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Chapter02TestBankStatic

Student:___________________________________________________________________________

1.
Whichoneofthefollowingisthefinancialstatementthatshowstheaccountingvalueofafirm'sequityasofaparticulardate?



A. Incomestatement.
B. Creditor'sstatement.
C. Balancesheet.
D. Statementofcashflows.
E. Dividendstatement.

2.
Networkingcapitalisdefinedas:



A. Totalliabilitiesminusshareholders'equity.
B. Currentliabilitiesminusshareholders'equity.
C. Fixedassetsminuslongtermliabilities.
D. Totalassetsminustotalliabilities.
E. Currentassetsminuscurrentliabilities.

3.
Whichoneofthesesetsforththecommonsetofstandardsandproceduresbywhichauditedfinancialstatementsareprepared?



A. TheMatchingPrinciple.
B.
TheCashFlowIdentity.

C. GenerallyAcceptedAccountingPrinciples.
D.
FinancialAccountingReportingPrinciples.

E. StandardAccountingValueGuidelines.

4.
Whichoneofthefollowingisthefinancialstatementthatsummarizesafirm'srevenueandexpensesoveraperiodoftime?



A. Incomestatement.
B. Balancesheet.
C. Statementofcashflows.
D.
Taxreconciliationstatement.

E. Marketvaluereport.

5.
Noncashitemsreferto:



A. Accruedexpenses.
B. Inventoryitemspurchasedusingcredit.
C. Theownershipofintangibleassetssuchaspatents.
D. Expenseswhichdonotdirectlyaffectcashflows.
E. Saleswhicharemadeusingstorecredit.

6.
Thepercentageofthenextdollaryouearnthatmustbepaidintaxesisreferredtoasthe_____taxrate.



A. Mean.
B.
Residual.

C. Total.
D. Average.
E. Marginal.

7.
The_____taxrateisequaltototaltaxesdividedbytotaltaxableincome.



A.
Deductible.

B.
Residual.

C.
Total.

D. Average.
E. Marginal.

8.
Thecashflowofafirmthatisavailablefordistributiontothefirm'screditorsandstockholdersiscalledthe:



A. Operatingcashflow.
B. Netcapitalspending.
C. Networkingcapital.
D. Cashflowfromassets.
E. Cashflowtostockholders.

9.
Whichtermrelatestothecashflowthatresultsfromafirm'songoing,normalbusinessactivities?



A. Operatingcashflow.
B.
Capitalspending.

C.
Networkingcapital.

D. Cashflowfromassets.
E. Cashflowtocreditors.

10.
Cashflowfromassetsisalsoknownasthefirm's:



A. Capitalstructure.
B. Equitystructure.
C. Hiddencashflow.
D. Freecashflow.
E. Historicalcashflow.

11.
Thecashflowrelatedtointerestpaymentslessanynetnewborrowingiscalledthe:



A. Operatingcashflow.
B. Capitalspendingcashflow.
C. Networkingcapital.
D. Cashflowfromassets.
E. Cashflowtocreditors.

12.
Cashflowtostockholdersisdefinedas:



A. Thetotalamountofinterestanddividendspaidduringthepastyear.
B. Thechangeintotalequityoverthepastyear.
C. Cashflowfromassetsplusthecashflowtocreditors.
D. Operatingcashflowminusthecashflowtocreditors.
E. Dividendpaymentslessnetnewequityraised.

13.
Whichoneofthefollowingisclassifiedasatangiblefixedasset?



A. Accountsreceivable.
B. Productionequipment.
C. Cash.
D. Patent.
E. Inventory.

14.
Whichofthefollowingarecurrentassets?


I.Cash
II.Trademark
III.Accountsreceivable
IV.Notespayable


A. IIandIIIonly.
B. IandIIIonly.
C. I,II,andIVonly.
D. I,II,andIVonly.
E. II,III,andIVonly.

15.
Whichoneofthefollowingisincludedinafirm'smarketvaluebutyetisexcludedfromthefirm'saccountingvalue?



A.
Realestateinvestment.

B.
Goodreputationofthecompany.

C.
Equipmentownedbythefirm.

D.
Moneyduefromacustomer.

E.
Anitemheldbythefirmforfuturesale.

16.
Whichofthefollowingareincludedincurrentliabilities?


I.Notepayabletoasupplierin13months.
II.Amountduefromacustomerlastweek.
III.Accountpayabletoasupplierthatisduenextweek.
IV.Loanpayabletothebankin10months.


A. IandIIIonly.
B. IIIandIVonly.
C. I,II,andIIIonly.
D.
I,III,andIVonly.

E.
I,II,III,andIV.

17.
Whichoneofthefollowingwilldecreasethevalueofafirm'snetworkingcapital?



A. Usingcashtopayasupplier.
B. Depreciatinganasset.
C. Collectinganaccountsreceivable.
D. Purchasinginventoryoncredit.
E. Sellinginventoryataloss.

18.
Whichoneofthefollowingstatementsconcerningnetworkingcapitaliscorrect?



A. Networkingcapitalincreaseswheninventoryispurchasedwithcash.
B. Networkingcapitalexcludesinventory.
C. Totalassetsmustincreaseifnetworkingcapitalincreases.
D. Networkingcapitalmaybeanegativevalue.
E. Networkingcapitalistheamountofcashafirmcurrentlyhasavailableforspending.

19.
Whichoneofthefollowingstatementsconcerningnetworkingcapitaliscorrect?



A. Thelowerthevalueofnetworkingcapitalis,thegreateristheabilityofafirmtomeetitscurrentobligations.
B. Anincreaseinnetworkingcapitalmustalsoincreasecurrentassets.
C. Networkingcapitalincreaseswheninventoryissoldforcashataprofit.
D. Firmswithequalamountsofnetworkingcapitalarealsoequallyliquid.
E. Networkingcapitalisapartoftheoperatingcashflow.

20.
Whichoneofthefollowingaccountsisthemostliquid?



A. Inventory.
B. Building.
C. AccountsReceivable.
D. Equipment.
E. Land.

21.
Whichoneofthefollowingrepresentsthemostliquidasset?



A. $100accountreceivablethatisdiscountedandcollectedfor$96today.
B. $100ofinventorywhichissoldtodayoncreditfor$103.
C. $100ofinventorywhichisdiscountedandsoldfor$97cashtoday.
D. $100ofinventorythatissoldtodayfor$100cash.
E. $100accountsreceivablethatwillbecollectedinfullnextweek.

22.
Whichoneofthefollowingstatementsrelatedtoliquidityiscorrect?



A. Liquidassetstendtoearnahighrateofreturn.
B. Liquidassetsarevaluabletoafirm.
C. Liquidassetsaredefinedasassetsthatcanbesoldquicklyregardlessofthepriceobtained.
D. Inventoryismoreliquidthanaccountsreceivablebecauseinventoryistangible.
E. Anyassetthatcanbesoldisconsideredliquid.

23.
Shareholders'equity:



A. Isreferredtoasafirmsfinancialleverage.
B. Isequaltototalassetsplustotalliabilities.
C. Decreaseswhenevernewsharesofstockareissued.
D. Includespatents,preferredstock,andcommonstock.
E.
Representstheresidualvalueofafirm.

