answr th following qustion. Rizwi Corp oratio n List of Acco unts at Dc mbr 31, 2014 Cash $30,000 Accumulatd dprciation $ 12,000 Mrchandis invntory 21,000 Nots payabl--du 12/31/ ,000 Land 40,000 Accounts payabl 14,000 Buildings 80,000 Equipmnt 33,000 Accounts rcivabl 25,000 Nots Payabl--Du 07/01/ ,000 What is Rizwi Corp. s currnt ratio? A to 1 B to 1 C to 1 D to If th currnt ratio is 3 to 1, nt incom is $12,000, and currnt liabilitis ar $24,000, how much is working capital? A. $ 12,000 B. $ 36,000 C. $ 48,000 D. $ 72, For which of th following is th currnt ratio most usful? A. In valuating a company s liquidity. B. In valuating a company s solvncy. C. In valuating a company s profitability. D. In valuating a company s probability. 42. Which of th following vnts will caus a company s currnt ratio to dcras? A. Th sal of invntory for cash. B. Th sal of invntory for crdit (accounts rcivabl). C. Issuing stock for cash. D. Paying off long-trm dbt with cash.

10 43. Which of th following vnts will caus a company s currnt ratio to incras? A. Th collction of an account rcivabl. B. Slling land for cash at a loss. C. Th discharg of an account payabl by signing a short-trm not payabl. D. Paying off a long-trm loan. 44. Liquidity rlats to a company's ability to do which of th following? A. Th ability to pay its financial obligations as thy bcom du. B. Th ability to stay in businss ovr th long run. C. Th ability to pay dividnds to its stockholdrs. D. Th ability to collct th amount thir customrs ow th company. 45. Skylin, Inc. Th balanc sht of Skylin Inc. includs th following itms: Cash $ 22,400 Accounts rcivabl 11,700 Invntory 23,300 Prpaid insuranc 1,040 Land 80,000 Accounts payabl 47,500 Salaris payabl 1,200 Capital stock 84,040 Rtaind arnings 5,700 Rad th information about Skylin, Inc. What is Skylin s currnt ratio? A. 0.8 to 1 B. 1.6 to 1 C. 1.2 to 1 D. 2.5 to Skylin, Inc. Th balanc sht of Skylin Inc. includs th following itms: Cash $ 22,400 Accounts rcivabl 11,700 Invntory 23,300 Prpaid insuranc 1,040 Land 80,000 Accounts payabl 47,500 Salaris payabl 1,200 Capital stock 84,040 Rtaind arnings 5,700

11 Rad th information about Skylin, Inc. What is Skylin s working capital? A. $58,440 B. $89,740 C. $84,040 D. $9, Which of th following would appar on a multipl-stp incom statmnt but not on a singl-stp incom statmnt? A. Nt incom B. Total xpnss C. Total rvnus D. Incom bfor incom taxs 48. Which of th following would not appar on an incom statmnt? A. Sals rvnu B. Cost of goods sold C. Accounts rcivabl D. Insuranc xpns 49. Which statmnt is truconcrning an incom statmnt? A. Th incom statmnt shows how much profit th company has arnd sinc it bgan oprations. B. Nt incom on th incom statmnt should b qual to th amount of cash on th balanc sht. C. Th incom statmnt summarizs th rsults of oprations for a priod of tim. D. Th incom statmnt indicats th liquidity of th company on an annual basis. 50. Which statmnt is truconcrning gains and losss? A. Gains and losss ar rportd on th balanc sht in th Assts and Liabilitis sctions, rspctivly. B. Gains and losss ar spcial typs of rvnus and xpnss that ar rportd on th incom statmnt. C. Th amounts of gains and losss ar includd in th calculation of th currnt ratio, in th numrator and dnominator, rspctivly. D. Gains and losss ar rportd only on a multi-stp incom statmnt. 51. Which on of th following subtotals or totals would appar in a multipl-stp, but not a singl-stp incom statmnt? A. Incom tax xpns B. Incom from oprations C. Cost of goods sold D. Nt incom

12 52. What ar th two subtotals that distinguish th multi-stp incom statmnt from th singl-stp incom statmnt? A. Incom bfor taxs and incom taxs B. Total oprating rvnus and total oprating xpnss C. Incom from oprations and incom bfor taxs D. Total rvnus and total xpnss 53. A qustion askd by stockholdrs is, "How much profit did th company mak?" What should th stockholdr xamin to gt th most information that will hlp valuat th answr to this qustion? A. Th balanc sht, bcaus rtaind arnings rprsnts currnt profits. B. Th statmnt of cash flows, as cash inflows and outflows rprsnts currnt profits. C. Th incom statmnt, sinc it shows th rvnus and xpnss for th priod. D. Th conomic rsourcs of th company. 54. Undr currnt accounting principls, how is nt incom on th incom statmnt masurd? A. Nt chang in ownrs quity during th priod. B. Excss of rvnus ovr xpnss during th priod. C. Nt chang in th cash balanc during th priod. D. Excss of rvnus ovr xpnss lss any dividnds paid during th priod. 55. Which of th following statmnts is trurgarding th multipl-stp incom statmnt? A. Th multipl-stp incom statmnt is usd only by companis that sll products, not thos that provid srvics. B. Th multipl-stp incom statmnt is hlpful in dtrmining a company's working capital C. Th multipl-stp incom statmnt rports th sam nt incom as th singl-stp incom statmnt. D. Th multipl-stp incom statmnt is rquird undr gnrally accptd accounting principls. 56. How is incom from oprations dtrmind? A. By subtracting th cost of goods sold from sals. B. By subtracting th total oprating xpnss from sals C. By subtracting th total oprating xpnss from gross profit. D. By subtracting slling xpnss from oprating rvnus. 57. Th following list contains svral itms that appar on an incom statmnt. 1. Othr rvnu and xpnss 5. Nt Incom 2. Incom bfor taxs 6. Oprating rvnus 3. Incom taxs 7. Incom from oprations 4. Oprating xpnss

