Finance Study
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? a. $10,231 b. $5,886 c. $8,671 d. $9,324 e. $7,778
a. $10,231
Omar's Market, a sole proprietorship has sales of $43,800, costs of $40,400, depreciation expense of $2,500, and interest expense of $1,100. If the tax rate is 21 percent, what is the operating cash flow, OCF? Assume tax losses can be carried forward and utilized. a. $3,442 b. $3,013 c. $3,332 d. $3,279 e. $3,511
a. $3,442
Zoey Pet Supply had $314,000 in net fixed assets at the beginning of the year. During the year, the company purchased $98,200 in new equipment. It also sold, at a price of $10,000, some old equipment that had a book value of $12,500. The depreciation expense for the year was $24,500. What is the net fixed asset balance at the end of the year? a. $375,200 b. $277,000 c. $283,700 d. $260,000 e. $424,200
a. $375,200
Last year, Northside Pizza added $6,230 to retained earnings from sales of $104,650. The company had costs of $87,300, dividends of $2,500, and interest paid of $1,620. Given a tax rate of 21 percent, what was the amount of the depreciation expense? a. $4,679 b. $4,414 c. $2,407 d. $3,908 e. $4,102
a. $4,679
Chun 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. $783,400 b. $46,700 c. $56,000 d. $975,000 e. $699,700
a. $783,400
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? a. 37% b. 39% c. 38% d. 32% e. 35%
a. 37%
Based on the recognition principle, revenue is recorded on the financial statements when the: I payment is collected for the sale of a good or service. II earnings process is virtually complete. III value of a sale can be reliably determined. IV product is physically delivered to the buyer. a. II and III only b. I and III only c. II and IV only d. I and IV only e. I and II only
a. II and III only
The market value of: a. an asset tends to provide a better guide to the actual worth of that asset than does the book value. b. an asset is lowered each year by the amount of depreciation expensed for that asset. c. fixed assets will always exceed the book value of those assets. d. an asset is reflected in the balance sheet. e. accounts receivable is generally higher than the book value of those receivables.
a. an asset tends to provide a better guide to the actual worth of that asset than does the book value.
Net working capital includes: a. an invoice from a supplier. b. the balance due on a 15-year mortgage. c. a land purchase. d. noncash expenses. e. fixed asset depreciation.
a. an invoice from a supplier.
The passage of the Tax Cuts and Jobs Act of 2017 created a revised progressive tax structure, which applies to all of the following except: a. corporations. b. LLCs. c. partnerships. d. sole proprietorships. e. unmarried individuals.
a. corporations.
Operating cash flow is defined as: a. the cash that a firm generates from its normal business activities. b. the change in the net working capital over a stated period. c. a firm's net profit over a specified period. d. a firm's operating margin. e. the cash that is generated and added to retained earnings.
a. the cash that a firm generates from its normal business activies
Prospect Avenue Nursery has sales of $318,400, costs of $199,400, depreciation expense of $28,600, interest expense of $1,100, and a tax rate of 21 percent. The firm paid out $23,400 in dividends. What is the addition to retained earnings? a. $34,645 b. $47,147 c. $36,909 d. $40,615 e. $37,208
b. $47,147
Cash flow to stockholders is defined as: a. operating cash flow minus cash flow to creditors. b. dividends paid minus net new equity raised. c. net income minus the addition to retained earnings. d. dividends paid plus the change in retained earnings. e. cash flow from assets plus cash flow to creditors.
b. dividends paid minus net new equity raised.
The tax rate that determines the amount of tax that will be due on the next dollar of taxable income earned is called the: a. average tax rate. b. marginal tax rate. c. ordinary tax rate. d. fixed tax rate. e. variable tax rate.
b. marginal tax rate.
The tax rate that determines the amount of tax that will be due on the next dollar of taxable income earned is called the: a. fixed tax rate. b. marginal tax rate. c.variable tax rate. d. ordinary tax rate. e. average tax rate.
b. marginal tax rate.
Kahlan Opinion Surveys had beginning retained earnings of $24,600. During the year, the company reported sales of $105,700, costs of $78,300, depreciation of $9,000, dividends of $1,200, and interest paid of $635. The tax rate is 21 percent. What is the retained earnings balance at the end of the year? a. $36,082.15 b. $35,835.50 c. $37,434 d. $36,121.44 e. $37,671.44
c. $37,434
Which one of the following terms is defined as the total tax paid divided by the total taxable income? a. Absolute tax rate b. Variable tax rate c. Average tax rate d. Marginal tax rate e. Contingent tax rate
c. Average tax rate
Which one of the following terms is defined as the total tax paid divided by the total taxable income? a. Variable tax rate b. Absolute tax rate c. Average tax rate d. Marginal tax rate e. Contingent tax rate
c. Average tax rate
Based on the recognition principle, revenue is recorded on the financial statements when the: I. payment is collected for the sale of a good or service. II. earnings process is virtually complete. III. value of a sale can be reliably determined. IV. product is physically delivered to the buyer. a. I and III only b. I and IV only c. II and III only d. I and II only e. II and IV only
c. II and III only
Which one of these is correct? a. Interest paid is a noncash item. b. Taxable income equals net income multiplied by (1 + Average tax rate). c. Net income is distributed either to dividends or retained earnings. d. Depreciation has no effect on taxes. e. Taxable income must be a positive value.
c. Net income is distributed either to dividends or retained earnings.
GAAP, as they relate to the income statement includes the recognition principle: to recognize revenue when the earnings process is virtually complete, and the value of an exchange of goods or services is known or can be reliably determined. Which of the following statements is true with regard to this principle? a. Income and expense items can be recorded at any time the company deems appropriate. b. Revenues must be reported only when cash is collected. c. Revenue is recognized at the time of sale. Costs associated with the sale of that product likewise would be recognized at that time. d. Expenses can be smoothed to make earnings appear greater.
c. Revenue is recognized at the time of sale. Costs associated with the sale of that product likewise would be recognized at that time.