24.
Thehigherthedegreeoffinancialleverageemployedbyafirmis,the:



A. Higheristheprobabilitythatthefirmwillencounterfinancialdistress.
B. Loweristheamountofdebtincurred.
C. Lessdebtafirmhasperdollaroftotalassets.
D. Higheristhenumberofoutstandingsharesofstock.
E. Loweristhebalanceinaccountspayable.

25.
Thebookvalueofafirmis:



A. Equivalenttothefirm'smarketvalueprovidedthatthefirmhassomefixedassets.
B. Basedonhistoricalcost.
C. Generallygreaterthanthemarketvaluewhenfixedassetsareincluded.
D. Moreofafinancialthananaccountingvaluation.
E. Adjustedtothemarketvaluewheneverthemarketvalueexceedsthestatedbookvalue.

26.
Whichofthefollowingis(are)includedinthemarketvalueofafirmbutis(are)excludedfromthefirm'sbookvalue?


I.Valueofmanagementskills.
II.Valueofacopyright.
III.Valueofthefirm'sreputation.
IV.Valueofemployee'sexperience.


A. Ionly.
B. IIonly.
C. IIIandIVonly.
D. I,II,andIIIonly.
E. I,III,andIVonly.

27.
Yourecentlypurchasedagrocerystore.Atthetimeofthepurchase,thestore'smarketvalueequaleditsbookvalue.Thepurchaseincluded
thebuilding,thefixtures,andtheinventory.Whichoneofthefollowingismostapttocausethemarketvalueofthisstoretobelowerthan
thebookvalue?



A. Asuddenandunexpectedincreaseininflation.
B. Thereplacementofoldinventoryitemswithmoredesirableproducts.
C. Improvementstothesurroundingareabyotherstoreowners.
D. Constructionofanewrestrictedaccesshighwaylocatedbetweenthestoreandthesurroundingresidentialareas.
E. Additionofastoplightatthemainentrancetothestore'sparkinglot.

28.
Whichoneofthefollowingistrueaccordingtogenerallyacceptedaccountingprinciples?



A. Depreciationisrecordedbasedonthemarketvalueprinciple.
B. Incomeisrecordedbasedontherealizationprinciple.
C. Costsarerecordedbasedontherealizationprinciple.
D. Depreciationisrecordedbasedontherecognitionprinciple.
E. Costsofgoodssoldarerecordedbasedonthematchingprinciple.

29.
Whichoneoftheseismostapttobeafixedcost?



A.
Rawmaterials.

B.
Manufacturingwages.

C.
Managementbonuses.

D.
Officesalaries.

E.
Shippingandfreight.

30.
Whichofthefollowingareexpensesforaccountingpurposesbutarenotoperatingcashflowsforfinancialpurposes?


I.Interestexpense.
II.Taxes.
III.Costofgoodssold.

IV.Depreciation.


A.
IVonly.

B.
IIandIVonly.

C.
IandIIIonly.

D.
IandIVonly.

E.
I,II,andIVonly.

31.
Whichoneofthefollowingstatementsrelatedtoanincomestatementiscorrect?Assumeaccrualaccountingisused.



A. Theadditiontoretainedearningsisequaltonetincomeplusdividendspaid.
B. Creditsalesarerecordedontheincomestatementwhenthecashfromthesaleiscollected.
C. Thelaborcostsforproducingaproductareexpensedwhentheproductissold.
D. Interestisanoncashexpense.
E. Depreciationincreasesthemarginaltaxrate.

32.
Whichoneofthefollowingstatementsrelatedtotaxesiscorrect?



A. Themarginaltaxratemustbeequaltoorlowerthantheaveragetaxrateforafirm.
B. Thetaxforafirmiscomputedbymultiplyingthefirm'scurrentmarginaltaxratetimesthetaxableincome.
C. Additionalincomeistaxedatafirm'saveragetaxrate.
D. Giventhetaxstructurein2014,thehighestaveragecorporatetaxrateis34percent.
E. Themarginaltaxrateforafirmcanbeeitherhigherthanorthesameastheaveragetaxrate.

33.
Asof2015,whichoneofthefollowingstatementsconcerningcorporateincometaxesiscorrect?



A. Thelargestcorporationshaveanaveragetaxrateof39percent.
B. Thelowestmarginalrateis25percent.
C. Afirm'staxiscomputedonanincrementalbasis.
D. Afirm'smarginaltaxratewillgenerallybelowerthanitsaveragetaxrateoncethefirm'sincomeexceeds$50,000.
E. Whenanalyzinganewproject,theaveragetaxrateshouldbeused.

34.
Depreciationforataxpayingfirm:



A. Increasesexpensesandlowerstaxes.
B. Increasesthenetfixedassetsasshownonthebalancesheet.
C.
Reducesboththenetfixedassetsandthecostsofafirm.

D. Isanoncashexpensethatincreasesthenetincome.
E. Decreasesnetfixedassets,netincome,andoperatingcashflows.

35.
Whichoneofthefollowingstatementsrelatedtoanincomestatementiscorrect?



A. Interestexpenseincreasestheamountoftaxdue.
B. Depreciationdoesnotaffecttaxessinceitisanoncashexpense.
C. Netincomeisdistributedtodividendsandpaidinsurplus.
D. Taxesreducebothnetincomeandoperatingcashflow.
E. Interestexpenseisincludedinoperatingcashflow.

36.
Whichoneofthefollowingstatementsiscorrectconcerningacorporationwithtaxableincomeof$125,000?



A. Netincomeminusdividendspaidwillequaltheendingretainedearningsfortheyear.
B. Anincreaseindepreciationwillincreasetheoperatingcashflow.
C. Netincomedividedbythenumberofsharesoutstandingwillequalthedividendspershare.
D. Interestpaidwillbeincludedinbothnetincomeandoperatingcashflow.
E. Anincreaseinthetaxratewillincreasebothnetincomeandoperatingcashflow.

37.
Whichoneofthefollowingwillincreasethecashflowfromassets,allelseequal?



A. Decreaseincashflowtostockholders.
B. Decreaseinoperatingcashflow.
C. Decreaseinthechangeinnetworkingcapital.
D. Decreaseincashflowtocreditors.
E. Increaseinnetcapitalspending.

38.
Forataxpayingfirm,anincreasein_____willcausethecashflowfromassetstoincrease.



A.
Depreciation.

B.
Netcapitalspending.

C.
Changeinnetworkingcapital.

D.
Taxes.

E.
Productioncosts.

39.
Whichoneofthefollowingmustbetrueifafirmhadanegativecashflowfromassets?



A. Thefirmborrowedmoney.
B. Thefirmacquirednewfixedassets.
C. Thefirmhadanetlossfortheperiod.
D. Thefirmutilizedoutsidefunding.
E. Newlyissuedsharesofstockweresold.

40.
Anincreaseinthedepreciationexpensewilldowhichofthefollowingforafirmwithtaxableincomeof$80,000?


I.Increasenetincome.
II.Decreasenetincome.
III.Increasethecashflowfromassets.
IV.Decreasethecashflowfromassets.


