504 Ch. 2 Quiz - Financial Statements, Taxes, and Cash Flows

Marcie's 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 35 percent. What is the net income? A. -$1,235 B. $382 C. $1,204 D. $14,660 E. $13,665

A. -$1,235 Net income = ($179,600 -138,200 -28,400 -14,900)(1 -.35) = -$1,235

Rusty Antiques has a marginal tax rate of 39 percent and an average tax rate of 26.9 percent. If the firm owes $37,265 in taxes, how much taxable income did it earn? A. $137,098 B. $136,800 C. $138,532 D. $139,957 E. $137,750

C. $138,532 Tax = $37,265 / .269 = $138,532

Wes Motors has total assets of $98,300, net working capital of $11,300, owners' equity of $41,600, and long-term debt of $38,600. What is the value of the current assets? A. $21,600 B. $18,100 C. $28,900 D. $29,400 E. $6,800

D. $29,400 Current liabilities = $98,300-38,600 -41,600 = $18,100 Current assets = $11,300 + 18,100 = $29,400

The Toy Store has beginning retained earnings of $318,423. For the year, the company earned net income of $11,318 and paid dividends of $7,500. The company also issued $25,000 worth of new stock. What is the value of the retained earnings account at the end of the year? A. $320,445 B. $322,695 C. $327,375 D. $322,241 E. $335,255

D. $322,241 Retained earnings = $318,423 + 11,318-7,500 = $322,241

MNM & Co incurred depreciation expenses of $36,810 last year. The sales were $903,480 and the addition to retained earnings was $11,530. The firm paid interest of $7,711 and dividends of $7,500. The tax rate was 33 percent. What was the amount of the costs incurred by the company? A. $822,845 B. $689,407 C. $742,306 D. $830,556 E. $780,400

D. $830,556 Earnings before interest and taxes = [($7,500 + 11,530)/(1 -.33)] + $7,711 = $36,114 Costs = $903,480-36,810-36,114 = $830,556

For the year, Uptowne Furniture had sales of $818,790, costs of $748,330, and interest paid of $24,450. The depreciation expense was $56,100 and the tax rate was 34 percent. At the beginning of the year, the firm had retained earnings of $172,270 and common stock of $260,000. At the end of the year, retained earnings was $158,713 and common stock was $280,000. Any tax losses can be used. What is the amount of the dividends paid for the year? A. $5,266 B. $6,466 C. $7,566 D. $7,066 E. $6,898

E. $6,898 Net income = [($818,790 -748,330-56,100 -24,450)(1 -.34)] =-$6,659 Dividends paid = -$6,659 - ($158,713-172,270) = $6,898

Net working capital is defined as: A. the depreciated book value of a firm's fixed assets. B. the value of a firm's current assets. C. available cash minus current liabilities. D. total assets minus total liabilities. E. current assets minus current liabilities.

E. current assets minus current liabilities.

A negative cash flow to stockholders indicates a firm: A. had a net loss for the year. B. had a positive cash flow to creditors. C. paid dividends that exceeded the amount of the net new equity. D. repurchased more shares than it sold. E. received more from selling stock than it paid out to shareholders.

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

The Embroidery Shoppe had beginning retained earnings of $18,670. During the year, the company reported sales of $83,490, costs of $68,407, depreciation of $8,200, dividends of $950, and interest paid of $478. The tax rate is 34 percent. What is the retained earnings balance at the end of the year? A. $21,947.30 B. $22,193.95 C. $22,233.24 D. $23,783.24 E. $21,883.25

A. $21,947.30 Net income = ($83,490 -68,407 -8,200 -478) ×(1 -.34) = $4,227.30 Ending retained earnings = $18,670 + 4,227.30-950 = $21,947.30

Blythe Industries reports the following account balances: inventory of $417,600, equipment of $2,028,300, accounts payable of $224,700, cash of $51,900, and accounts receivable of $313,900. What is the amount of the current assets? A. $46,700 B. $56,000 C. $783,400 D. $975,000 E. $699,700

C. $783,400 Current assets = $51,900 + 313,900 + 417,600 = $783,400

A firm has earnings before interest and taxes of $27,130, net income of $16,220, and taxes of $5,450 for the year. While the firm paid out $31,600 to pay off existing debt it then later borrowed $42,000. What is the amount of the cash flow to creditors? A. -$14,040 B. $0 C. -$4,940 D. $14,040 E. $4,660

C. -$4,940 Interest = $27,130 -16,220 -5,450 = $5,460 Cash flow to creditors = $5,460 + 31,600-42,000 = -$4,940

Cash flow from assets is defined as: A. the cash flow to shareholders minus the cash flow to creditors. B. operating cash flow plus the cash flow to creditors plus the cash flow to shareholders. C. operating cash flow minus the change in net working capital minus net capital spending. D. operating cash flow plus net capital spending plus the change in net working capital. E. cash flow to shareholders minus net capital spending plus the change in net working capital.

C. operating cash flow minus the change in net working capital minus net capital spending.

The Pretzel Factory has net sales of $821,300 and costs of $698,500. The depreciation expense is $28,400 and the interest paid is $8,400. What is the amount of the firm's operating cash flow if the tax rate is 34 percent? A. $87,620 B. $89,540 C. $91,220 D. $93,560 E. $95,240

D. $93,560 EBIT = $821,300 -698,500 -28,400 = $94,400 Tax = ($94,400 -8,400) ×.34 = $29,240 OCF = $94,400 + 28,400 -29,240 = $93,560