GAAP, as they relate to the income statement includes the recognition principle: to recognize revenue when the earnings process is virtually complete, and the value of an exchange of goods or services is known or can be reliably determined. Which of the following statements is true with regard to this principle? a. Income and expense items can be recorded at any time the company deems appropriate. b. Revenues must be reported only when cash is collected. c. Revenue is recognized at the time of sale. Costs associated with the sale of that product likewise would be recognized at that time. d. Expenses can be smoothed to make earnings appear greater.
c. Revenue is recognized at the time of sale. Costs associated with the sale of that product likewise would be recognized at that time.
The passage of the Tax Cuts and Jobs Act of 2017 created a revised progressive tax structure, which applies to all of the following except: a. unmarried individuals. b. sole proprietorships. c. corporations. d. partnerships. e. LLCs.
c. corporations.
If a firm has a negative cash flow from assets every year for several years, the firm: a. is repaying debt every year. b. must also have a negative cash flow from operations each year. c. may be continually increasing in size. d. is operating at a high level of efficiency. e. has annual net losses.
c. may be continually increasing in size.
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? a. $7,778 b. $9,324 c. $8,671 d. $10,231 e. $5,886
d. $10,231
Assume a company has sales of $423,800, production costs of $297,400, other expenses of $18,500, depreciation expense of $36,300, interest expense of $2,100, taxes of $23,600, and dividends of $12,000. In addition, you're told that during the year the firm issued $4,500 in new equity and redeemed $6,500 in outstanding long-term debt. If net fixed assets increased by $7,400 during the year, what was the addition to net working capital? a. $30,400 b. $37,500 c. $15,800 d. $24,500 e. $11,500
d. $24,500
The financial statements of the Santa Domingo Marina reflect depreciation expenses of $41,600 and interest expenses of $27,900 for the year. The current assets increased by $31,800 and the net fixed assets increased by $28,600. What is the amount of the net capital spending for the year? a. $13,000 b. $28,600 c. $21,600 d. $70,200 e. $60,400
d. $70,200
McKendree Industries has current liabilities of $54,900 and accounts receivable of $88,700. The firm has total assets of $395,000 and net fixed assets of $265,100. The owners' equity has a book value of $147,500. What is the amount of the net working capital? a. −$8,500 b. $33,800 c. $77,400 d. $75,000 e. −$2,400
d. $75,000
In 2021, what was the maximum average tax rate for corporations? a. 38% b. 33% c. 39% d. 21% e. 25%
d. 21%
Which one of the following statements concerning the balance sheet is correct? a. Net working capital is equal total assets minus total liabilities. b. Total assets equal total liabilities minus total equity. c. Current assets are equal to total assets minus net working capital. d. Assets are listed in descending order of liquidity. e. Shareholders' equity is equal to net working capital minus net fixed assets plus long-term debt.
d. Assets are listed in descending order of liquidity.
Net working capital decreases when: a. a new 3-year loan is obtained with the proceeds used to purchase inventory. b. a credit customer pays his or her bill in full. c. a long-term debt is used to finance a fixed asset purchase. d. a dividend is paid to current shareholders. e. depreciation increases.
d. a dividend is paid to current shareholders.
All else held constant, the book value of owners' equity will decrease when: a. taxable income increases. b. the market value of inventory increases. c. a long-term debt is repaid. d. dividends exceed net income for a period. e. cash is used to pay an accounts payable.
d. dividends exceed net income for a period.
A negative cash flow to stockholders indicates a firm: a. paid dividends that exceeded the amount of the net new equity. b. repurchased more shares than it sold. c. had a net loss for the year. d. received more from selling stock than it paid out to shareholders. e. had a positive cash flow to creditors.
d. received more from selling stock than it paid out to shareholders.
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. $14,040 c. $4,660 d. −$4,940 e. $0
d. −$4,940
Zhang's fixed assets were purchased three years ago for $1.8 million. These assets can be sold to Stewart's today for $1.2 million. Roscoe's current balance sheet shows net fixed assets of $960,000, current liabilities of $348,000, and net working capital of $121,000. If all the current assets were liquidated today, the company would receive $518,000 cash. The book value of the firm's assets today is _____ and the market value is ____. a. $1,307,000; $1,429,000 b. $1,081,000; $1,308,000 c. $1,081,000; $1,718,000 d. $1,429,000; $1,308,000 e. $1,429,000; $1,718,000
e. $1,429,000; $1,718,000
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? a. 30.33% b. 35.00% c. 15.00% d. 33.33% e. 15.85%
e. 15.85%
The concept of marginal taxation is best exemplified by which one of the following? a. Fazzari's paid $120,000 in taxes while its primary competitor paid only $80,000 in taxes. b. Sunset Charters paid $2.20 in taxes for every $10 of revenue last year. c. Edwardsville Centre paid no taxes last year due to carryforward losses. d. Mariano's Retreat paid only $45,000 in taxes on total revenue of $570,000 last year. e. Burke's Grocer increased its sales by $52,000 last year and had to pay an additional $16,000 in taxes.
e. Burke's Grocer increased its sales by $52,000 last year and had to pay an additional $16,000 in taxes.
The market value of a firm's fixed assets: a. will always exceed the book value of those assets. b. in addition to the firm's net working capital reflects the true value of a firm. c. is more predictable than the book value of those assets. d. is decreased annually by the depreciation expense. e. is equal to the estimated current cash value of those assets.
e. is equal to the estimated current cash value of those assets.