A. Ionly.
B.
IIonly.

C. IandIIIonly.
D. IIandIIIonly.
E. IIandIVonly.

41.
WhichoneofthefollowingisNOTincludedincashflowfromassets?



A. Accountspayable.
B. Inventory.
C. Sales.
D. Interestexpense.
E. Cashaccount.

42.
Netcapitalspending:



A. Isequaltoendingnetfixedassetsminusbeginningnetfixedassets.
B. Isequaltozeroifthedecreaseinthenetfixedassetsisequaltothedepreciationexpense.
C.
Reflectsthenetchangesintotalassetsoverastatedperiodoftime.

D. Isequivalenttothecashflowfromassetsminustheoperatingcashflowminusthechangeinnetworkingcapital.
E. Isequaltothenetchangeinthecurrentaccounts.

43.
Whichoneofthefollowingstatementsrelatedtothecashflowtocreditorsiscorrect?



A. Ifthecashflowtocreditorsispositive,thenthefirmmusthaveborrowedmoremoneythanitrepaid.
B. Ifthecashflowtocreditorsisnegative,thenthefirmmusthaveanegativecashflowfromassets.
C. Apositivecashflowtocreditorsrepresentsanetcashoutflowfromthefirm.
D. Apositivecashflowtocreditorsmeansthatafirmhasincreaseditslongtermdebt.
E. Ifthecashflowtocreditorsiszero,thenafirmhasnolongtermdebt.

44.
Apositivecashflowtostockholdersindicateswhichoneofthefollowingwithcertainty?



A. Thedividendspaidexceededthenetnewequityraised.
B. Theamountofthesaleofcommonstockexceededtheamountofdividendspaid.
C. Nodividendsweredistributed,butnewsharesofstockweresold.
D. Boththecashflowtoassetsandthecashflowtocreditorsmustbenegative.
E. Boththecashflowtoassetsandthecashflowtocreditorsmustbepositive.

45.
Afirmhas$680ininventory,$2,140infixedassets,$210inaccountsreceivables,$250inaccountspayable,and$80incash.Whatisthe
amountofthenetworkingcapital?



A. $970
B. $720
C. $640
D. $3,110
E. $2,860

46.
Afirmhasnetworkingcapitalof$560.Longtermdebtis$3,970,totalassetsare$7,390,andfixedassetsare$3,910.Whatistheamountof
thetotalliabilities?



A. $2,050
B. $2,920
C. $4,130
D. $7,950
E. $6,890

47.
Afirmhascommonstockof$6,200,paidinsurplusof$9,100,totalliabilitiesof$8,400,currentassetsof$5,900,andfixedassetsof
$21,200.Whatistheamountoftheshareholders'equity?



A. $6,900
B. $15,300
C. $18,700
D. $23,700
E. $35,500

48.
Yourfirmhastotalassetsof$4,900,fixedassetsof$3,200,longtermdebtof$2,900,andshorttermdebtof$1,400.Whatistheamountof
networkingcapital?



A. $100
B. $300
C. $600
D. $1,700
E. $1,800

49.
BonnerAutomotivehasshareholders'equityof$218,700.Thefirmowesatotalof$141,000ofwhich40percentispayablewithinthenext
year.Thefirmhasnetfixedassetsof$209,800.Whatistheamountofthenetworkingcapital?



A. $149,900
B. $93,500
C. $125,600
D. $47,500
E. $56,500

50.
Fouryearsago,ShipExpresspurchasedamailingmachineatacostof$218,000.Thisequipmentiscurrentlyvaluedat$97,400ontoday's
balancesheetbutcouldactuallybesoldfor$92,900.Thisistheonlyfixedassetthefirmowns.Networkingcapitalis$41,300andlong
termdebtis$102,800.Whatisthebookvalueofshareholders'equity?



A. $31,400
B. $47,700
C. $35,900
D. $249,400
E. $253,900

51.
DrewownsTheWhatNotShop,whichheistryingtosellsothathecanretireandtravel.Theshopownsthebuildinginwhichitislocated.
Thisbuildingwasbuiltatacostof$647,000andiscurrentlyappraisedat$819,000.Thecountersandfixturesoriginallycost$148,000and
arecurrentlyvaluedat$65,000.Theinventoryisvaluedonthebalancesheetat$319,000andhasaretailmarketvalueequalto1.1timesits
cost.Jakeexpectsthestoretocollect96percentofthe$21,700inaccountsreceivable.Thefirmhas$26,800incashandhastotaldebtof
$414,700.Whatisthemarketvalueofthisfirm?



A. $867,832
B. $900,166
C. $695,832
D. $775,632
E. $1,190,332

52.
JensenEnterprisespaid$1,300individendsand$920ininterestthispastyear.Commonstockincreasedby$1,200andretainedearnings
decreasedby$310.Whatisthenetincomefortheyear?



A. $210
B. $990
C. $1,610
D. $1,910
E. $2,190

53.
Andre'sBakeryhassalesof$613,000withcostsof$479,000.Interestexpenseis$26,000anddepreciationis$42,000.Thetaxrateis25
percent.Whatisthenetincome?



A. $42,750
B.
$49,500

C. $39,000
D. $81,000
E. $74,550

54.
KaylorEquipmentRentalpaid$75individendsand$511ininterestexpense.Theadditiontoretainedearningsis$418andnetnewequityis
$500.Thetaxrateis35percent.Salesare$15,900anddepreciationis$680.Whataretheearningsbeforeinterestandtaxes?



A. $589.46
B. $1,269.46
C. $1,331.54
D. $9,560.85
E. $10,949.46

55.
Giventhetaxratesasshown,whatistheaveragetaxrateforafirmwithtaxableincomeof$289,740?



A. 26.68percent
B. 35.87percent
C. 33.22percent
D. 34.67percent
E. 39.00percent

56.
Thetaxratesareasshown.NevadaMiningcurrentlyhastaxableincomeof$97,800.Howmuchadditionaltaxwillthefirmoweiftaxable
incomeincreasesby$21,000?



A. $8,080
B. $8,130
C. $8,155
D. $8,170
E. $8,190

57.
WinstonIndustrieshadsalesof$843,800andcostsof$609,900.Thefirmpaid$38,200ininterestand$18,000individends.Italso
increasedretainedearningsby$62,138fortheyear.Thedepreciationwas$76,400.Whatistheaveragetaxrate?



A. 32.83percent
B. 33.33percent
C. 38.17percent
D. 43.39percent
E. 48.87percent

58.
RTFOilhastotalsalesof$911,400andcostsof$787,300.Depreciationis$52,600andthetaxrateis34percent.Thefirmdoesnothave
anyinterestexpense.Whatistheoperatingcashflow?



A. $148,410
B. $68,320
C. $79,924
D. $81,417
E. $99,790

59.
NielsenAutoPartshadbeginningnetfixedassetsof$218,470andendingnetfixedassetsof$209,411.Duringtheyear,assetswitha
combinedbookvalueof$6,943weresold.Depreciationfortheyearwas$42,822.Whatistheamountofnetcapitalspending?