13 Slct th choic that lists th itms in th ordr thy would appar on a multi-stp incom statmnt A. 6, 1, 7, 4, 2, 3, 5 B. 7, 6, 1, 4, 2, 3, 5 C. 6, 4, 7, 1, 2, 3, 5 D. 6, 7, 4, 1, 2, 3, Wbb Company Slctd data from th accounting rcords of Wbb Company ar listd blow: Gnral & administrativ xpnss $2,200 Oprating rvnus $6,000 Slling xpnss 1,800 Incom taxs 600 Othr rvnus (xpnss) 800 Dividnds paid 1,200 Rad th information about Wbb Company. What is Wbb s incom from oprations? A. $ 1,600 B. $ 2,000 C. $ 2,200 D. $ 2, Rad th information about Wbb Company. What is Wbb s nt incom? A. $ 1,600 B. $ 2,000 C. $ 2,200 D. $ 2, Rad th information about Wbb Company. By what amount will nt incom on a singl-stp incom statmnt diffr from nt incom on a multi-stp incom statmnt if Wbb Company prpars both formats? A. $ 800 B. $ 600 C. $ 200 D. $ -0-

14 61. Dal Mart Th 2014 incom statmnt of Dal Mart shows oprating rvnus of $130,800, slling xpnss of $37,100, gnral and administrativ xpnss of $34,900, intrst xpns of $900, and incom tax xpns of $11,430. Dal Mart s stockholdrs quity was $280,000 at th bginning of th yar and $320,000 at th nd of th yar. Th company has 20,000 shars of stock outstanding at Dcmbr 31, Rad th information about Dal Mart. What is Dal Mart s nt incom? A. $80,000 B. $92,190 C. $130,800 D. $46, Dal Mart Th 2014 incom statmnt of Dal Mart shows oprating rvnus of $130,800, slling xpnss of $37,100, gnral and administrativ xpnss of $34,900, intrst xpns of $900, and incom tax xpns of $11,430. Dal Mart s stockholdrs quity was $280,000 at th bginning of th yar and $320,000 at th nd of th yar. Th company has 20,000 shars of stock outstanding at Dcmbr 31, Rad th information about Dal Mart. What is Dal Mart s profit margin (to th closst tnth of a prcnt)? A. 2.8 B C D Dardnll, Inc. arnd $600,000 profit during On which financial statmnt(s) will you find th dollar amount of th profit arnd by th company? A. Balanc sht and incom statmnt B. Incom statmnt only C. Statmnt of rtaind arnings only D. Incom statmnt and statmnt of rtaind arnings 64. Grand Stors, Inc. is concrnd about its profitability for th currnt yar, sinc its profit margin has droppd 10% sinc last yar. Which of th following is th last usful comparison in valuating th drop in Grand Stors profit margin? A. Comparison with th industry avrag for th currnt yar. B. Comparison with its currnt ratio for th currnt yar C. Comparison with th profit margins for its major comptitors for th currnt yar. D. Comparison with its profit margins for th past fiv yars.

15 65. Assum that you want to dtrmin th profit margin for a company. Which on of th following financial statmnts is th bst sourc of this information? A. Statmnt of rtaind arnings B. Statmnt of cash flows C. Statmnt of stockholdrs quity D. Incom statmnt 66. Hoppr, Inc. Us th information from Hoppr Inc. to answr th following qustion(s) Oprating rvnus $1,900,000 $1,600,000 Oprating xpnss 1,400,000 1,100,000 Incom taxs 200, ,000 Rad th information about Hoppr. Inc. Which statmnt bst rprsnts Hoppr s prformanc? A. Hoppr s profit margin ratio dcrasd. B. Hoppr has bcom mor profitabl. C. Hoppr s incras in oprating rvnus incrasd th company s nt incom. D. Hoppr s oprating xpnss as a prcntag of oprating rvnus rmaind th sam. 67. Hoppr, Inc. Us th information from Hoppr Inc. to answr th following qustion(s) Oprating rvnus $1,900,000 $1,600,000 Oprating xpnss 1,400,000 1,100,000 Incom taxs 200, ,000 Rad th information about Hoppr, Inc. Which of th following statmnts is th bst answr rgarding th company s profit margin? A. Th profit margin was 15.8% in B. Th profit margin was 15.8% in C. Th profit margin was 31.5% in D. Th profit margin was 31.5% in 2013.

