Unit 4 Quiz

Which one of the following terms is defined as the total tax paid divided by the total taxable income?

Average tax rate

The market value of a firm's fixed assets:

is equal to the estimated current cash value of those assets

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?

$138,532 Avg tax rate (138532 x 0.269 = $37265)

Last year, The Pizza Joint 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 34 percent, what was the amount of the depreciation expense?

$2,503 Earning before interest and taxed = [(Addition to RE + dividends)(1-%)] + interest paid Earnings before interest and taxes = [($6,230 + 2,500)/(1 -.34)] + $1,620 = $14,847 Dep = sales - costs -earnings before interest and taxes Depreciation = $104,650-87,300-14,847 = $2,503

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?

$783,400 Inventory + Cash + Accounts Receivable

Plenti-Good Foods has ending net fixed assets of $98,700 and beginning net fixed assets of $84,900. During the year, the firm sold assets with a total book value of $13,200 and also recorded $9,800 in depreciation expense. How much did the company spend to buy new fixed assets?

98700 - 84900 = $13800 13800 + 9800 = $23600 23600 + 13200 = $36,800**

Pharrell, Inc., has sales of $595,000, costs of $263,000, depreciation expense of $66,000, interest expense of $33,000, and a tax rate of 30 percent. The firm paid out $41,000 in cash dividends and has 50,000 shares of common stock outstanding. What is the dividends per share figure?

DPS = Dividends / Shares outstanding $41,000 / 50,000 = $0.82 per share

For the year, Movers United has net income of $31,800, net new equity of $7,500, and an addition to retained earnings of $24,200. What is the amount of the dividends paid?

Dividends paid = net income - retained earnings $31,800 - 24,200 = $7,600

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.

II and III only

The tax rate that determines the amount of tax that will be due on the next dollar of taxable income earned is called the:

Marginal tax rate

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?

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

An income statement prepared according to GAAP:

Records expenses based on the matching principle

The December 31, 2015, balance sheet of Maria's Tennis Shop, Inc., showed current assets of $1,125 and current liabilities of $925. The December 31, 2016, balance sheet showed current assets of $1,340 and current liabilities of $1,015. What was the company's 2016 change in net working capital, or NWC?

The change in net working capital is the end of period net working capital minus the beginning of period net working capital, so: Change in NWC = NWCend - NWCbeg Change in NWC = (CAend - CLend) - (CAbeg - CLbeg) Change in NWC = ($1,340 - 1,015) - ($1,125 - 925) Change in NWC = (325 - 200) = 125

Pharrell, Inc., has sales of $590,000, costs of $268,000, depreciation expense of $68,500, interest expense of $35,500, and a tax rate of 40 percent. What is the net income for this firm? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

The income statement starts with revenues and subtracts costs to arrive at EBIT. We then subtract out interest to get taxable income, and then subtract taxes to arrive at net income. Doing so, we get Income statement Sales $590,000 Costs $268,000 Depreciation $68,500 EBIT = $253,500 Interest = $35,500 Taxable income = $218,000 Taxes (40%) = 87,200 Net income = $130,800

Pharrell, Inc., has sales of $595,000, costs of $263,000, depreciation expense of $66,000, interest expense of $33,000, and a tax rate of 30 percent. The firm paid out $41,000 in cash dividends and has 50,000 shares of common stock outstanding. What is the earnings per share figure?

The income statement starts with revenues and subtracts costs to arrive at EBIT. We then subtract out interest to get taxable income, and then subtract taxes to arrive at net income. Doing so, we get: Income statement Sales $ 595,000 Costs 263,000 Depreciation 66,000 EBIT $ 266,000 Interest 33,000 Taxable income $ 233,000 Taxes (30%) 69,900 Net income $ 163,100 EPS = Net income / Shares outstanding $13 / 50,000 = $3.26 / per share

Use the following tax table to answer this question: Taxable income: 0-50,000 @ 15% 50-75,000 @ 25% 75-100,000 @ 34% 100-335,000 @ 39% 335-10,000,000 @ 34% Comfy Inn earned $218,310 in taxable income for the year. How much tax does the company owe?

Total tax = .15($50,000) + .25($25,000) + .34($25,000) + .39($218,310-100,000) Total tax = $68,390.90

Which one of the following statements concerning the balance sheet is correct?

assets are listed in descending order of liquidity

Net working capital is defined as:

current assets minus current liabilities

Which one of the following is included in the market value of a firm but not in the book value?

reputation of the firm

The recognition principle states that:

sales should be recorded when the earnings process is virtually completed and the value of the sale can be determined