A. $33,763
B. $40,706
C. $58,218
D. $65,161
E. $67,408

60.
Atthebeginningoftheyear,afirmhadcurrentassetsof$121,306andcurrentliabilitiesof$124,509.Attheendoftheyear,thecurrent
assetswere$122,418andthecurrentliabilitieswere$103,718.Whatisthechangeinnetworkingcapital?



A. $19,679
B. $11,503
C. $9,387
D. $1,809
E. $21,903

61.
Atthebeginningoftheyear,thelongtermdebtofafirmwas$72,918andtotaldebtwas$138,407.Attheendoftheyear,longtermdebt
was$68,219andtotaldebtwas$145,838.Theinterestpaidwas$6,430.Whatistheamountofthecashflowtocreditors?



A. $1,731
B. $1,001
C. $11,129
D. $13,861
E. $19,172

62.
ErniesHomeRepairhadbeginninglongtermdebtof$51,207andendinglongtermdebtof$36,714.Thebeginningandendingtotaldebt
balanceswere$59,513and$42,612,respectively.Theinterestpaidwas$2,808.Whatistheamountofthecashflowtocreditors?



A. $11,685
B. $11,272
C. $17,301
D. $17,418
E. $11,174

63.
TheDailyNewshadnetincomeof$121,600ofwhich40percentwasdistributedtotheshareholdersasdividends.Duringtheyear,the
companysold$75,000worthofcommonstock.Whatisthecashflowtostockholders?



A. $75,000
B. $26,360
C. $2,040
D. $123,640
E. $147,960

64.
TheLakesideInnhadoperatingcashflowof$48,450.Depreciationwas$6,700andinterestpaidwas$2,480.Anettotalof$2,620waspaid
onlongtermdebt.Thefirmspent$24,000onfixedassetsanddecreasednetworkingcapitalby$1,330.Whatistheamountofthecashflow
tostockholders?



A. $5,100
B. $7,830
C. $18,020
D. $19,998
E. $20,680

65.
ThefollowinginformationpertainstoGalaxyInteriors:

Whatisthenetcapitalspendingfor2015?



A. $382
B. $1,229
C. $127
D. $1,993
E. $1,172

66.
ThefollowinginformationpertainstoGalaxyInteriors:

Whatistheamountofthenoncashexpensesfor2015?



A. $740
B. $1,282
C. $1,333
D. $1,611
E. $2,351

67.
ThefollowinginformationpertainstoGalaxyInteriors:

Whatisthecashflowtocreditorsfor2015?



A. $530
B. $432
C. $1,839
D. 2,132
E. $3,094

68.
ThefollowinginformationpertainstoGalaxyInteriors:

Whatistheoperatingcashflowfor2015?



A. $2,114
B. $2,900
C. $2,985
D. $3,536
E. $4,267

69.
ThefollowinginformationpertainstoGalaxyInteriors:

Whatisthefreecashflowfor2015?



A. $1,732
B. $2,247
C. $2,961
D. $3,915
E. $4,267

70.
ThefollowinginformationpertainstoGalaxyInteriors:

Whatistheamountofdividendspaidfor2015?



A. $0
B. $1,948
C. $1,374
D. 800
E. $574

71.
ThefollowinginformationpertainstoGalaxyInteriors:

Giventhesefinancialstatements,whichoneofthefollowingiscorrectfor2015?



A. Currentassetsincreased.
B. Thefirmreduceditstotaldebt.
C. Theaveragetaxrateis34percent.
D. Thefirmpaidmoretoitssuppliersthanitborrowed.
E. Thenoncashexpensestotaled$2,893.

72.
YouhavegatheredthisinformationonJJEnterprises:

2014 2015
Sales $6,318 $7,202
COGS 3,945 4,460
Interest 303 277
Depreciation 1,204 1,196
Cash 672 418
Accountsreceivables 601 578
Currentliabilities 414 463
Inventory 1,215 1,598
Longtermdebt 4,780 4,103
Netfixedassets 7,700 7,330
Shareholdersequity 4,994 5,358
Taxes 217 317

Whatisthenetworkingcapitalfor2015?


A.
$859

B. $533
C. $1,262
D. $2,131
E. $2,074

73.
YouhavegatheredthisinformationonJJEnterprises:


2014 2015
Sales $6,318 $7,202
COGS 3,945 4,460
Interest 303 277
Depreciation 1,204 1,196
Cash 672 418
Accountsreceivables 601 578
Currentliabilities 414 463
Inventory 1,215 1,598
Longtermdebt 4,780 4,103
Netfixedassets 7,700 7,330
Shareholdersequity 4,994 5,358
Taxes 217 317

Whatisthechangeinnetworkingcapitalfrom2014to2015?


A. $57
B. $70
C. $105
D. $40
E. $326

74.
YouhavegatheredthisinformationonJJEnterprises:


2014 2015
Sales $6,318 $7,202
COGS 3,945 4,460
Interest 303 277
Depreciation 1,204 1,196
Cash 672 418
Accountsreceivables 601 578
Currentliabilities 414 463
Inventory 1,215 1,598
Longtermdebt 4,780 4,103
Netfixedassets 7,700 7,330
Shareholdersequity 4,994 5,358
Taxes 217 317

Whatisthenetcapitalspendingfor2015?


A. $117
B. $826
C. $834
D. $370
E. $421

75.
YouhavegatheredthisinformationonJJEnterprises:


2014 2015
Sales $6,318 $7,202
COGS 3,945 4,460
Interest 303 277
Depreciation 1,204 1,196
Cash 672 418
Accountsreceivables 601 578
Currentliabilities 414 463
Inventory 1,215 1,598
Longtermdebt 4,780 4,103
Netfixedassets 7,700 7,330
Shareholdersequity 4,994 5,358
Taxes 217 317

Whatistheoperatingcashflowfor2015?


A. $1,229
B. $1,367
C. $2,425
D. $1,766
E. $1,823

76.
YouhavegatheredthisinformationonJJEnterprises:


2014 2015
Sales $6,318 $7,202
COGS 3,945 4,460
Interest 303 277
Depreciation 1,204 1,196
Cash 672 418
Accountsreceivables 601 578
Currentliabilities 414 463
Inventory 1,215 1,598
Longtermdebt 4,780 4,103
Netfixedassets 7,700 7,330
Shareholdersequity 4,994 5,358
Taxes 217 317

Whatisthecashflowfromassetsfor2015?


A. $1,430
B. $1,542
C. $1,656
D. $2,810
E. $3,308

77.
YouhavegatheredthisinformationonJJEnterprises:


2014 2015
Sales $6,318 $7,202
COGS 3,945 4,460
Interest 303 277
Depreciation 1,204 1,196
Cash 672 418
Accountsreceivables 601 578
Currentliabilities 414 463
Inventory 1,215 1,598
Longtermdebt 4,780 4,103
Netfixedassets 7,700 7,330
Shareholdersequity 4,994 5,358
Taxes 217 317

Whatisnetnewborrowingfor2015?


