Question 1

Which two of the following determine when revenue is recorded on the financial statements based on the recognition principle?
I.Payment is collected for the sale of a good or service.
II.The earnings process is virtually complete.
III.The value of a sale can be reliably determined.
IV.The product is physically delivered to the buyer.

Accepted Answer

A)  I and II only
B)  I and IV only
C)  II and III only
D)  II and IV only
E)  I and III onlyF) None of the above
G) All of the above

Question 2

Precision Manufacturing had the following operating results for 2014: sales = $38,900; cost of goods sold = $24,600; depreciation expense = $1,700; interest expense = $1,400; dividends paid = $1,000.At the beginning of the year,net fixed assets were $14,300,current assets were $8,700,and current liabilities were $6,600.At the end of the year,net fixed assets were $13,900,current assets were $9,200,and current liabilities were $7,400.The tax rate for 2014 was 34 percent.What is the cash flow from assets for 2014?

Accepted Answer

A)  $8,047
B)  $8,292
C)  $8,658
D)  $9,492
E)  $9,964F) B) and D)
G) A) and E)

Question 3

A firm has earnings before interest and taxes of $25,380 with a net income of $14,220.The taxes amounted to $5,400 for the year.During the year,the firm paid out $43,800 to pay off existing debt and then later borrowed an additional $24,000.What is the amount of the cash flow to creditors?

Accepted Answer

A)  -$14,040
B)  $19,800
C)  $25,560
D)  $28,440
E)  $29,790F) A) and D)
G) A) and E)

Question 4

During the year,The Dalton Firm had sales of $3,210,000.Cost of goods sold,administrative and selling expenses,and depreciation expenses were $2,540,000,$389,000,and $112,000,respectively.In addition,the company had an interest expense of $118,000 and a tax rate of 34 percent.(Ignore any tax loss carryback or carryforward provisions.) What is its operating cash flow?

Accepted Answer

A)  $263,660
B)  $271,420
C)  $273,330
D)  $285,400
E)  $287,700F) B) and E)
G) A) and B)

Question 5

The recognition principle states that:

Accepted Answer

A)  costs should be recorded on the income statement whenever those costs can be reliably determined.
B)  costs should be recorded when paid.
C)  the costs of producing an item should be recorded when the sale of that item is recorded as revenue.
D)  sales should be recorded when the payment for that sale is received.
E)  sales should be recorded when the earnings process is virtually completed and the value of the sale can be determined.F) A) and D)
G) B) and D)

Question 6

The corporate tax structure in the U.S.is based on a:

Accepted Answer

A)  maximum tax rate of 38 percent.
B)  minimum tax rate of 10 percent.
C)  flat rate of 34 percent for the highest income earners.
D)  flat-rate tax.
E)  modified flat-rate tax.F) A) and E)
G) C) and D)

Question 7

Which one of the following terms is defined as the total tax paid divided by the total taxable income?

Accepted Answer

A)  Average tax rate
B)  Variable tax rate
C)  Marginal tax rate
D)  Absolute tax rate
E)  Contingent tax rateF) A) and D)
G) A) and E)

Question 8

Chevelle,Inc.has sales of $487,000 and costs of $394,500.The depreciation expense is $43,800.Interest paid equals $18,200 and dividends paid equal $6,500.The tax rate is 35 percent.What is the addition to retained earnings?

Accepted Answer

A)  $10,775
B)  $11,460
C)  $13,120
D)  $13,325
E)  $15,450F) C) and D)
G) B) and C)

Question 9

The Play House's December 31,2013,balance sheet showed net fixed assets of $1,238,000 and the December 31,2014,balance sheet showed net fixed assets of $1,416,000.The company's 2014 income statement showed a depreciation expense of $214,600.What was the firm's net capital spending for 2014?