16 68. Hoppr, Inc. Us th information from Hoppr Inc. to answr th following qustion(s) Oprating rvnus $1,900,000 $1,600,000 Oprating xpnss 1,400,000 1,100,000 Incom taxs 200, ,000 Rad th information about Hoppr, Inc. Which ratio ar you abl to calculat givn only th information providd by Hoppr? A. Profit margin B. Currnt ratio C. Working capital D. Gross profit prcntag 69. Which on of th following quations rprsnts rtaind arnings activity? A. Bginning balanc + nt incom + dividnds = profits for th yar B. Bginning balanc + cash inflows - cash outflows = nding balanc C. Bginning balanc + dividnds - nt incom = nding balanc D. Bginning balanc + nt incom - dividnds = nding balanc 70. Garrison Industris Garrison Industris bgan oprations on January 2, 2014, with an invstmnt of $50,000 by ach of its two stockholdrs. Nt incom for its first yar of businss was $240,000. Garrison Industris paid a total of $100,000 in dividnds to its stockholdrs during th yar. Rad th information about Garrison Industris. What is th company s rtaind arnings balanc at Dcmbr 31, 2014? A. $140,000 B. $190,000 C. $240,000 D. $340,000

17 71. Garrison Industris Garrison Industris bgan oprations on January 2, 2014, with an invstmnt of $50,000 by ach of its two stockholdrs. Nt incom for its first yar of businss was $240,000. Garrison Industris paid a total of $100,000 in dividnds to its stockholdrs during th yar. Rad th information about Garrison Industris. If th company s rvnus wr $500,000 for th yar ndd Dcmbr 31, 2014, how much wr total xpnss? A. $160,000 B. $260,000 C. $640,000 D. $740, Rad th information about Garrison Industris. Th company s dividnds for th yar A. Rduc th amount of capital stock rportd by th company. B. Ar part of Garrison Industris' oprating costs. C. Ar rportd on th statmnt of rtaind arnings. D. Ar an xpns of Garrison Industris. 73. A company is not rquird to prpar both a(n) A. Incom statmnt and statmnt of stockholdrs quity B. Incom statmnt and statmnt of rtaind arnings C. Statmnt of stockholdrs quity and statmnt of rtaind arnings D. Statmnt of cash flows and statmnt of rtaind arnings 74. In prparing th financial statmnts for Dcmbr 31, 2014, an accountant improprly classifid th paymnt of prpaid rnt as rnt xpns. Which of th following amounts would not b affctd by this impropr classification? A. Rtaind arnings, January 1, 2014 B. Rtaind arnings, Dcmbr 31, 2014 C. Nt incom D. Total assts 75. Carnival Bakry borrowd $500,000 from Front Strt Bank. Carnival thn hird a contractor to build a nw cooki distribution outlt. In which sction of Carnival s statmnt of cash flows would you find information that indicatd that Carnival acquird th nw cooki distribution outlt? A. Oprating Activitis B. Invsting Activitis C. Financing Activitis D. Profit Activitis

18 76. A bank loand $62 million to Apx Corporation to financ th construction of a nw distribution warhous. In which sction of Apx s statmnt of cash flows would you b abl to dtrmin whthr th company rpaid any portion of th dbt during th yar? A. Oprating Activitis B. Invsting Activitis C. Financing Activitis D. Profit Activitis 77. Which of th following catgoris on a statmnt of cash flows is usd to rport th cash flow ffcts of transactions involving a company's stock? A. Oprating Activitis B. Invsting Activitis C. Financing Activitis D. Profit Activitis 78. Which on of th following catgoris on a statmnt of cash flows is usd to rport th cash flow ffcts of buying and slling proprty, plant, and quipmnt? A. Oprating Activitis B. Invsting Activitis C. Financing Activitis D. Profit Activitis 79. Which on of th following is considrd a financing activity? A. Th paymnt of intrst on a not payabl to th bank. B. Slling products to customrs C. Paying wags to mploys D. Th paymnt of a cash dividnd. 80. Which on of th following statmnts is tru? A. Th two primary sourcs of financing availabl to corporations ar borrowd funds and funds invstd by ownrs B. Financing activitis involv th acquisition of proprty, plant and quipmnt. C. Borrowd funds ar a mor prmannt sourc of financing than funds invstd by ownrs D. Invsting activitis involv th slling of products or srvics and th incurring of xpnss rlatd to slling ths products and srvics

19 81. Marvl Shos Marvl Shos rportd th following itms on its statmnt of cash flows for th currnt yar: Nt cash inflows from oprating activitis $70,000 Nt cash outflows from invsting activitis (20,000) Nt cash outflows from financing activitis (40,000) Cash balanc at th bginning of th yar 30,000 Rad th information about Marvl Shos. What was th amount of nt incras or dcras in th cash balanc for Marvl Shos for th currnt yar? A. $ 10,000 incras B. $ 30,000 incras C. $ 40,000 incras D. $ 70,000 incras 82. Marvl Shos Marvl Shos rportd th following itms on its statmnt of cash flows for th currnt yar: Nt cash inflows from oprating activitis $70,000 Nt cash outflows from invsting activitis (20,000) Nt cash outflows from financing activitis (40,000) Cash balanc at th bginning of th yar 30,000 Rad th information about Marvl Shos. What was th cash balanc for Marvl Shos at th nd of th currnt yar? A. $ 10,000 B. $ 30,000 C. $ 40,000 D. $ 70, Which financial statmnt rports th sourcs and uss of an ntity's cash rsourcs? A. Incom statmnt B. Statmnt of rtaind arnings C. Balanc sht D. Statmnt of cash flows