A. $677
B. $400
C. $400
D. $677
E. $1,077

78.
YouhavegatheredthisinformationonJJEnterprises:


2014 2015
Sales $6,318 $7,202
COGS 3,945 4,460
Interest 303 277
Depreciation 1,204 1,196
Cash 672 418
Accountsreceivables 601 578
Currentliabilities 414 463
Inventory 1,215 1,598
Longtermdebt 4,780 4,103
Netfixedassets 7,700 7,330
Shareholdersequity 4,994 5,358
Taxes 217 317

Whatisthecashflowtocreditorsfor2015?


A. $1,023
B. $1,577
C. $954
D. $954
E. 577

79.
YouhavegatheredthefollowinginformationonJJEnterprises.Thefirmneithersoldnorrepurchasedanystockduringtheyear.


2014 2015
Sales $6,318 $7,202
COGS 3,945 4,460
Interest 303 277
Depreciation 1,204 1,196
Cash 672 418
Accountsreceivables 601 578
Currentliabilities 414 463
Inventory 1,215 1,598
Longtermdebt 4,780 4,103
Netfixedassets 7,700 7,330
Shareholdersequity 4,994 5,358
Taxes 217 317

Whatisthedividendamountpaidin2015?


A. $588
B. $0
C. $364
D. $709
E. $515

80. Usethebelowinformationtoanswerthefollowingquestion.

Costofgoodssold $6,409
Interest 315
Dividends 420
Depreciation 811
Changeinretainedearnings 296
Taxrate 34%

Whatisthetaxableincomegiventheaboveinformation?



A. $1,051.00
B. $1,367.78
C. $1,084.85
D. $2,776.41
E. $636.36

81. Usethebelowinformationtoanswerthefollowingquestion.

Costofgoodssold $92,511
Interest 4,608
Dividends 3,200
Depreciation 18,709
Changeinretainedearnings 14,308
Taxrate 35%

Whatistheoperatingcashflowgiventheaboveinformation?



A. $40,825.00
B. $42,122.42
C. $36,462.58
D. $31,543.38
E. $36,741.42

82.
BeachFrontIndustrieshassalesof$546,000,costsof$295,000,depreciationexpenseof$37,000,interestexpenseof$15,000,andataxrate
of32percent.Thefirmpaid$59,000incashdividends.Whatistheadditiontoretainedearnings?



A. $76,320
B. $81,700
C. $95,200
D. $103,460
E. $121,680

83.
TheWidgetCo.purchasednewmachinerythreeyearsagofor$4million.ThemachinerycanbesoldtotheRomanCo.todayfor$2million.
TheWidgetCo.'scurrentbalancesheetshowsnetfixedassetsof$2,500,000,currentliabilitiesof$1,375,000,andnetworkingcapitalof
$725,000.Ifallthecurrentassetswereliquidatedtoday,thecompanywouldreceive$1.9millionincash.ThebookvalueoftheWidget
Co.'sassetstodayis_____andthemarketvalueofthoseassetsis_____.



A. $4,600,000;$3,900,000
B. $4,600,000;$3,125,000
C. $5,000,000;$3,125,000
D. $5,000,000;$3,900,000
E. $6,500,000;$3,900,000

84.
BoyerEnterpriseshad$200,000intaxableincome.Whatisthefirm'saveragetaxratebasedontheratesshowninthefollowingtable?


Taxableincome Taxrate
$050,000 15%
50,00175,000 25%
75,001100,000 34%
100,001335,000 39%


A. 28.25percent
B. 30.63percent
C. 32.48percent
D. 36.50percent
E. 39.00percent

85.
WebsterWorldhassalesof$13,800,costsof$5,800,depreciationexpenseof$1,100,andinterestexpenseof$700.Whatistheoperating
cashflowifthetaxrateis32percent?



A. $7,704
B. $5,969
C. $6,016
D. $7,036
E. $7,100

86.
Afirmsbalancesheetshowedbeginningnetfixedassetsof$3.6millionandendingnetfixedassetsof$3.4million.Thedepreciation
expenseis$900,000.Whatwasthenetcapitalspendingfortheyear?



A. $500,000
B. $400,000
C. $700,000
D. $1,100,000
E. $1,300,000

87.
GlobalTourshadcurrentassetsof$1,360andcurrentliabilitiesof$940asofthebeginningoftheyear.Attheendoftheyear,currentassets
are$1,720andcurrentliabilitiesare$1,080.Whatwasthechangeinnetworkingcapitalfortheyear?



A. $220
B. $170
C. $190
D. $940
E. $1,060

88.
ThebeginningofyearbalancesheetofTheBeachShoppeshowedlongtermdebtof$2.1million,whiletheendofyearbalancesheet
showedlongtermdebtof$2.3million.Theannualincomestatementshowedaninterestexpenseof$250,000.Whatwasthecashflowto
creditorsfortheyear?



A. $200,000
B. $150,000
C. $50,000
D. $200,000
E. $450,000

89.
Atthebeginningoftheyear,thebalancesheetofTheOutletshowed$800,000inthecommonstockaccountand$2.6millioninthe
additionalpaidinsurplusaccount.Theendofyearbalancesheetshowed$872,000and$4.8millioninthesametwoaccounts,respectively.
Thecompanypaidout$150,000incashdividendsduringtheyear.Whatisthecashflowtostockholdersfortheyear?



A. $1,972,000
B. $2,122,000
C. $628,000
D. $222,000
E. $78,000

90.
SupposeyouaregiventhefollowinginformationforBaysideBakery:sales=$30,000;costs=$15,000;additiontoretainedearnings=
$4,221;dividendspaid=$469;interestexpense=$1,300;taxrate=30percent.Whatistheamountofthedepreciationexpense?



A. $4,820
B. $5,500
C. $7,000
D. $8,180
E. $9,500

91.
TheOversideMarketisobligatedtopayitscreditors$11,800today.Thefirm'sassetshaveacurrentmarketvalueof$10,900.Whatisthe
currentmarketvalueoftheshareholders'equity?



A. $600
B. $500
C. $0
D. $500
E. $600

92.
Duringtheyear,RITCorp.hadsalesof$565,600.Costsofgoodssold,administrativeandsellingexpenses,anddepreciationexpenseswere
$476,000,$58,800,and$42,800,respectively.Inaddition,thecompanyhadaninterestexpenseof$112,000andataxrateof32percent.
Whatistheoperatingcashflowfortheyear?Ignoreanytaxlosscarrybackorcarryforwardprovisions.



