Chapter 3 Quiz review

A firm paid dividends of $10,000, paid interest of $20,000, reduced debt principal outstanding (paid off debt) in the amount of $100,000, and sold new stock for $150,000. What was the firm's cash flow from financing activities?

+20,000 (20,000 flowed into the firm)

A firm paid dividends of $10,000, paid interest of $20,000, reduced debt principal outstanding (paid off debt) in the amount of $100,000, and sold new stock for $150,000. What was the firm's cash flow from financing activities?

+20,000 = 150,000 - 10,000 - 20,000 - 100,000

Given the following financial statements for ARGON Corporation, and assuming that ARGON paid a common dividend of $80,000 in 2010, what is the company's financing cash flow for 2010?

-70,000 ?

Rogue Industries reported the following items for the current year: Sales = $3,000,000; Cost of Goods Sold = $1,500,000; Depreciation Expense = $170,000; Administrative Expenses = $150,000; Interest Expense = $30,000; Marketing Expenses = $80,000; and Taxes = $300,000. Rogue's operating income is equal to

1,100,000 ?

The December 31, 2009 balance sheet shows net fixed assets of $150,000 and the December 31, 2010 balance sheet shows net fixed assets of $250,000. Depreciation expense for 2009 is $25,000 and depreciation expense for 2010 is $35,000. Based on this information, the cost of fixed assets purchased during 2010 is

135,000

Based on the information in Table 3-1, calculate the amount of dividends paid by Jones Company in 2010 (no assets were disposed of during the year, and there was no change in interest payable or taxes payable).

2,000 ?=

Racing Horse Corporation reported net income for 2010 of $200,000, sales of $540,000, expenses (excluding depreciation) of $180,000, and depreciation expense of $60,000. The company's accounts receivable balance increased by $40,000 during the year and its accounts payable balance remained the same. The company's change in cash for the year is estimated to be

220,000 = 200,000 + 60,000 - 40,000

Use the following information to calculate the company's accounting net income for the year.

240,000 ? =

Rogue Industries reported the following items for the current year: Sales = $3,000,000; Cost of Goods Sold = $1,500,000; Depreciation Expense = $170,000; Administrative Expenses = $150,000; Interest Expense = $30,000; Marketing Expenses = $80,000; and Taxes = $300,000. Rogue's net profit margin is equal to

25.67%

Use the following information to calculate the change in the company's cash balance for the year.

260,000

Given the following financial statements for ARGON Corporation, what is the company's after-tax cash flow from operations?

270,000 ? = 250,000 + 100,000 - 80,000

California Retailing Inc. has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000. The firm's interest expense is $250,000, and the corporate tax rate is 40%. The firm paid dividends to preferred stockholders of $40,000, and the firm distributed $60,000 in dividend payments to common stockholders. What is California Retailing's "Addition to Retained Earnings"?

290,000 = 4,000,000 - 2,500,000 - 600,000 - 250,000 = 650,000... ... 650,000 * .4 = 260,000... ... 650,000 - 260,000 = 390,000 - 40,000 - 60,000

California Retailing Inc. has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000. The firm's interest expense is $250,000, and the corporate tax rate is 40%. What is California Retailing's net income?

390,000

Based on the information in Table 3-1, the change in cash for 2010 is

5,800 = 4,000 - 200 (change in acc. rec) + 500(accum.dep) + 500(change in comstock) + 1000 (paidin cap)

A firm has after-tax cash flow from operations equal to $100,000. Operating working capital increased by $20,000, and the firm purchased $30,000 of fixed assets. The firm's free cash flow was

50,000

Based on the information in Table 3-1, assuming that no assets were disposed of during 2010, the amount of depreciation expense was

500

Corporation B reported earnings per share of $10. Corporation B has 100,000 shares of common stock outstanding and reported an increase in owners' equity of $400,000 for the period. Corporation B paid $50,000 in interest expense during the period. Corporation B paid dividends per share of

6.00 1,000,000 -400,000 = 600,000... ...600,000/100,000 = 6.00

Siskiyou, Inc. has total current assets of $1,200,000; total current liabilities of $500,000; long-term assets of $800,000; and long-term debt of $600,000. How much is the firm's total equity?

900,000

California Retailing Inc. has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000. What is California Retailing's EBIT?

900,000 = 4,000,000 - 2,500,000 - 600,000

Examples of uses of cash include a - paying cash dividends to stockholders b - borrowing an additional amount using a secured loan c - selling machinery d - all of these

a

The Colorado Jet Boat Company had a cash balance of $3 million at the beginning of 2010. During 2010, Sales were $8 million and expenses were $7 million. Therefore, a - the cash balance at the end of 2020 cannot be determined from the information given b - the cash balance at the end of 2010 must be greater than $3,000,000 c - the cash balance at the end of 2010 is $4 million d - the cash balance at the end of 2010 must be less than $11 million

a

The increase in owners' equity for a given period is equal to a - net income minus dividends b - positive net cash flow minus dividends c - gross profit minus distributions to shareholders d - sales minus dividends

a

What information does a firm's balance sheet provide to the viewing public? a - an itemization of all of a firm's assets, liabilities, and equity as of the balance sheet date b - a report of revenues and expenses for a defined period of time c - a report of investments made and their cost for a specific period of time d - a complete listing of all of a firm's cash receipts and cash expenditures for a defined period of time

a

Which of the following accounts belongs in the liability section of a balance sheet? a - accounts payable b - interest expense c - accumulated depreciation d - preferred stock

