Chapter 2 Quiz

Net working capital includes:

an invoice from a supplier.

Dakota Pride Farms has sales of $509,600, costs of $448,150, depreciation expense of $36,100, and interest paid of $12,400. The tax rate is 21 percent. How much net income did the firm earn for the period?

$10,231

Porter Jewelers, a sole proprietorship has a marginal tax rate of 32 percent and an average tax rate of 20.9 percent. If the firm owes $34,330 in taxes, how much taxable income did it earn?

$164,258

The tax rate that determines the amount of tax that will be due on the next dollar of taxable income earned is called the:

marginal tax rate.

The financial statement that summarizes a firm's accounting value as of a particular date is called the:

balance sheet.

In 2021, what was the maximum average tax rate for corporations?

25%

Sunny Disposition, Incorporated, has net working capital of $32,500, current assets of $59,000, equity of $74,500, and long-term debt of $42,500. What is the amount of the net fixed assets?

$84,500

The term "free cash flow" is another term to describe:

cash flow from assets.

A firm's liquidity level decreases when:

inventory is purchased with cash.

The accounting statement that measures the revenues, expenses, and net income of a firm over a period is called the:

income statement.

During the past year, Rend Yard Services paid $36,800 in interest along with $2,000 in dividends. The company issued $3,000 of stock and $16,000 of new debt. The company reduced the balance due on its old debt by $18,400. What is the amount of the cash flow to creditors?

$39,200

Pyri Flours, a sole proprietorship, owes $9,741 in taxes on taxable income of $61,509. If the firm earns $100 more in income, it will owe an additional $22 in taxes. What is the average tax rate on income of $61,609?

15.85%

LaMarcus Photography, a sole proprietorship owes $190,874 in taxes on a taxable income of $608,606. The company has determined that it will owe $195,246 in tax if its taxable income rises to $620,424. What is the marginal tax rate at this level of income?

37%

Lopez Bakery had $236,400 in net fixed assets at the beginning of the year. During the year, the company purchased $53,200 in new equipment. It also sold, at a price of $22,000, some old equipment that had a book value of $5,900. The depreciation expense for the year was $13,400. What is the net fixed asset balance at the end of the year?

$270,300

Tressler Industries opted to repurchase 5,000 shares of stock last year in lieu of paying a dividend. The cash flow statement for last year must have which one of the following assuming that no new shares were issued?

Positive cash flow to stockholders

A negative cash flow to stockholders indicates a firm:

received more from selling stock than it paid out to shareholders.

Net income increases when:

revenue increases.

The recognition principle states that:

sales should be recorded when the earnings process is virtually completed, and the value of the sale can be determined.

Operating cash flow is defined as:

the cash that a firm generates from its normal business activities.

Trinity Industries has sales of $179,600, depreciation of $14,900, costs of goods sold of $138,200, and other costs of $28,400. The tax rate is 21 percent. What is the net income?

−$1,900