Chapter 2

Jensen Enterprises paid $700 in dividends and $320 in interest this past year. Common stock remained constant at $6,800 and retained earnings decreased by $180. What is the net income for the year? A) $520 B) $1,020 C) $880 D) $1,200 E) $180

A

Last year, Kaylor Equipment had $15,900 of sales, $500 of net new equity, dividend payments of $75, an addition to retained earnings of $418, depreciation of $680, and $511 of interest expense. What are the earnings before interest and taxes at a tax rate of 21 percent? A) $1,135.05 B) $1,331.54 C) $589.46 D) $1,560.85 E) $949.46

A

Which one of the following accounts is the most liquid? A) Land B) Equipment C) Inventory D) Accounts Receivable E) Building

D

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

D

Beach Front Industries has sales of $546,000, costs of $295,000, depreciation expense of $37,000, interest expense of $15,000, and a tax rate of 21 percent. The firm paid $59,000 in cash dividends. What is the addition to retained earnings? A) $98,210 B) $95,200 C) $103,460 D) $121,680 E) $81,700

A

Which is more liquidable: Inventory or Accounts Receivable?

Accounts Receivable

Which one of the following statements related to the cash flow to creditors must be correct? A) If the cash flow to creditors is positive, then the firm must have borrowed more money than it repaid. B) A positive cash flow to creditors represents a net cash outflow from the firm. C) A positive cash flow to creditors means that a firm has increased its long-term debt. D) If the cash flow to creditors is negative, then the firm must have a negative cash flow from assets. E) If the cash flow to creditors is zero, then a firm has no long-term debt.

B

Which one of these is most apt to be a fixed cost? A) Raw materials B) Office salaries C) Manufacturing wages D) Management bonuses E) Shipping and freight

B

Noncash items refer to: A) The ownership of intangible assets such as patents. Incorrect B) Inventory items purchased using credit. C) Expenses that do not directly affect cash flows. D) sales that are made using store credit. E) fixed expenses.

C

The River Side Stop has a current market value of $26,400 and owes its creditors $31,300. What is the market value of the shareholders' equity? A) −$4,900 B) $4,900 C) $0 D) $5,200 E) −$5,200

C

Which one of the following accounts is the most liquid? A) Land B) Inventory C) Accounts Receivable D) Building E) Equipment

C

Cash flow from assets is also known as the firm's: A) historical cash flow. B) equity structure. C) capital structure. D) free cash flow. E) hidden cash flow.

D

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

D

For a tax-paying firm, an increase in _____ will cause the cash flow from assets to increase. A) taxes B) net capital spending C) production costs D) depreciation E) the change in net working capital

D

Can shareholders equity every be negative?

NO! The least it can be is 0