20 84. During its fifth yar of oprations, Bright Crations Company rports a bginning cash balanc of $132,000, cash inflows from invsting activitis of $210,000, cash outflows for financing activitis of $79,000, and cash outflows for oprating activitis of $13,000. What was Bright Crations cash balanc at th nd of th fifth yar? A. $ 250,000 B. $ 434,000 C. $ 276,000 D. $ 132, Which of th following bst dscribs a company s financing activitis? A. Financing activitis focus on th sal of products and srvics. B. Financing activitis includ slling products. C. Financing activitis nabl a company to acquir assts ndd to run a businss. D. Financing activitis ar rprsntd by th rvnus and xpnss on th incom statmnt. 86. Which of th following bst dscribs a company s oprating activitis? A. Oprating activitis focus on th sal of products and srvics. B. Oprating activitis ar ncssary to provid th mony to start a businss. C. Oprating activitis ar ndd to provid th valuabl assts rquird to run a businss. D. Oprating activitis rprsnt th right to rciv a bnfit in th futur 87. Which on of th following is an invsting activity of a businss? A. Paying for purchass of invntory B. Issuing stock for cash C. Borrowing mony from a bank. D. Purchasing a manufacturing plant for cash 88. Which on of th following is a financing activity of a businss? A. Paying for purchass of invntory B. Issuing stock for cash C. Paying salaris D. Purchasing a manufacturing plant 89. Which on of th following is an oprating activity of a businss? A. Paying for purchass of invntory B. Issuing stock for cash C. Borrowing mony from a bank D. Purchasing a manufacturing plant.

21 90. Which of th following rprsnts th corrct squnc of th thr businss activitis on th Statmnt of Cash Flows? A. Financing - Oprating - Invsting B. Invsting - Oprating - Financing C. Oprating - Invsting - Financing D. Financing - Invsting - Oprating 91. Businss ntitis gnrally carry on: A. Oprating, invsting, and financing activitis B. Oprating activitis, but only corporations ngag in financing and invsting activitis C. Invsting and oprating activitis, but only corporations ngag in financing activitis D. Eithr invsting or financing activitis, but not both 92. Although businsss ngag in a wid varity of activitis, all of ths activitis can b catgorizd into thr typs. Which of th following choics bst rflcts ths thr typs of businss activitis? A. Oprating, financing, rporting B. Invsting, rporting, financing C. Oprating, financing, invsting D. Invsting, rporting, oprating 93. As usd in accounting, th Nots to th Financial Statmnts should b: A. Listd with th liabilitis on th balanc sht B. Omittd at th option of th company C. Includd as an intgral part of th financial statmnts D. Rportd as xpnss on th Incom Statmnt 94. Which of th following itms will b found in a corporat annual rport? A. Company budgts B. Nots to th financial statmnts C. Slctd financial data from comptitor companis D. Managmnt s statmnt that th auditors ar rsponsibl for th financial statmnts. 95. Which on of th following sctions is last likly to b found in a corporat annual rport? A. Nots to th Financial Statmnts B. Forcasts of Cash Flows and Earnings C. Rport of th Indpndnt Accountants D. Managmnt s Discussion and Analysis

22 96. A discussion of th financial statmnts with xplanations of crtain amounts in th statmnts is most likly found in which of th following sctions of a corporat annual rport? A. Rport of th Indpndnt Accountants B. Nots to th Financial Statmnts C. Managmnt s Discussion and Analysis D. Balanc Sht 97. An invstor found th following in an annual rport: "Th financial statmnts, in our opinion, prsnt fairly th financial position, oprating rsults, and cash flows, in conformity with accounting principls gnrally accptd in th Unitd Stats." In which sction of th annual rport did th invstor find this? A. Balanc Sht B. Nots to th Financial Statmnts C. Managmnt s Discussion and Analysis D. Rport of th Indpndnt Accountants 98. Which of th following rprsnts on of th purposs of th nots to financial statmnts? A. To provid a plac for managmnt to justify qustionabl itms in th statmnts. B. To provid comparativ ratios for th company's financial data C. To provid th CPA's opinion of th fairnss of th financial statmnts. D. To satisfy th nd for full disclosur of all th facts rlvant to a company's rsults and financial position 99. Accountants ar th main rason financial statmnts ar prpard. Tru Fals 100. Th Financial Accounting Standards Board cratd th objctivs of financial rporting. Tru Fals 101. Th purpos of financial rporting is to provid conomic information to xtrnal dcision makrs only. Tru Fals 102. An objctiv of financial rporting is to rflct conomic information concrning a company's cash flows. Tru Fals 103. Th concpt of consrvatism is th capacity of information to mak a diffrnc in a dcision. Tru Fals

23 104. Matriality dals with th siz of an rror in accounting information. Tru Fals 105. Most businsss hav an oprating cycl of lss than on yar. Tru Fals 106. Currnt assts, othr than cash, ar xpctd to b sold or consumd ar during a company's normal oprating cycl. Tru Fals 107. Obligations rlatd to oprating activitis that will b paid within th company's oprating cycl must b rportd as currnt liabilitis on a classifid balanc sht. Tru Fals 108. Th oprating cycl for all businsss is on yar. Tru Fals 109. A construction company that builds skyscraprs is likly to hav an oprating cycl longr than on yar. Tru Fals 110. Thr common catgoris of long-trm assts ar: 1) proprty, plant, and quipmnt, 2) invstmnts, and 3) intangibls. Tru Fals 111. In th stockholdrs' quity sction of a classifid balanc sht, a distinction is mad btwn amounts invstd by ownrs and amounts accumulatd from businss arnings. Tru Fals 112. On primary purpos of a classifid balanc sht is to hlp usrs valuat th liquidity of a company. Tru Fals

