Chapter 2

During 2001, your firm reported net income of $600 and paid a $120 cash dividend. The December 31, 2000 balance sheet reported the following items: common stock = $500, capital surplus = $750, retained earnings = $900. What is the value of the retained earnings account for the December 31, 2001 balance sheet? $780 $1,500 $1,380 $1,020 $300

$1380

Given the following income statement data, calculate net income: sales = $2,500, cost of goods sold = $1,800, miscellaneous expenses = $200, depreciation = $150, interest expense = $50, tax rate = 35%. $260 $195 $575 $230 $425

$195

ABC Corporation reported retained earnings of $1,250 on its year-end 2020 balance sheet. During 2021, the company reported a loss of $320 in net income, and it paid out a dividend of $200. What will retained earnings be for ABC's 2021 year-end balance sheet? $1,450 $520 $730 $930 Not enough information

$730

Bonner Automotive has shareholders' equity of $218,700. The firm owes a total of $141,000 of which 40 percent is payable within the next year. The firm has long-term assets of $209,800. What is the amount of the net working capital?

93500

Which of the following is/are false regarding the balance sheet and income statement? I. The income statement reflects a summary of activity that occurs over some period of time while the balance sheet is a snapshot taken at a single point in time. II. Both represent a summary of activity that occurs over some time period. III. The two statements, taken together, give an accurate estimate of the firm's cash flows and market value. III only II only II and III only I and III only I only

I and III only

Balance sheet assets _______. I. are always equal to total liabilities minus shareholders' equity II. represent items acquired with the use of the firm's assumed liabilities and equity III. are listed in order of decreasing liquidity Select one: II and III only I only I and III only II only III only

II and III only

____________________ refers to the difference between a firm's current assets and its current liabilities. Operating cash flow Cash flow to creditors Net working capital Capital spending Cash flow from assets

NWC

Which of the following best describes why the left and right sides of a balance sheet are equal? By definition, the assets plus the liabilities will be the same as the stockholders' equity. The assets must equal liabilities plus stockholders' equity because stockholders' equity is the difference between the assets and the liabilities. By accounting convention, the assets of a company must be equal to the liabilities of that company. In a properly run business, the value of liabilities will not exceed the assets help by the company.

The assets must equal liabilities plus stockholders' equity because stockholders' equity is the difference between the assets and the liabilities.

Which of the following is a false statement? The balance sheet tells investors exactly what the firm is worth Assets are usually listed on the balance sheet at their book value, not market value All public companies are required to file timely, audited financial statements for purposes of public perusal Accounting income is rarely equal to firm cash flow

The balance sheet tells investors exactly what the firm is worth

Which of the following income statement accounts is a non-cash item? Select one: Cost of goods sold Income taxes Interest expense Depreciation Wages and salaries

depreciation