ACG Ch. 2 missed q's / confusing info

Stonebrook Corporation reported net income of $24,000, net sales of $400,000, and average common shares outstanding of 6,000. There were $8,000 of preferred stock dividends. How much was its earnings per share? $1.60 $0.06 $4.00 $2.67 $16.67

$2.67 (Earnings per share equals net income earned on each share of common stock. Earnings per share equals net income minus preferred dividends divided by the average number of shares outstanding. This company has no preferred dividends. Earnings per share = ($24,000 - $8,000)/6,000 shares = $2.67/share.)

What is the primary criterion by which accounting information can be judged? Predictive value Comparability Consistency Usefulness for decision making

Usefulness for decision making

Bombay Corporation had $24,000 of cash at the beginning of the year and it had cash receipts of $21,000 during the year. At the end of the year, Bombay Company had $33,000 of cash. What was Bombay Corporation's cash disbursements for the year? $22,000 $12,000 $45,000 $30,000 $24,000

$12,000 (The ending balance equals beginning cash minus cash disbursements plus cash receipts $33,000 = $24,000 + $21,000 - X Solve for X: Cash disbursements = $12,000.)

The net cash inflow from operating activities is $140,000; cash received from issuing stock is $75,000; cash paid for capital expenditures is $60,000; cash paid for bonds held as an investment is $20,000; and dividends paid are $20,000. How much is free cash flow? $180,000 $90,000 $40,000 $60,000

$60,000 Free cash flow is cash provided by operating activities minus cash paid for capital expenditures and dividends paid. Free cash flow = $140,000 - $60,000 -$20,000 = $60,000.

Clawson Corporation has current assets of $3,750,000 and current liabilities of $2,050,000. If Clawson Corporation pays $500,000 of its accounts payable what will the new current ratio be? 1.51 2.51 2.10 2.42 1.80

2.10 (Current ratio equals current assets divided by current liabilities. Accounts payable is a current liability. Paying accounts payable reduces cash (i.e., current assets) and reduces accounts payable (i.e., current liabilities). Current ratio = ($3,750,000 − $500,000) ÷ ($2,050,000 − $500,000) Current ratio = 2.0967)

What is the correct order for listing assets on the balance sheet?

Cash, short-term investments, land, and patents

The following ratios are available for Rock Inc. and Pebble Inc. Rock Inc. Pebble Inc. Current Ratio 1.8 2.1 Compared to Rock Inc., Pebble Inc. has lower solvency. higher solvency. higher liquidity. lower liquidity. lower profitability

higher liquidity

Issuing new shares of common stock will increase common stock. increase liabilities. decrease common stock. increase retained earnings. decrease retained earnings.

increase common stock (Issuing common stock does not affect retained earnings.)

measure short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash

liquidity ratios

An item is ________ if it is likely to influence the decision of an investor or creditor.

material

measure the income or operating success of a company for a given period of time

profitability ratios

The going concern assumption assumes that the business

remain in business for the foreseeable future.

measure the ability of the company to survive over a long period of time

solvency ratios

Information is _________ if independent observers, using the same methods, obtain similar results. For example, certified public accountants (CPAs) perform audits of financial statements to confirm or double-check their accuracy. comparable verifiable understandable consistent relevant

verifiable

How do you calculate working capital?

working capital = current assets - current liabilities