Econ 135 Hw 1

Income Statement Brick-o-Store For the Period Ending 12/31/2018 Sales $3,800,000 - Cost of goods sold _3,000,000 Gross profit 800,000 - Operating expenses 400,000 - Depreciation 100,000 Operating income 300,000 - Interest expense 200,000 Profit before taxes 100,000 - Taxes 40,000 Net income 60,000 What is Brick-o-Store's Gross Profit Margin? • 13% • 21% • 48%

21%

Income Statement Brick-o-Store For the Period Ending 12/31/2018 Sales $3,800,000 - Cost of goods sold _3,000,000 Gross profit 800,000 - Operating expenses 400,000 - Depreciation 100,000 Operating income 300,000 - Interest expense 200,000 Profit before taxes 100,000 - Taxes 40,000 Net income 60,000 • What is Brick store's Gross Profit? • $800,000 • $3,800,000 • $6,800,000

800,000

Which of the following items would NOT fall under the definition of an asset? • Land • A 30-year loan made by the company • Cash

A 30-year loan made by the company

Current Assets are: • Assets that will be converted into cash in a year or a business cycle • Equal to Current Liabilities + Expenses for the period • Assets that will have to be paid within one year

Assets that will be converted into cash in a year or a business cycle

Which of the following is considered an operating expense? • Purchase of land to build a new plant • Purchase of machinery for a new project • Purchase of toner for the copy machine

Purchase of toner for the copy machine

The income statement measures the flow of funds into (i.e. revenue) and out of (i.e. expenses) the firm over a certain time period. It is always based on accounting data. • True • False

True

Two key limitations of the proprietorship form of business involve potential difficulty in raising needed capital and the presence of unlimited personal liability for business debts. • True • False

True

Which of the following items is included as part of a company's current assets? • Inventory. • Accounts receivable. • Statements A and B are correct.

Statements A and B are correct.

Income Statement Brick-o-Store For the Period Ending 12/31/2018 Sales $3,800,000 - Cost of goods sold 3,000,000 Gross profit 800,000 - Operating expenses 400,000 - Depreciation 100,000 Operating income 300,000 - Interest expense 200,000 Profit before taxes 100,000 - Taxes 40,000 Net income 60,000 • What is Brick-o-Store's Interest Expense? • $400,000 • $300,000 • $200,000

• $200,000

Income Statement Brick-o-Store For the Period Ending 12/31/2018 Sales $3,800,000 - Cost of goods sold _3,000,000 Gross profit 800,000 - Operating expenses 400,000 - Depreciation 100,000 Operating income 300,000 - Interest expense 200,000 Profit before taxes 100,000 - Taxes 40,000 Net income 60,000 What is Brick-o-Store's Operating Income? • $800,000 • $400,000 • $300,000

• $300,000

Income Statement Brick-o-Store For the Period Ending 12/31/2018 Sales $3,800,000 - Cost of goods sold _3,000,000 Gross profit 800,000 - Operating expenses 400,000 - Depreciation 100,000 Operating income 300,000 - Interest expense 200,000 Profit before taxes 100,000 - Taxes 40,000 Net income 60,000 What is Brick-o-Store's Tax Expense? • $80,000 • $40,000 • $30,000

• $40,000

Income Statement Brick-o-Store For the Period Ending 12/31/2018 Sales $3,800,000 - Cost of goods sold _3,000,000 Gross profit 800,000 - Operating expenses 400,000 - Depreciation 100,000 Operating income 300,000 - Interest expense 200,000 Profit before taxes 100,000 - Taxes 40,000 Net income 60,000 What is Brick-o-Store's Net Income? • $60,000 • $30,000 • $8,000

• $60,000

Balance Sheet Brick-o-Store, Inc. As of 12/31/2018 Cash 230,000 Accounts receivable 380,000 Inventories 540,000 PP&E 4,350,000 Total Assets 5,500,000 Notes payable 340,000 Accounts payable 390,000 Current portion of L.T. Debt 90,000 Long term debt 2,100,000 Total Liabilities 2,920,000 Common stock ($1 par) 1,000,000 Retained earnings 1,580,000 Total Liabilities and Equity 5,500,000 What is Brick-o-Store's Current Liabilities? • $220,000 • $400,000 • $820,000

• $820,000

Income Statement Brick-o-Store For the Period Ending 12/31/2018 Sales $3,800,000 - Cost of goods sold _3,000,000 Gross profit 800,000 - Operating expenses 400,000 - Depreciation 100,000 Operating income 300,000 - Interest expense 200,000 Profit before taxes 100,000 - Taxes 40,000 Net income 60,000 What is Brick-o-Store's Net Profit Margin? • 1.3% • 1.6% • 2.8

• 1.6%

Balance Sheet Brick-o-Store, Inc. As of 12/31/2018 Cash 230,000 Accounts receivable 380,000 Inventories 540,000 PP&E 4,350,000 Total Assets 5,500,000 Notes payable 340,000 Accounts payable 390,000 Current portion of L.T. Debt 90,000 Long term debt 2,100,000 Total Liabilities 2,920,000 Common stock ($1 par) 1,000,000 Retained earnings 1,580,000 Total Liabilities and Equity 5,500,000 What is Brick-o-Store's Current Assets? • $610,000 • $920,000 • $1,150,000

1,150,000

The balance sheet is a financial statement measuring the flow of funds into and out of various accounts over time while the income statement measures the progress of the firm at a point in time. • True • False

False

For any firm, Total Assets = Total Liabilities + Stockholder's Equity. The Stockholder's Equity will increase if: • Assets increase and liabilities remain unchanged. • Assets remain unchanged and liabilities increase. • Assets decrease and liabilities increase or decrease less than the decrease in the assets.

Assets increase and liabilities remain unchanged.

Which of the following financial statements includes information about a firm's assets, equity, and liabilities? • Income statement • Cash flow statement • Balance sheet

Balance sheet

Current Liabilities are: • Equal to Current Assets - Expenses for the period • Liabilities that are due now or even overdue for payment • Liabilities that will have to be paid within one year

Liabilities that will have to be paid within one year

Which of the following financial statements reports the companies' performance over a business cycle? • Income Statement • Balance Sheet • Statement of Journal Entries

income Statement