A. $17,920
B. $21,840
C. $30,800
D. $52,600
E. $77,840

Chapter02TestBankStaticKey

1.
Whichoneofthefollowingisthefinancialstatementthatshowstheaccountingvalueofafirm'sequityasofaparticulardate?



A. Incomestatement.
B. Creditor'sstatement.
C. Balancesheet.
D. Statementofcashflows.
E. Dividendstatement.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
Difficulty:Challenge
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet

2.
Networkingcapitalisdefinedas:



A. Totalliabilitiesminusshareholders'equity.
B. Currentliabilitiesminusshareholders'equity.
C. Fixedassetsminuslongtermliabilities.
D. Totalassetsminustotalliabilities.
E. Currentassetsminuscurrentliabilities.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Networkingcapital

3.
Whichoneofthesesetsforththecommonsetofstandardsandproceduresbywhichauditedfinancialstatementsareprepared?



A. TheMatchingPrinciple.
B.
TheCashFlowIdentity.

C. GenerallyAcceptedAccountingPrinciples.
D.
FinancialAccountingReportingPrinciples.

E. StandardAccountingValueGuidelines.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:GenerallyAcceptedAccountingPrinciples(GAAP)

4.
Whichoneofthefollowingisthefinancialstatementthatsummarizesafirm'srevenueandexpensesoveraperiodoftime?



A. Incomestatement.
B. Balancesheet.
C. Statementofcashflows.
D.
Taxreconciliationstatement.

E. Marketvaluereport.

5.
Noncashitemsreferto:



A. Accruedexpenses.
B. Inventoryitemspurchasedusingcredit.
C. Theownershipofintangibleassetssuchaspatents.
D. Expenseswhichdonotdirectlyaffectcashflows.
E. Saleswhicharemadeusingstorecredit.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0202Thedifferencebetweenaccountingincomeandcashflow.
Section:2.2TheIncomeStatement
Topic:Noncashitems

6.
Thepercentageofthenextdollaryouearnthatmustbepaidintaxesisreferredtoasthe_____taxrate.



A. Mean.
B.
Residual.

C. Total.
D. Average.
E. Marginal.

7.
The_____taxrateisequaltototaltaxesdividedbytotaltaxableincome.



A.
Deductible.

B.
Residual.

C.
Total.

D. Average.
E. Marginal.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0203Thedifferencebetweenaverageandmarginaltaxrates.
Section:2.3Taxes
Topic:Taxes

8.
Thecashflowofafirmthatisavailablefordistributiontothefirm'screditorsandstockholdersiscalledthe:



A. Operatingcashflow.
B. Netcapitalspending.
C. Networkingcapital.
D. Cashflowfromassets.
E. Cashflowtostockholders.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Cashflowfromassets

9.
Whichtermrelatestothecashflowthatresultsfromafirm'songoing,normalbusinessactivities?



A. Operatingcashflow.
B.
Capitalspending.

C.
Networkingcapital.

D. Cashflowfromassets.
E. Cashflowtocreditors.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Operatingcashflow

10.
Cashflowfromassetsisalsoknownasthefirm's:



A. Capitalstructure.
B. Equitystructure.
C. Hiddencashflow.
D. Freecashflow.
E. Historicalcashflow.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Freecashflow

11.
Thecashflowrelatedtointerestpaymentslessanynetnewborrowingiscalledthe:



A. Operatingcashflow.
B. Capitalspendingcashflow.
C. Networkingcapital.
D. Cashflowfromassets.
E. Cashflowtocreditors.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Cashflowtocreditors

12.
Cashflowtostockholdersisdefinedas:



A. Thetotalamountofinterestanddividendspaidduringthepastyear.
B. Thechangeintotalequityoverthepastyear.
C. Cashflowfromassetsplusthecashflowtocreditors.
D. Operatingcashflowminusthecashflowtocreditors.
E. Dividendpaymentslessnetnewequityraised.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow

13.
Whichoneofthefollowingisclassifiedasatangiblefixedasset?



A. Accountsreceivable.
B. Productionequipment.
C. Cash.
D. Patent.
E. Inventory.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet

14.
Whichofthefollowingarecurrentassets?


I.Cash
II.Trademark
III.Accountsreceivable
IV.Notespayable


A. IIandIIIonly.
B. IandIIIonly.
C. I,II,andIVonly.
D. I,II,andIVonly.
E. II,III,andIVonly.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet

15.
Whichoneofthefollowingisincludedinafirm'smarketvaluebutyetisexcludedfromthefirm'saccountingvalue?



A.
Realestateinvestment.

B.
Goodreputationofthecompany.

C.
Equipmentownedbythefirm.

D.
Moneyduefromacustomer.

E.
Anitemheldbythefirmforfuturesale.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Understand
Difficulty:Basic
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Marketandbookvalues

16.
Whichofthefollowingareincludedincurrentliabilities?


I.Notepayabletoasupplierin13months.
II.Amountduefromacustomerlastweek.
III.Accountpayabletoasupplierthatisduenextweek.
IV.Loanpayabletothebankin10months.


A. IandIIIonly.
B. IIIandIVonly.
C. I,II,andIIIonly.
D.
I,III,andIVonly.

E.
I,II,III,andIV.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Balancesheet

17.
Whichoneofthefollowingwilldecreasethevalueofafirm'snetworkingcapital?



A. Usingcashtopayasupplier.
B. Depreciatinganasset.
C. Collectinganaccountsreceivable.
D. Purchasinginventoryoncredit.
E. Sellinginventoryataloss.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Understand
Difficulty:Intermediate
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Networkingcapital

18.
Whichoneofthefollowingstatementsconcerningnetworkingcapitaliscorrect?



A. Networkingcapitalincreaseswheninventoryispurchasedwithcash.
B. Networkingcapitalexcludesinventory.
C. Totalassetsmustincreaseifnetworkingcapitalincreases.
D. Networkingcapitalmaybeanegativevalue.
E. Networkingcapitalistheamountofcashafirmcurrentlyhasavailableforspending.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Understand
Difficulty:Intermediate
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Networkingcapital

19.
Whichoneofthefollowingstatementsconcerningnetworkingcapitaliscorrect?



A. Thelowerthevalueofnetworkingcapitalis,thegreateristheabilityofafirmtomeetitscurrentobligations.
B. Anincreaseinnetworkingcapitalmustalsoincreasecurrentassets.
C. Networkingcapitalincreaseswheninventoryissoldforcashataprofit.
D. Firmswithequalamountsofnetworkingcapitalarealsoequallyliquid.
E. Networkingcapitalisapartoftheoperatingcashflow.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Understand
Difficulty:Intermediate
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Networkingcapital

20.
Whichoneofthefollowingaccountsisthemostliquid?



A. Inventory.
B. Building.
C. AccountsReceivable.
D. Equipment.
E. Land.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Liquidity

21.
Whichoneofthefollowingrepresentsthemostliquidasset?



A. $100accountreceivablethatisdiscountedandcollectedfor$96today.
B. $100ofinventorywhichissoldtodayoncreditfor$103.
C. $100ofinventorywhichisdiscountedandsoldfor$97cashtoday.
D. $100ofinventorythatissoldtodayfor$100cash.
E. $100accountsreceivablethatwillbecollectedinfullnextweek.

22.
Whichoneofthefollowingstatementsrelatedtoliquidityiscorrect?



A. Liquidassetstendtoearnahighrateofreturn.
B. Liquidassetsarevaluabletoafirm.
C. Liquidassetsaredefinedasassetsthatcanbesoldquicklyregardlessofthepriceobtained.
D. Inventoryismoreliquidthanaccountsreceivablebecauseinventoryistangible.
E. Anyassetthatcanbesoldisconsideredliquid.