a

Which of the following accounts belongs on the asset side of a balance sheet? a - inventory b - accounts payable c - depreciation expense d - accruals

a

Which of the following statements about International Financial Reporting Standards (IFRS) is NOT true? a - IFRS leaves less room for discretion than GAAP does b - IFRS sets out broad and general principles that accountants should follow when preparing financial statements c - IFRS offers simplicity by also possibly more leeway for accounting malpractice than does GAAP d - in 2008, the SEC announced its plan to convert us companies from GAAP to IFRS

a

A company borrows $2,000,000 and uses the money to purchase high technology machinery for its operations. These are examples of a - cash flow from investing and cash flow from operations b - cash flow from financing and cash flow from investing c - cash flow from financing and cash flow from operations d - cash flow from investing and cash flow from financing

b

A firm's financing costs include a - depreciation expense b - interest expense c - cost of goods sold d - both depreciation expense and interest expense

b

Corporation A decides to borrow $1,000,000 and use the money to buy back $1,000,000 of its common stock. The corporation pays 6% interest on its borrowed funds which exactly equals the amount of the dividend it used to pay on the common stock it repurchased. Therefore, a - corporation A's operating income will decrease due to higher interest expense b - corporation A's net income will increase due to the tax deductibility of interest expense c - corporation A's gross profit will decrease d - Corporation A will have no change in its operating income since the interest expense exactly offsets the prior dividend payment

b

Gross profit is equal to a - revenues - expenses b - sales - cost of goods sole c - profits plus depreciation d - earnings before taxes minus taxes payable

b

The A corporation has an operating profit margin of 20%, operating expenses of $500,000, and financing costs of $15,000. Therefore, a - the corporation's gross profit margin is less than 20% b - the corporation's gross profit margin is greater than 20% c - the corporation's net profit margin is greater than 20% d - the corporation's gross profit margin is equal to 20% because gross profit is not affected by operating expenses or financing costs

b

What information does a firm's statement of cash flows provide to the viewing public? a - a report of investments made and their cost for a specific period of time b - a report documenting a firm's cash inflows and cash outflows from operating, financing, and investing activities for a defined period of time c - an itemization of all of a firm's assets, liabilities, and equity for a defined period of time d - a report of revenues and expenses for a defined period of time

b

Which of the following accounts does NOT belong in the equity section of a balance sheet? a - preferred stock b - long-term debt c - paid-in surplus d - retained earnings

b

All of the following are income statement items EXCEPT a - cost of goods sold b - interest expense c - accrued expenses d - depreciation expense

c

Cash flows between investors and the firm, what we call financing cash flows, occur in one of four ways EXCEPT a - pay interest to lenders b - increase or decrease interest-bearing debt c - pay stock dividend d - pay dividends to stockholders

c

Company A and Company B both report the same level of sales and net income. Therefore, a - both A and B will report the same earnings per share b - both A and B will report the same gross profit margin c - both A and B will report the same net profit margin d - both A and B will report the same earnings per share and both A and B will report the same net profit margin are true

c

The two principal sources of financing for corporations are a - debt and accounts payable b - common equity and preferred equity c - debt and equity d - cash and common equity

c

What information does a firm's income statement provide to the viewing public? a - an itemization of all of a firm's assets and liabilities for a defined period of time b - a report of investments made and their cost for a specific period of time c - a report of revenues and expenses for a defined period of time d - a complete listing of all of a firm's cash receipts and cash expenditures for a defined period of time

c

Which of the following accounts does NOT belong on the asset side of a balance sheet? a - cash b - accounts receivable c - accruals d - accumulated depreciation

c

A corporation's operating profit margin is equal to a - sales dived by EBIT b - EBIT divided by net income c - net income divided by sales d - EBIT divided by sales

d

All of the following statements about balance sheets are true EXCEPT a - a balance sheet reports a company's financial position at a specific point in time b - assets are reported at historical cost c - assets - liabilities = shareholders' equity d - balance sheets show average asset balances over a one-year period

d

An income statement may be represented as follows: a - sales - liabilities = profits b - revenues - liabilities = net income c - sales - expenses = retained earnings d - sales - expenses = profits

d

Net working capital is equal to a - current assets minus total liabilities b - total operating capital minus net income c - total assets minus total liabilities d - current assets minus current liabilities

d

What information does a firm's balance sheet provide to the viewing public? a - a report of investments made and their cost for a specific period of time b - a complete listing of all of a firm's cash receipts and cash expenditures for a defined period of time c - a report of revenues and expenses for a defined period of time d - an itemization of all of a firm's asets, liabilities, and equity as of the balance sheet date

d

Which of the following accounts does NOT belong in the liability section of a balance sheet? a - long-term debt b - short-term debt c - accruals d - additional paid-in capital

d

Which of the following represents an attempt to measure the net results of the firm's operations (revenues versus expenses) over a given time period? a - statement of cash flows b - balance sheet c - sources and uses of funds statement d - income statement

d

Which of the following statements about Generally Accepted Accounting Principles (GAAP) is NOT true? a - GAAP is a set of rule-based accounting standards established by the FASB b - GAAP sets out the standards, conventions, and rules that accountants must follow when preparing audited financial statements c - GAAP is complex, providing more than 150 "pronouncements" as to how to account for different types of transactions d - all of these statements are true

d

Which of the following statements concerning net income is MOST correct? a - negative net income reduces a company's cash balance b - net income represents sales minus operating expenses at a specific point in time c - net income represents cash available to pay dividends d - net income represents income that may be reinvested in the firm or distributed to its owners

d