24 113. Companis prpar classifid financial statmnts bcaus thy ar rquird by intrnational accounting principls. Tru Fals 114. Th currnt ratio is irrlvant in liquidity analysis for srvic companis bcaus thy do not hav invntoris among thir currnt assts Tru Fals 115. An advantag of th currnt ratio is that it considrs th makup of th currnt assts. Tru Fals 116. Th xcss of currnt assts ovr currnt liabilitis is rfrrd to as working capital. Tru Fals 117. A balanc sht shows cash, $75,000; marktabl scuritis, $115,000; accounts rcivabl, $150,000 and $222,500 of invntoris. Currnt liabilitis ar $225,000. Th currnt ratio is 2.5 to 1. Tru Fals 118. If a firm has a currnt ratio of 2, th subsqunt rcipt of a 60-day not rcivabl to sttl an opn account will caus th ratio to dcras. Tru Fals 119. Th purchas of invntory for cash will caus th currnt ratio to dcras. Tru Fals 120. Incom from oprations dos not includ intrst rvnu and intrst xpns bcaus ths itms ar considrd to b non-oprating in natur. Tru Fals 121. A 12% chang in sals will rsult in a 12% chang in nt incom. Tru Fals

25 122. Som analysts proprly rfr to a company s profit margin as its rturn on assts. Tru Fals 123. Dividnds dclard and paid rduc a company s rtaind arnings balanc. Tru Fals 124. Dividnds paid appars on both th incom statmnt and th statmnt of rtaind arnings. Tru Fals 125. Invsting activitis ar ndd to provid th funds to start a businss. Tru Fals 126. Th statmnt of cash flows, lik th incom statmnt, rports only oprating activitis of a company. Tru Fals 127. Funds raisd from financing activitis should b invstd in assts that can b usd to carry on businss oprations. Tru Fals 128. Th primary rsponsibility for th prparation and intgrity of th financial statmnts in an annual rport blongs to th company's indpndnt accountants (CPAs). Tru Fals 129. Indpndnt auditors (CPAs) rndr an opinion that th financial statmnts do or do not fairly prsnt a company's financial position, oprating rsults, and cash flows. Tru Fals 130. An indpndnt auditor's (CPA's) rport is a guarant that th financial statmnts ar fr from fraud or matrial rror Tru Fals

26 131. In th indpndnt auditors' rport includd with th annual rport, managmnt discusss th financial statmnts and provids th sharholdrs with xplanations for crtain amounts rportd in th statmnts. Tru Fals 132. and hav claims to an ntity s conomic rsourcs is th magnitud of an omission or misstatmnt in accounting information that will affct th judgmnt of somon rlying on th information 134. is th capacity of information to mak a diffrnc in a dcision 135. is th practic of using th last optimistic stimat whn two stimats of amounts ar about qually likly 136. is th quality of accounting information that maks it comprhnsibl to thos willing to spnd th ncssary tim 137. is th quality of accounting information that maks it dpndabl in rprsnting th vnts that it purports to rprsnt 138. is th quality of accounting information that allows a usr to analyz two or mor companis and look for similaritis and diffrncs 139. is th quality of accounting information that allows a usr to compar two or mor accounting priods for a singl company.

27 140. hav claims to an ntity s conomic rsourcs 141. ar cash and othr assts that ar rasonably xpctd to b ralizd in cash during th normal oprating cycl of th businss Proprty, plant and quipmnt is classifid as assts on th balanc sht is th procss of writing off th cost of tangibl assts and is th procss of writing off th cost of intangibl assts is a liquidity masur that is calculatd by subtracting currnt assts from currnt liabilitis Th ability of a company to pay its dbt as it coms du rlats to In a -stp incom statmnt, all xpnss and losss ar addd togthr, thn dductd from th sum of all rvnus and gains Th statmnt of xplains changs in th componnts of ownrs quity during th priod On th statmnt of cash flows, th sction involvs th acquisition and sal of long-trm assts.

28 149. On th statmnt of cash flows, th sction involvs th purchas and sal of products and srvics On th statmnt of cash flows, th sction involvs th issuanc and rpaymnt of long trm liabilitis and stock transactions Match th following charactristics with th statmnts about ach qualitativ charactristic s importanc. 1. Accounting information must b vrifiabl and faithfully rprsnt actual transactions. 2. This quality rfrs to an amount larg nough to affct a dcision. 3. Accounting information should us th last optimistic stimat. 4. Usrs must b abl to compar accounting information of a firm with its prior yar information. 5. Thos willing to spnd th tim should b providd with comprhnsibl accounting information. 6. Th accounting information must b information that could affct a dcision. 7. This quality allows usrs to analyz two or mor companis and look for similaritis and diffrncs. Undrstandability Rlvanc Consrvatism Comparability Consistncy Rliability Matriality 152. Lorn Corporation Listd blow is information from th financial rcords of Lorn Corporation at Dcmbr 31, 2014: Rtaind arnings $37,000 Nots payabl--du July 1, 2017 $12,000 Accumulatd dprciation 13,000 Intrst payabl 1,000 Incom taxs payabl 24,000 Offic supplis 2,000 Buildings 48,000 Accounts payabl 36,000 Cash 11,000 Invntory 33,000 Accounts rcivabl 35,000 Land 50,000 Capital stock 60,000 Prpaid rnt 4,000