23.
Shareholders'equity:



A. Isreferredtoasafirmsfinancialleverage.
B. Isequaltototalassetsplustotalliabilities.
C. Decreaseswhenevernewsharesofstockareissued.
D. Includespatents,preferredstock,andcommonstock.
E.
Representstheresidualvalueofafirm.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Balancesheet

24.
Thehigherthedegreeoffinancialleverageemployedbyafirmis,the:



A. Higheristheprobabilitythatthefirmwillencounterfinancialdistress.
B. Loweristheamountofdebtincurred.
C. Lessdebtafirmhasperdollaroftotalassets.
D. Higheristhenumberofoutstandingsharesofstock.
E. Loweristhebalanceinaccountspayable.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Understand
Difficulty:Intermediate
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Financialandoperatingleverage

25.
Thebookvalueofafirmis:



A. Equivalenttothefirm'smarketvalueprovidedthatthefirmhassomefixedassets.
B. Basedonhistoricalcost.
C. Generallygreaterthanthemarketvaluewhenfixedassetsareincluded.
D. Moreofafinancialthananaccountingvaluation.
E. Adjustedtothemarketvaluewheneverthemarketvalueexceedsthestatedbookvalue.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Understand
Difficulty:Basic
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Marketandbookvalues

26.
Whichofthefollowingis(are)includedinthemarketvalueofafirmbutis(are)excludedfromthefirm'sbookvalue?


I.Valueofmanagementskills.
II.Valueofacopyright.
III.Valueofthefirm'sreputation.
IV.Valueofemployee'sexperience.


A. Ionly.
B. IIonly.
C. IIIandIVonly.
D. I,II,andIIIonly.
E. I,III,andIVonly.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Intermediate
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Marketandbookvalues

27.
Yourecentlypurchasedagrocerystore.Atthetimeofthepurchase,thestore'smarketvalueequaleditsbookvalue.Thepurchase
includedthebuilding,thefixtures,andtheinventory.Whichoneofthefollowingismostapttocausethemarketvalueofthisstoretobe
lowerthanthebookvalue?



A. Asuddenandunexpectedincreaseininflation.
B. Thereplacementofoldinventoryitemswithmoredesirableproducts.
C. Improvementstothesurroundingareabyotherstoreowners.
D. Constructionofanewrestrictedaccesshighwaylocatedbetweenthestoreandthesurroundingresidentialareas.
E. Additionofastoplightatthemainentrancetothestore'sparkinglot.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Apply
Difficulty:Intermediate
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Marketandbookvalues

28.
Whichoneofthefollowingistrueaccordingtogenerallyacceptedaccountingprinciples?



A. Depreciationisrecordedbasedonthemarketvalueprinciple.
B. Incomeisrecordedbasedontherealizationprinciple.
C. Costsarerecordedbasedontherealizationprinciple.
D. Depreciationisrecordedbasedontherecognitionprinciple.
E. Costsofgoodssoldarerecordedbasedonthematchingprinciple.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0202Thedifferencebetweenaccountingincomeandcashflow.
Section:2.2TheIncomeStatement
Topic:GenerallyAcceptedAccountingPrinciples(GAAP)

29.
Whichoneoftheseismostapttobeafixedcost?



A.
Rawmaterials.

B.
Manufacturingwages.

C.
Managementbonuses.

D.
Officesalaries.

E.
Shippingandfreight.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0202Thedifferencebetweenaccountingincomeandcashflow.
Section:2.2TheIncomeStatement
Topic:Fixedandvariablecosts

30.
Whichofthefollowingareexpensesforaccountingpurposesbutarenotoperatingcashflowsforfinancialpurposes?


I.Interestexpense.
II.Taxes.
III.Costofgoodssold.

IV.Depreciation.


A.
IVonly.

B.
IIandIVonly.

C.
IandIIIonly.

D.
IandIVonly.

E.
I,II,andIVonly.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0202Thedifferencebetweenaccountingincomeandcashflow.
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.2TheIncomeStatement
Section:2.4CashFlow
Topic:Operatingcashflow

31.
Whichoneofthefollowingstatementsrelatedtoanincomestatementiscorrect?Assumeaccrualaccountingisused.



A. Theadditiontoretainedearningsisequaltonetincomeplusdividendspaid.
B. Creditsalesarerecordedontheincomestatementwhenthecashfromthesaleiscollected.
C. Thelaborcostsforproducingaproductareexpensedwhentheproductissold.
D. Interestisanoncashexpense.
E. Depreciationincreasesthemarginaltaxrate.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Understand
Difficulty:Intermediate
LearningObjective:0202Thedifferencebetweenaccountingincomeandcashflow.
LearningObjective:0203Thedifferencebetweenaverageandmarginaltaxrates.
Section:2.2TheIncomeStatement
Section:2.3Taxes
Topic:Incomestatement

32.
Whichoneofthefollowingstatementsrelatedtotaxesiscorrect?



A. Themarginaltaxratemustbeequaltoorlowerthantheaveragetaxrateforafirm.
B. Thetaxforafirmiscomputedbymultiplyingthefirm'scurrentmarginaltaxratetimesthetaxableincome.
C. Additionalincomeistaxedatafirm'saveragetaxrate.
D. Giventhetaxstructurein2014,thehighestaveragecorporatetaxrateis34percent.
E. Themarginaltaxrateforafirmcanbeeitherhigherthanorthesameastheaveragetaxrate.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Intermediate
LearningObjective:0203Thedifferencebetweenaverageandmarginaltaxrates.
Section:2.3Taxes
Topic:Taxes

33.
Asof2015,whichoneofthefollowingstatementsconcerningcorporateincometaxesiscorrect?



A. Thelargestcorporationshaveanaveragetaxrateof39percent.
B. Thelowestmarginalrateis25percent.
C. Afirm'staxiscomputedonanincrementalbasis.
D. Afirm'smarginaltaxratewillgenerallybelowerthanitsaveragetaxrateoncethefirm'sincomeexceeds$50,000.
E. Whenanalyzinganewproject,theaveragetaxrateshouldbeused.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Understand
Difficulty:Intermediate
LearningObjective:0203Thedifferencebetweenaverageandmarginaltaxrates.
Section:2.3Taxes
Topic:Taxes

34.
Depreciationforataxpayingfirm:



A. Increasesexpensesandlowerstaxes.
B. Increasesthenetfixedassetsasshownonthebalancesheet.
C.
Reducesboththenetfixedassetsandthecostsofafirm.

D. Isanoncashexpensethatincreasesthenetincome.
E. Decreasesnetfixedassets,netincome,andoperatingcashflows.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Understand
Difficulty:Intermediate
LearningObjective:0202Thedifferencebetweenaccountingincomeandcashflow.
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.2TheIncomeStatement
Section:2.4CashFlow
Topic:Depreciation

35.
Whichoneofthefollowingstatementsrelatedtoanincomestatementiscorrect?



A. Interestexpenseincreasestheamountoftaxdue.
B. Depreciationdoesnotaffecttaxessinceitisanoncashexpense.
C. Netincomeisdistributedtodividendsandpaidinsurplus.
D. Taxesreducebothnetincomeandoperatingcashflow.
E. Interestexpenseisincludedinoperatingcashflow.