Accepted Answer

A)  $36,600
B)  $42,400
C)  $392,600
D)  $404,400
E)  $416,600F) None of the above
G) A) and D)

Question 10

Net capital spending is equal to:

Accepted Answer

A)  ending net fixed assets minus beginning net fixed assets plus depreciation.
B)  beginning net fixed assets minus ending net fixed assets plus depreciation.
C)  ending net fixed assets minus beginning net fixed assets minus depreciation.
D)  ending total assets minus beginning total assets plus depreciation.
E)  ending total assets minus beginning total assets minus depreciation.F) A) and E)
G) None of the above

Question 11

Home Supply,Inc.has compiled the following information:  For 2014,the cash flow from assets is _____ and the cash flow to shareholders is ______.

Accepted Answer

A)  $49,100; $62,500
B)  $49,100; $76,800
C)  $49,100; $81,100
D)  $56,400; $76,800
E)  $56,400; $79,300F) All of the above
G) B) and C)

Question 12

Operating cash flow is defined as:

Accepted Answer

A)  a firm's net profit over a specified period of time.
B)  the cash that a firm generates from its normal business activities.
C)  a firm's operating margin.
D)  the change in the net working capital over a stated period of time.
E)  the cash that is generated and added to retained earnings.F) D) and E)
G) B) and D) B

Question 13

Miser Materials paid $27,500 in dividends and $28,311 in interest over the past year while net working capital increased from $13,506 to $18,219.The company purchased $42,000 in net new fixed assets and had depreciation expenses of $16,805.During the year,the firm issued $25,000 in net new equity and paid off $21,000 in long-term debt.What is the amount of the cash flow from assets?

Accepted Answer

A)  $21,811
B)  $30,811
C)  $36,189
D)  $49,811
E)  51,811F) A) and B)
G) A) and C)

Question 14

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 B)
G) B) and D)

Question 15

Which one of the following statements concerning the balance sheet is correct?

Accepted Answer

A)  Total assets equal total liabilities minus total equity.
B)  Net working capital is equal total assets minus total liabilities.
C)  Assets are listed in descending order of liquidity.
D)  Current assets are equal to total assets minus net working capital.
E)  Shareholders' equity is equal to net working capital minus net fixed assets plus long-term debt.F) B) and D)
G) D) and E)

Question 16

Bama & Co.owes a total of $21,684 in taxes for this year.The taxable income is $61,509.If the firm earns $100 more in income,it will owe an additional $56 in taxes.What is the average tax rate on income of $71,609?

Accepted Answer

A)  28.00 percent
B)  30.33 percent
C)  33.33 percent
D)  35.00 percent
E)  35.29 percentF) A) and B)
G) B) and E)

Question 17

Kroeger Exporters has total assets of $74,300,net working capital of $22,900,owners' equity of $38,600,and long-term debt of $23,900.What is the value of the current assets?

Accepted Answer

A)  $21,600
B)  $24,300
C)  $38,900
D)  $34,700
E)  $46,100F) B) and D)
G) All of the above

Question 18

Baugh and Essary reports the following account balances: inventory of $17,600,equipment of $128,300,accounts payable of $24,700,cash of $11,900,and accounts receivable of $31,900.What is the amount of the current assets?

Accepted Answer

A)  $46,700
B)  $56,000
C)  $61,400
D)  $175,000
E)  $199,700F) A) and E)
G) All of the above

Question 19

Which one of the following decreases net income but does not affect the operating cash flow of a firm that owes no taxes for the current year?

Accepted Answer

A)  Indirect cost
B)  Direct cost
C)  Noncash item
D)  Period cost
E)  Variable costF) B) and E)
G) C) and D) 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 D)
G) B) and C) A

Exam 2: Financial Statements, Taxes, and Cash Flow

Correct Answer
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A firm has earnings before interest and taxes of $25,380 with a net income of $14,220.The taxes amounted to $5,400 for the year.During the year,the firm paid out $43,800 to pay off existing debt and then later borrowed an additional $24,000.What is the amount of the cash flow to creditors?

Correct Answer
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Correct Answer
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The recognition principle states that:

Correct Answer
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The corporate tax structure in the U.S.is based on a:

Correct Answer
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Which one of the following terms is defined as the total tax paid divided by the total taxable income?

Correct Answer
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Chevelle,Inc.has sales of $487,000 and costs of $394,500.The depreciation expense is $43,800.Interest paid equals $18,200 and dividends paid equal $6,500.The tax rate is 35 percent.What is the addition to retained earnings?

