Mgt 213 exam 3
Parks Company reported an increase of $370,000 in its accounts receivable during the year 2017. The company's statement of cash flows for 2017 using the direct method reported $1 million of cash received from customers. What amount of net sales must Parks have recorded in 2017?
$1,370,000
How much cash was paid for interest during 2018?
$11,750
If Tommy's Subs Company has a current ratio of 2.5 and current assets of $195,000, the amount of working capital is
$117,000.
How much cash was paid for insurance during 2018?
$13,300
Pinecrest Company: The current ratio for 2018 is
1.68 to 1.
Based on this information, what is the accounts receivable turnover for the current period?
12.5 times.
Based on this information, what is Fawnsworth's number of days' sales in inventory (assuming a 360-day year)?
120 days.
Planet & Co. reported net income for the current year. Which of the following business transactions would cause cash from operating activities to be higher than the amount of net income?
Depreciation expense was recorded for the year.
Which of the following financing activities results in a cash inflow?
Issuing bonds
Moonbeam Gift Shop's inventory turned over six times during the year. Similar gift shops have an inventory turnover equal to 12 times per year. What might explain Moonbeam's state of inventory management?
Moonbeam needs to increase sales and decrease the amount of inventory on hand.
Pinecrest company: Which of the following statements is true?
The amount of working capital decreased from 2017 to 2018.
Treetop Company paid off a $100,000 two-year note payable. The effect of this transaction is that the
current ratio decreased.
Cash flows from issuing and repurchasing stock or issuing and repaying (retiring) debt are classified as
financing activities.
Competitors in Pinecrest Company's industry have an average inventory turnover of 20.8 times. Its inventory turnover for 2018
indicates that the market may be reacting to problems in the sales department by reducing demand for the company's products.
What amount would be reported in the Operating Activities section of the statement of cash flows for payments for operating expenses under the direct method?
$186,000
How much cash was collected from customers during 2018?
$749,000
Based on this information, what is Fawnsworth's number of days' sales in receivables (assuming a 360-day year)?
28.8 days.
Based on this information, what is Fawnsworth's inventory turnover ratio for the current period?
3.00 times.
Which of the following is considered a liquidity analysis tool?
Acid-test ratio.
How would the change in accounts receivable be reported in the Operating Activities section of the statement of cash flows under the indirect method?
As a deduction from net income
When using the direct method, how is the issuance of stock for cash shown on the statement of cash flows?
As a financing activity
When using the direct method, how is the payment of a cash dividend shown on the statement of cash flows?
As a financing activity
When using the direct method, how is the retirement of bonds payable at their maturity date shown on the statement of cash flows?
As a financing activity
The ratios at year-end are current ratio, 2.3 to 1; debt-to-equity ratio, 0.6 to 1; times interest earned, 7.1; and inventory turnover, 3.7. Which of the following statements is true?
Carlton was in default because of the inventory turnover.
Which of the following ratios is least useful in evaluating a company's ability to pay its current debts as they become due?
Debt-to-equity ratio.
Which of the following would result from a vertical analysis of its income statement?
Gross profit is 57.9% of net sales for 2018.
Which of the following should be classified as an investing activity on the statement of cash flows?
None of these choices are correct.
Which of the following operating activities results in a cash outflow?
Paying creditors for merchandise
From 2017 to 2018, the company's management of inventory is
declining, because the number of days' sales in inventory is getting larger.
Westmoreland's company The company's times interest earned ratio for 2018
increased, which indicates the company's lenders will be pleased.
Cash flows from acquiring and disposing of long-term assets are classified as
investing activities.
In 2017, Valencia Company purchased equipment for $363,000 and also sold some special purpose machinery with a book value of $155,000 for $182,000. In its statement of cash flows for 2017, Valencia should report the following with respect to the above transactions:
$181,000 net cash used by investing activities.
Gaulle Company began the year with a balance of $6,000 in Accounts Receivable and ended the year with $9,000 in the account. Revenues for the period amounted to $38,000. Under the direct method, Gaulle will report cash collected from customers of
$35,000.
Pinecrest Company: The amount of working capital at the end of 2018 is
$44,000.
Rent expense in Volusia Company's 2018 income statement is $420,000. If prepaid rent was $70,000 at December 31, 2017, and is $95,000 at December 31, 2018, the cash paid for rent during 2018 is
$445,000.