29 Rad th information about Lorn Corporation. Rquird: Prpar th currnt liabilitis sction of th balanc sht for Lorn Corp. at Dcmbr 31, You may omit th hading. If th amount of currnt liabilitis wr largr, what ffct would this hav on th currnt ratio? 153. Lorn Corporation Listd blow is information from th financial rcords of Lorn Corporation at Dcmbr 31, 2014: Rtaind arnings $37,000 Nots payabl--du July 1, 2017 $12,000 Accumulatd dprciation 13,000 Intrst payabl 1,000 Incom taxs payabl 24,000 Offic supplis 2,000 Buildings 48,000 Accounts payabl 36,000 Cash 11,000 Invntory 33,000 Accounts rcivabl 35,000 Land 50,000 Capital stock 60,000 Prpaid rnt 4,000 Rad th information about Lorn Corporation. Rquird: Prpar th long-trm asst sction of Lorn Corp.'s balanc sht at Dcmbr 31, You may omit th hading. Why ar ths amounts classifid as "long-trm"? 154. Lorn Corporation Listd blow is information from th financial rcords of Lorn Corporation at Dcmbr 31, 2014: Rtaind arnings $37,000 Nots payabl--du July 1, 2017 $12,000 Accumulatd dprciation 13,000 Intrst payabl 1,000 Incom taxs payabl 24,000 Offic supplis 2,000 Buildings 48,000 Accounts payabl 36,000 Cash 11,000 Invntory 33,000 Accounts rcivabl 35,000 Land 50,000 Capital stock 60,000 Prpaid rnt 4,000

30 Rad th information about Lorn Corporation. Rquird: Prpar th currnt assts sction of th balanc sht for Lorn Corp. at Dcmbr 31, You may omit th hading. How dos th concpt of liquidity apply? 155. Lorn Corporation Listd blow is information from th financial rcords of Lorn Corporation at Dcmbr 31, 2014: Rtaind arnings $37,000 Nots payabl--du July 1, 2017 $12,000 Accumulatd dprciation 13,000 Intrst payabl 1,000 Incom taxs payabl 24,000 Offic supplis 2,000 Buildings 48,000 Accounts payabl 36,000 Cash 11,000 Invntory 33,000 Accounts rcivabl 35,000 Land 50,000 Capital stock 60,000 Prpaid rnt 4,000 Rad th information about Lorn Corporation. Rquird: Calculat Manus currnt ratio at Dcmbr 31, What dos this ratio tll you about th "composition" of th currnt assts? 156. Lorn Corporation Listd blow is information from th financial rcords of Lorn Corporation at Dcmbr 31, 2014: Rtaind arnings $37,000 Nots payabl--du July 1, 2017 $12,000 Accumulatd dprciation 13,000 Intrst payabl 1,000 Incom taxs payabl 24,000 Offic supplis 2,000 Buildings 48,000 Accounts payabl 36,000 Cash 11,000 Invntory 33,000 Accounts rcivabl 35,000 Land 50,000 Capital stock 60,000 Prpaid rnt 4,000

31 Rad th information blow about Lorn Corporation. Rquird: Calculat th amount of working capital at Dcmbr 31, 2014 for Lorn Corp. What can you larn from th currnt ratio that you cannot larn from th amount of working capital? 157. Raponi, Inc. Th following balanc sht itms from Raponi, Inc. ar listd for Dcmbr 31, 2014: Accounts payabl $ 32,650 Intrst payabl 2,200 Accounts rcivabl 26,500 Land 250,000 Accumulatd dprciation buildings 40,000 Marktabl scuritis 15,000 Mrchandis invntory 112,900 Accumulatd dprciation quipmnt 12,500 Nots payabl, du April 15, ,500 Offic supplis 200 Nots payabl, du Dcmbr 31, ,630 Paid-in capital in xcss of par valu 75,000 Buildings 150,000 Patnts 45,000 Capital stock, $1 par valu 200,000 Prpaid rnt 3,800 Cash 60,990 Rtaind arnings 113,510 Equipmnt 84,500 Salaris payabl 7,400 Incom taxs payabl 7,500 Rad th information about Raponi, Inc. Rquird: Prsnt th Currnt Assts sction (including th total) of a classifid balanc sht.

32 158. Raponi, Inc. Th following balanc sht itms from Raponi, Inc. ar listd for Dcmbr 31, 2014: Accounts payabl $ 32,650 Intrst payabl 2,200 Accounts rcivabl 26,500 Land 250,000 Accumulatd dprciation buildings 40,000 Marktabl scuritis 15,000 Mrchandis invntory 112,900 Accumulatd dprciation quipmnt 12,500 Nots payabl, du April 15, ,500 Offic supplis 200 Nots payabl, du Dcmbr 31, ,630 Paid-in capital in xcss of par valu 75,000 Buildings 150,000 Patnts 45,000 Capital stock, $1 par valu 200,000 Prpaid rnt 3,800 Cash 60,990 Rtaind arnings 113,510 Equipmnt 84,500 Salaris payabl 7,400 Incom taxs payabl 7,500 Rad th information about Raponi, Inc. Rquird: Prpar th Stockholdrs Equity sction of th classifid balanc sht, including th total stockholdrs quity amount.

33 159. Raponi, Inc. Th following balanc sht itms from Raponi, Inc. ar listd for Dcmbr 31, 2014: Accounts payabl $ 32,650 Intrst payabl 2,200 Accounts rcivabl 26,500 Land 250,000 Accumulatd dprciation buildings 40,000 Marktabl scuritis 15,000 Mrchandis invntory 112,900 Accumulatd dprciation quipmnt 12,500 Nots payabl, du April 15, ,500 Offic supplis 200 Nots payabl, du Dcmbr 31, ,630 Paid-in capital in xcss of par valu 75,000 Buildings 150,000 Patnts 45,000 Capital stock, $1 par valu 200,000 Prpaid rnt 3,800 Cash 60,990 Rtaind arnings 113,510 Equipmnt 84,500 Salaris payabl 7,400 Incom taxs payabl 7,500 Rad th information about Raponi, Inc. Rquird: Prsnt th currnt liabilitis sction (including th total) of a classifid balanc sht.