Correct Answer
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The Play House's December 31,2013,balance sheet showed net fixed assets of $1,238,000 and the December 31,2014,balance sheet showed net fixed assets of $1,416,000.The company's 2014 income statement showed a depreciation expense of $214,600.What was the firm's net capital spending for 2014?

Correct Answer
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Net capital spending is equal to:

Correct Answer
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Home Supply,Inc.has compiled the following information: For 2014,the cash flow from assets is _ and the cash flow to shareholders is __.

Correct Answer
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Operating cash flow is defined as:

Correct Answer
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B

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 statements concerning the balance sheet is correct?

Correct Answer
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Bama & Co.owes a total of $21,684 in taxes for this year.The taxable income is $61,509.If the firm earns $100 more in income,it will owe an additional $56 in taxes.What is the average tax rate on income of $71,609?

Correct Answer
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Kroeger Exporters has total assets of $74,300,net working capital of $22,900,owners' equity of $38,600,and long-term debt of $23,900.What is the value of the current assets?

Correct Answer
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Baugh and Essary reports the following account balances: inventory of $17,600,equipment of $128,300,accounts payable of $24,700,cash of $11,900,and accounts receivable of $31,900.What is the amount of the current assets?

Correct Answer
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Which one of the following decreases net income but does not affect the operating cash flow of a firm that owes no taxes for the current year?

Correct Answer
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C

Cash flow to creditors is defined as:

Correct Answer
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A

Exam 2: Financial Statements, Taxes, and Cash Flow

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A firm has earnings before interest and taxes of $25,380 with a net income of $14,220.The taxes amounted to $5,400 for the year.During the year,the firm paid out $43,800 to pay off existing debt and then later borrowed an additional $24,000.What is the amount of the cash flow to creditors?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The recognition principle states that:

Correct AnswerverifiedShow Answer

The corporate tax structure in the U.S.is based on a:

Correct AnswerverifiedShow Answer

Which one of the following terms is defined as the total tax paid divided by the total taxable income?

Correct AnswerverifiedShow Answer

Chevelle,Inc.has sales of $487,000 and costs of $394,500.The depreciation expense is $43,800.Interest paid equals $18,200 and dividends paid equal $6,500.The tax rate is 35 percent.What is the addition to retained earnings?

Correct AnswerverifiedShow Answer

The Play House's December 31,2013,balance sheet showed net fixed assets of $1,238,000 and the December 31,2014,balance sheet showed net fixed assets of $1,416,000.The company's 2014 income statement showed a depreciation expense of $214,600.What was the firm's net capital spending for 2014?

Correct AnswerverifiedShow Answer

Net capital spending is equal to:

Correct AnswerverifiedShow Answer

Home Supply,Inc.has compiled the following information: For 2014,the cash flow from assets is _____ and the cash flow to shareholders is ______.

Correct AnswerverifiedShow Answer

Operating cash flow is defined as:

Correct AnswerverifiedB

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 statements concerning the balance sheet is correct?

Correct AnswerverifiedShow Answer

Bama & Co.owes a total of $21,684 in taxes for this year.The taxable income is $61,509.If the firm earns $100 more in income,it will owe an additional $56 in taxes.What is the average tax rate on income of $71,609?

Correct AnswerverifiedShow Answer

Kroeger Exporters has total assets of $74,300,net working capital of $22,900,owners' equity of $38,600,and long-term debt of $23,900.What is the value of the current assets?

Correct AnswerverifiedShow Answer

Baugh and Essary reports the following account balances: inventory of $17,600,equipment of $128,300,accounts payable of $24,700,cash of $11,900,and accounts receivable of $31,900.What is the amount of the current assets?

Correct AnswerverifiedShow Answer

Which one of the following decreases net income but does not affect the operating cash flow of a firm that owes no taxes for the current year?

Correct AnswerverifiedC

Cash flow to creditors is defined as:

Correct AnswerverifiedA

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Home Supply,Inc.has compiled the following information: For 2014,the cash flow from assets is _ and the cash flow to shareholders is __.

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B

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C

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A