Assuming all purchases are on credit, how much cash was paid for merchandise during 2018?
$472,000
How much cash was paid for salaries during 2018?
$58,900
At the end of the first year of operations, the balance sheet of Huntington Beach Co. Industries had the following balances: Accounts Receivable, $5,000; Accounts Payable, $6,000; Inventory, $3,000; and Unexpired Insurance, $2,000. The corporation reported net income of $79,000 for the year, including depreciation expense of $5,000, and uses the indirect method of computing net cash flow from operating activities. Based on this information, net cash flow from operating activities is
$80,000.
If Mussel Company has working capital of $540,000 and a current ratio of 3 to 1, the amount of current assets is
$810,000.
What amount would be reported in the Operating Activities section of the statement of cash flows for collections from customers under the direct method assuming that all sales are on credit?
$857,000
O'Bryan Company began the year with a balance of $18,000 in Salaries and Wages Payable and ended the year with $11,000 in the account. Salaries and Wages Expense for the period amounted to $91,000. Under the direct method, O'Bryan will report cash payments for salaries and wages of
$98,000.
Which of the following would result from a horizontal analysis of its balance sheet?
Accounts receivable increased $22,000, or 57.9%, during 2018.
How would the change in accounts payable be reported in the Operating Activities section of the statement of cash flows under the indirect method?
As an addition to net income
Which of the following would result from a horizontal analysis of its income statement?
Cost of goods sold decreased $50,000, or 23.8%, during 2018.
Which of the following solvency ratios is the best measure of a company's ability to pay interest and maturing principal amounts on its long-term debt?
Debt service coverage ratio.
Which of the following solvency ratios is the best measure to determine the degree to which a company relies on outsiders for funds?
Debt-to-equity ratio.
Which of the following results would be found through a vertical analysis of the balance sheet or the income statement of Mother Nature Supplies?
Gross profit is 57.9% of net sales for 2018.
Which of the following will decrease working capital?
Purchase of a new computer with cash.
Nordic Exports Inc. reported net income of $150,000 for 2017, but its cash balance decreased $40,000. Which financial statement should Nordic Exports' management refer to for an explanation of this situation?
Statement of cash flows
Zack Co. reported a net loss of $50,000 for 2017, yet its cash balance increased during the year. Which financial statement should Zack's management refer to for an explanation of this situation?
Statement of cash flows
Pinecrest Company: Which of the following statements is true? #2
The amount of net income for 2018 cannot be determined based on the data provided.
The company's debt-to-equity ratio was 0.83 to 1 in 2018 and 0.89 to 1 in 2017. Which of the following statements is true concerning Westmoreland?
The company is improving its debt-to-equity ratio.
Which method of preparing the Operating Activities section has Feline used?
The direct method
Which method of preparing the Operating Activities section has Golden Consulting used?
The indirect method
Which of the following generally indicates a positive change?
The number of days' sales in inventory decreases.
The ratios at year-end are current ratio, 2.3 to 1 and debt-to-equity ratio, 0.2 to 1. The amount of cash on the bank statement is $75,400, but the Cash account after the adjustments from the bank reconciliation has a balance of $74,900. Has Scrubber violated its loan agreement?
Yes, the cash balance is less than $75,000.
The company's debt service coverage ratio for 2018 indicates that the
company has more net income available to allocate to stockholders after the payment of debt.
Santana Company issued additional shares of common stock. The effect of the transaction is that the
earnings per share decreased.
Cash flows from borrowing and paying off a 90-day bank loan are classified as
financing activities.
The cash flow from operations to capital expenditures ratio for 2018 is an indicator that Westmoreland Company
has been effectively able to use operations to finance its acquisitions of productive assets
Competitors in Pinecrest Company's industry have an average accounts receivable turnover of 10.8 times. Pinecrest reported accounts receivable at December 31, 2018, of $42,000 and has normal credit terms requiring payment within 30 days. Pinecrest's accounts receivable turnover for 2018 is
less efficient in its collection policies in 2018 than the industry as a whole.
Cash flows from acquiring and selling products are classified as
operating activities.
From this information, the most likely explanation is that Jerry's is
using cash from operations and borrowing to purchase long-term assets.
