ch. 2

$6,890 Current assets = $7,390 - 3,910 = $3,480 Current liabilities = $3,480 - 560 = $2,920 Total liabilities = $2,920 + 3,970 = $6,890

A firm has net working capital of $560. Long-term debt is $3,970, total assets are $7,390, and fixed assets are $3,910. What is the amount of the total liabilities? $2,050 $2,920 $4,130 $7,950 $6,890

-$2,122,000 Cash flow to stockholders = $150,000 - [($872,000 + 4,800,000) - ($800,000 + 2,600,000) = -$2,122,000

At the beginning of the year the balance sheet of The Outlet showed $800,000 in the common stock account and $2.6 million in the additional paid-in surplus account. The end-of-year balance sheet showed $872,000 and $4.8 million in the same two accounts, respectively. The company paid out $150,000 in cash dividends during the year. What is the cash flow to stockholders for the year? -$1,972,000 -$2,122,000 -$628,000 $222,000 $78,000

I and III only.

Which of the following are current assets? I. Cash II. Trademark III. Accounts receivable IV. Notes payable II and III only. I and III only. I, II, and IV only. I, III, and IV only. II, III, and IV only.

Accounts Receivable.

Which one of the following accounts is the most liquid? Inventory. Building. Accounts Receivable. Equipment. Land.

Income is recorded based on the realization principle.

Which one of the following is true according to generally accepted accounting principles? Depreciation is recorded based on the market value principle. Income is recorded based on the realization principle. Costs are recorded based on the realization principle. Depreciation is recorded based on the recognition principle. Costs of goods sold are recorded based on the matching principle.

Cash flow to creditors.

The cash flow related to interest payments less any net new borrowing is called the: Operating cash flow. Capital spending cash flow. Net working capital. Cash flow from assets. Cash flow to creditors.

Increases expenses and lowers taxes

Depreciation for a tax-paying firm: Increases expenses and lowers taxes. Increases the net fixed assets as shown on the balance sheet. Reduces both the net fixed assets and the costs of a firm. Is a noncash expense that increases the net income. Decreases net fixed assets, net income, and operating cash flows.

Current assets minus current liabilities.

Net working capital is defined as: Total liabilities minus shareholders' equity. Current liabilities minus shareholders' equity. Fixed assets minus long-term liabilities. Total assets minus total liabilities. Current assets minus current liabilities.

Expenses which do not directly affect cash flows.

Noncash items refer to: Accrued expenses. Inventory items purchased using credit. The ownership of intangible assets such as patents. Expenses which do not directly affect cash flows. Sales which are made using store credit.

$4,600,000; $3,900,000 Book value = ($725,000 + 1,375,000) + 2,500,000 = $4,600,000 Market value = $1,900,000 + 2,000,000 = $3,900,000

The Widget Co. purchased new machinery three years ago for $4 million. The machinery can be sold to the Roman Co. today for $2 million. The Widget Co.'s current balance sheet shows net fixed assets of $2,500,000, current liabilities of $1,375,000, and net working capital of $725,000. If all the current assets were liquidated today, the company would receive $1.9 million in cash. The book value of the Widget Co.'s assets today is _____ and the market value of those assets is _____. $4,600,000; $3,900,000 $4,600,000; $3,125,000 $5,000,000; $3,125,000 $5,000,000; $3,900,000 $6,500,000; $3,900,000

$20,680 Cash flow from assets = $48,450 - (-$1,330) - 24,000 = $25,780 Cash flow to creditors = $2,480 - (-$2,620) = $5,100 Cash flow to stockholders = $25,780 - 5,100 = $20,680

The Lakeside Inn had operating cash flow of $48,450. Depreciation was $6,700 and interest paid was $2,480. A net total of $2,620 was paid on long-term debt. The firm spent $24,000 on fixed assets and decreased net working capital by $1,330. What is the amount of the cash flow to stockholders? $5,100 $7,830 $18,020 $19,998 $20,680

III and IV only.

Which of the following are included in current liabilities? I. Note payable to a supplier in 13 months. II. Amount due from a customer last week. III. Account payable to a supplier that is due next week. IV. Loan payable to the bank in 10 months. I and III only. III and IV only. I, II, and III only. I, III, and IV only. I, II, III, and IV.

I, III, and IV only.

Which of the following is (are) included in the market value of a firm but is (are) excluded from the firm's book value? I. Value of management skills. II. Value of a copyright. III. Value of the firm's reputation. IV. Value of employee's experience. I only. II only. III and IV only. I, II, and III only. I, III, and IV only.

Production equipment.

Which one of the following is classified as a tangible fixed asset? Accounts receivable. Production equipment. Cash. Patent. Inventory.

Balance sheet.

Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date? Income statement. Creditor's statement. Balance sheet. Statement of cash flows. Dividend statement.

Net working capital may be a negative value.

Which one of the following statements concerning net working capital is correct? Net working capital increases when inventory is purchased with cash. Net working capital excludes inventory. Total assets must increase if net working capital increases. Net working capital may be a negative value. Net working capital is the amount of cash a firm currently has available for spending.

Net working capital increases when inventory is sold for cash at a profit.

Which one of the following statements concerning net working capital is correct? The lower the value of net working capital is, the greater is the ability of a firm to meet its current obligations. An increase in net working capital must also increase current assets. Net working capital increases when inventory is sold for cash at a profit. Firms with equal amounts of net working capital are also equally liquid. Net working capital is a part of the operating cash flow.

Generally Accepted Accounting Principles.

Which one of these sets forth the common set of standards and procedures by which audited financial statements are prepared? The Matching Principle. The Cash Flow Identity. Generally Accepted Accounting Principles. Financial Accounting Reporting Principles. Standard Accounting Value Guidelines.

32.83 percent Earnings before taxes = $843,800 - 609,900 - 76,400 - 38,200 = $119,300 Net income = $18,000 + 62,138 = $80,138 Taxes = $119,300 - 80,138 = $39,162 Tax rate = $39,162 / $119,300 = .3283, or 32.83 percent

Winston Industries had sales of $843,800 and costs of $609,900. The firm paid $38,200 in interest and $18,000 in dividends. It also increased retained earnings by $62,138 for the year. The depreciation was $76,400. What is the average tax rate? 32.83 percent 33.33 percent 38.17 percent 43.39 percent 48.87 percent