34 160. Raponi, Inc. Th following balanc sht itms from Raponi, Inc. ar listd for Dcmbr 31, 2014: Accounts payabl $ 32,650 Intrst payabl 2,200 Accounts rcivabl 26,500 Land 250,000 Accumulatd dprciation buildings 40,000 Marktabl scuritis 15,000 Mrchandis invntory 112,900 Accumulatd dprciation quipmnt 12,500 Nots payabl, du April 15, ,500 Offic supplis 200 Nots payabl, du Dcmbr 31, ,630 Paid-in capital in xcss of par valu 75,000 Buildings 150,000 Patnts 45,000 Capital stock, $1 par valu 200,000 Prpaid rnt 3,800 Cash 60,990 Rtaind arnings 113,510 Equipmnt 84,500 Salaris payabl 7,400 Incom taxs payabl 7,500 Rad th information about Raponi, Inc. Rquird: Comput Raponi s currnt ratio. On th basis of your answr, dos Raponi appar to b liquid? What othr information do you nd to fully answr that qustion?

35 161. Raponi, Inc. Th following balanc sht itms from Raponi, Inc. ar listd for Dcmbr 31, 2014: Accounts payabl $ 32,650 Intrst payabl 2,200 Accounts rcivabl 26,500 Land 250,000 Accumulatd dprciation buildings 40,000 Marktabl scuritis 15,000 Mrchandis invntory 112,900 Accumulatd dprciation quipmnt 12,500 Nots payabl, du April 15, ,500 Offic supplis 200 Nots payabl, du Dcmbr 31, ,630 Paid-in capital in xcss of par valu 75,000 Buildings 150,000 Patnts 45,000 Capital stock, $1 par valu 200,000 Prpaid rnt 3,800 Cash 60,990 Rtaind arnings 113,510 Equipmnt 84,500 Salaris payabl 7,400 Incom taxs payabl 7,500 Rad th information about Raponi, Inc. Rquird: Prpar th Assts sction of th classifid balanc sht Rad th information about Raponi, Inc. Rquird: Prpar th Liabilitis sction of th classifid balanc sht, including total liabilitis balanc.

36 163. Complt th Dcmbr 31, 2014 (first yar of opration) Balanc sht for Wglin Company using th following information: (a) Rtaind arnings at Dcmbr 31, 2014 was $51,000. (b) Total stockholdrs quity at January 1, 2014 was $139,000. (c) On Dcmbr 30, 2014, additional capital stock was sold for cash, $55,000 (d) Th land and building wr purchasd on Dcmbr 30, 2014 for $150,000. Wglin Company Balanc Sht Dcmbr 31, 2014 Assts Liabil itis & Stock hold rs Equit y Cash $ 80,000 L ia bi li ti s: Accounts rcivabl $ Land 112,000 Buildings N ot s p a y a bl 45, 000 A c c o u nt s p a y a bl $ T ot al li a bi li ti s

37 Equipmnt 30,000 S to c k h ol d r s q ui ty : C a pi ta l S to c k $ R t ai n d ar ni n g s T ot al li a bi li ti s a n d Total assts $ st o c k h ol d r s q ui ty $390, 000

38 164. Ficus Company calculatd th following amounts concrning its financial information for th yars nding Dcmbr 31, 2014 and 2013: Currnt ratio 3.1 to to 1 Profit margin 22 % 18% REQUIRED: Examin Ficus ratios. Is th chang in th currnt ratio favorabl or not? Explain Ficus Company calculatd th following amounts concrning its financial information for th yars nding Dcmbr 31, 2014 and 2013: Currnt ratio 3.1 to to 1 Profit margin 22 % 18% REQUIRED: Suppos Ficus Company had a dcras in its cash account from 2013 to Would th othr currnt asst amounts hav incrasd or dcrasd? Explain.

39 166. Fllsmr Corporation Prsntd blow ar th condnsd balanc shts of Fllsmr Corporation at Dcmbr 31, 2014 and Nt incom for th yars nding Dcmbr 31, 2014 and 2013 is $346,000 and $109,000, rspctivly. Dc Dcmbr 31, 2013 mb r 31, C u rr nt a ss t s P r o p r ty, pl a nt, & q ui p m nt ( n t ) I nt a n gi bl s a n d ot h r a ss t s $2,228,186 $2,544, , , , ,12 1 Tota $2,889,981 $3,039,45 l 1 asst s

40 C u rr nt li a bi li ti s $1,429,674 $1,003,90 6 L o n g -t r m o bl ig at io n s 3,360 7,240 W ar ra nt y a n d ot h r li a bi li ti s 112,971 98,08 1 Tota l liabi litis $1,546,605 $1,109,22 7 S to c k h ol d r s q ui ty : Com mon stoc k $ 1,566 $ 501,63 1

41 Add ition al paid -in capit al 365, ,483 Rta ind arn ings 980, ,509 Acc umu latd oth r com prh nsi v loss (4,085) (5,489 ) Tota l stoc khol drs qui ty $1,343,976 $1,930,22 4 T ot al li a bi li ti s a n d st o c k h ol d r s q ui ty $2,8 89,9 81 $3,039,451

42 Rad th information about Fllsmr Corporation. Rquird: (A) Did Fllsmr s currnt ratio incras or dcras from 2013 to 2014? Mak any ncssary calculations and xplain your answr. Which financial statmnt usrs ar most concrnd with this ratio? (B) Th balanc shts show a larg incras in rtaind arnings during Idntify th possibl rason(s) for this incras.

43 167. Fllsmr Corporation Prsntd blow ar th condnsd balanc shts of Fllsmr Corporation at Dcmbr 31, 2014 and Nt incom for th yars nding Dcmbr 31, 2014 and 2013 is $346,000 and $109,000, rspctivly. Dc Dcmbr 31, 2013 mb r 31, C u rr nt a ss t s P r o p r ty, pl a nt, & q ui p m nt ( n t ) I nt a n gi bl s a n d ot h r a ss t s $2,228,186 $2,544, , , , ,12 1 Tota $2,889,981 $3,039,45 l 1 asst s

44 C u rr nt li a bi li ti s $1,429,674 $1,003,90 6 L o n g -t r m o bl ig at io n s 3,360 7,240 W ar ra nt y a n d ot h r li a bi li ti s 112,971 98,08 1 Tota l liabi litis $1,546,605 $1,109,22 7 S to c k h ol d r s q ui ty : Com mon stoc k $ 1,566 $ 501,63 1

45 Add ition al paid -in capit al 365, ,483 Rta ind arn ings 980, ,509 Acc umu latd oth r com prh nsi v loss (4,085) (5,489 ) Tota l stoc khol drs qui ty $1,343,976 $1,930,22 4 T ot al li a bi li ti s a n d st o c k h ol d r s q ui ty $2,8 89,9 81 $3,039,451

46 Rad th information about Fllsmr Corporation. Rquird: (A) Explain th chang in Fllsmr s working capital from 2013 to Why do usrs bliv th currnt ratio provids mor information than th dollar amount of working capital? Explain. (B) Fllsmr Corporation's crditors nd to know whthr its working capital position improvd during th yar. How would you valuat this? 168. Crystal, Inc. Crystal, Inc. rportd $52,000 of nt incom for Crystal s balanc sht at Dcmbr 31, 2014 includs th following amounts: Wags payabl $ 1,000 Invntory $26,000 Prpaid rnt 3,000 Land 40,000 Cash 15,000 Accounts rcivabl 22,000 Accounts payabl 25,000 Capital stock 40,000 Rtaind arnings 29,000 Incom taxs payabl 11,000 Rad th information about Crystal, Inc. Which itm is most "liquid"? Why is liquidity important? 169. Crystal, Inc. Crystal, Inc. rportd $52,000 of nt incom for Crystal s balanc sht at Dcmbr 31, 2014 includs th following amounts: Wags payabl $ 1,000 Invntory $26,000 Prpaid rnt 3,000 Land 40,000 Cash 15,000 Accounts rcivabl 22,000 Accounts payabl 25,000 Capital stock 40,000 Rtaind arnings 29,000 Incom taxs payabl 11,000

47 Rad th information about Crystal, Inc. Has Crystal bn profitabl sinc it bgan oprations? How do you know? 170. Th balanc sht of Evanston Inc. includs th following itms: Cash $ 21,500 Accounts rcivabl 12,400 Invntory 45,300 Prpaid insuranc 1,800 Land 80,000 Accounts payabl 49,000 Salaris payabl 1,625 Capital stock 105,100 Rtaind arnings 5,700 Rquird: (1) Dtrmin th currnt ratio and working capital. (2) What dos th composition of th currnt assts tll you about Evanston s liquidity? (3) What othr information do you nd to fully assss Evanston s liquidity? 171. Eagl Corporation Prsntd blow ar all of th itms from Eagl Corporation s incom statmnt for th yars nding Dcmbr 31, 2014 and Dcmbr 31, 2014 Dcmbr 31, 2013 Srvic fs $2,300,000 $2,100,000 Gnral and administrativ xpnss 1,900,000 1,500,000 Othr incom, nt 40,000 20,000 Incom taxs 150, ,000

48 Rad th information about Eagl Corporation. Rquird:: How much is nt incom for th yar ndd Dcmbr 31, 2014? If Eagl Corporation had usd a singl-stp statmnt, by how much would nt incom b diffrnt? Explain Eagl Corporation Prsntd blow ar all of th itms from Eagl Corporation s incom statmnt for th yars nding Dcmbr 31, 2014 and Dcmbr 31, 2014 Dcmbr 31, 2013 Srvic fs $2,300,000 $2,100,000 Gnral and administrativ xpnss 1,900,000 1,500,000 Othr incom, nt 40,000 20,000 Incom taxs 150, ,000 Rad th information about Eagl Corporation. Rquird: Compar th profit margins for 2014 and Is th company bcoming mor or lss profitabl or staying th sam? What could b contributing to this?

49 173. Burk Company Th following incom statmnt itms ar takn from th rcords of Burk Company for th yar ndd Dcmbr 31, 2014: Advrtising xpns $2,600 Commission xpns 3,515 Cost of goods sold 29,200 Dprciation xpns - Offic Building 4,000 Incom tax xpns 190 Insuranc xpns - sals prson s auto 3,350 Intrst xpns 1,400 Intrst rvnu 2,340 Rnt rvnu 7,700 Salaris and wags xpns - Offic 13,660 Sals Rvnu 50,300 Supplis xpns - Offic 1,990 Rad th information about Burk Company. Rquird: Prpar a multipl-stp incom statmnt for th yar ndd Dcmbr 31, Burk Company Th following incom statmnt itms ar takn from th rcords of Burk Company for th yar ndd Dcmbr 31, 2014: Advrtising xpns $2,600 Commission xpns 3,515 Cost of goods sold 29,200 Dprciation xpns - Offic Building 4,000 Incom tax xpns 190 Insuranc xpns - sals prson s auto 3,350 Intrst xpns 1,400 Intrst rvnu 2,340 Rnt rvnu 7,700 Salaris and wags xpns - Offic 13,660 Sals Rvnu 50,300 Supplis xpns - Offic 1,990