36.
Whichoneofthefollowingstatementsiscorrectconcerningacorporationwithtaxableincomeof$125,000?



A. Netincomeminusdividendspaidwillequaltheendingretainedearningsfortheyear.
B. Anincreaseindepreciationwillincreasetheoperatingcashflow.
C. Netincomedividedbythenumberofsharesoutstandingwillequalthedividendspershare.
D. Interestpaidwillbeincludedinbothnetincomeandoperatingcashflow.
E. Anincreaseinthetaxratewillincreasebothnetincomeandoperatingcashflow.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Understand
Difficulty:Intermediate
LearningObjective:0202Thedifferencebetweenaccountingincomeandcashflow.
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.2TheIncomeStatement
Section:2.4CashFlow
Topic:Incomestatement

37.
Whichoneofthefollowingwillincreasethecashflowfromassets,allelseequal?



A. Decreaseincashflowtostockholders.
B. Decreaseinoperatingcashflow.
C. Decreaseinthechangeinnetworkingcapital.
D. Decreaseincashflowtocreditors.
E. Increaseinnetcapitalspending.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Understand
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Cashflowfromassets

38.
Forataxpayingfirm,anincreasein_____willcausethecashflowfromassetstoincrease.



A.
Depreciation.

B.
Netcapitalspending.

C.
Changeinnetworkingcapital.

D.
Taxes.

E.
Productioncosts.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Understand
Difficulty:Intermediate
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Cashflowfromassets

39.
Whichoneofthefollowingmustbetrueifafirmhadanegativecashflowfromassets?



A. Thefirmborrowedmoney.
B. Thefirmacquirednewfixedassets.
C. Thefirmhadanetlossfortheperiod.
D. Thefirmutilizedoutsidefunding.
E. Newlyissuedsharesofstockweresold.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Understand
Difficulty:Intermediate
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Cashflowfromassets

40.
Anincreaseinthedepreciationexpensewilldowhichofthefollowingforafirmwithtaxableincomeof$80,000?


I.Increasenetincome.
II.Decreasenetincome.
III.Increasethecashflowfromassets.
IV.Decreasethecashflowfromassets.


A. Ionly.
B.
IIonly.

C. IandIIIonly.
D. IIandIIIonly.
E. IIandIVonly.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Understand
Difficulty:Intermediate
LearningObjective:0202Thedifferencebetweenaccountingincomeandcashflow.
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.2TheIncomeStatement
Section:2.4CashFlow
Topic:Depreciation

41.
WhichoneofthefollowingisNOTincludedincashflowfromassets?



A. Accountspayable.
B. Inventory.
C. Sales.
D. Interestexpense.
E. Cashaccount.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Cashflowfromassets

42.
Netcapitalspending:



A. Isequaltoendingnetfixedassetsminusbeginningnetfixedassets.
B. Isequaltozeroifthedecreaseinthenetfixedassetsisequaltothedepreciationexpense.
C.
Reflectsthenetchangesintotalassetsoverastatedperiodoftime.

D. Isequivalenttothecashflowfromassetsminustheoperatingcashflowminusthechangeinnetworkingcapital.
E. Isequaltothenetchangeinthecurrentaccounts.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Understand
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Capitalspending

43.
Whichoneofthefollowingstatementsrelatedtothecashflowtocreditorsiscorrect?



A. Ifthecashflowtocreditorsispositive,thenthefirmmusthaveborrowedmoremoneythanitrepaid.
B. Ifthecashflowtocreditorsisnegative,thenthefirmmusthaveanegativecashflowfromassets.
C. Apositivecashflowtocreditorsrepresentsanetcashoutflowfromthefirm.
D. Apositivecashflowtocreditorsmeansthatafirmhasincreaseditslongtermdebt.
E. Ifthecashflowtocreditorsiszero,thenafirmhasnolongtermdebt.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Understand
Difficulty:Intermediate
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Cashflowtocreditors

44.
Apositivecashflowtostockholdersindicateswhichoneofthefollowingwithcertainty?



A. Thedividendspaidexceededthenetnewequityraised.
B. Theamountofthesaleofcommonstockexceededtheamountofdividendspaid.
C. Nodividendsweredistributed,butnewsharesofstockweresold.
D. Boththecashflowtoassetsandthecashflowtocreditorsmustbenegative.
E. Boththecashflowtoassetsandthecashflowtocreditorsmustbepositive.

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Remember
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow

45.
Afirmhas$680ininventory,$2,140infixedassets,$210inaccountsreceivables,$250inaccountspayable,and$80incash.Whatis
theamountofthenetworkingcapital?



A. $970
B. $720
C. $640
D. $3,110
E. $2,860

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
Difficulty:Basic
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Networkingcapital

46.
Afirmhasnetworkingcapitalof$560.Longtermdebtis$3,970,totalassetsare$7,390,andfixedassetsare$3,910.Whatisthe
amountofthetotalliabilities?



A. $2,050
B. $2,920
C. $4,130
D. $7,950
E. $6,890

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
Difficulty:Intermediate
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Networkingcapital

47.
Afirmhascommonstockof$6,200,paidinsurplusof$9,100,totalliabilitiesof$8,400,currentassetsof$5,900,andfixedassetsof
$21,200.Whatistheamountoftheshareholders'equity?



A. $6,900
B. $15,300
C. $18,700
D. $23,700
E. $35,500

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
Difficulty:Intermediate
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Balancesheet

48.
Yourfirmhastotalassetsof$4,900,fixedassetsof$3,200,longtermdebtof$2,900,andshorttermdebtof$1,400.Whatistheamount
ofnetworkingcapital?



A. $100
B. $300
C. $600
D. $1,700
E. $1,800

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
Difficulty:Basic
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Networkingcapital

49.
BonnerAutomotivehasshareholders'equityof$218,700.Thefirmowesatotalof$141,000ofwhich40percentispayablewithinthe
nextyear.Thefirmhasnetfixedassetsof$209,800.Whatistheamountofthenetworkingcapital?



A. $149,900
B. $93,500
C. $125,600
D. $47,500
E. $56,500

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
Difficulty:Intermediate
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Networkingcapital

50.
Fouryearsago,ShipExpresspurchasedamailingmachineatacostof$218,000.Thisequipmentiscurrentlyvaluedat$97,400on
today'sbalancesheetbutcouldactuallybesoldfor$92,900.Thisistheonlyfixedassetthefirmowns.Networkingcapitalis$41,300
andlongtermdebtis$102,800.Whatisthebookvalueofshareholders'equity?



A. $31,400
B. $47,700
C. $35,900
D. $249,400
E. $253,900

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Apply
Difficulty:Basic
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Marketandbookvalues

51.
DrewownsTheWhatNotShop,whichheistryingtosellsothathecanretireandtravel.Theshopownsthebuildinginwhichitis
located.Thisbuildingwasbuiltatacostof$647,000andiscurrentlyappraisedat$819,000.Thecountersandfixturesoriginallycost
$148,000andarecurrentlyvaluedat$65,000.Theinventoryisvaluedonthebalancesheetat$319,000andhasaretailmarketvalue
equalto1.1timesitscost.Jakeexpectsthestoretocollect96percentofthe$21,700inaccountsreceivable.Thefirmhas$26,800in
cashandhastotaldebtof$414,700.Whatisthemarketvalueofthisfirm?



A. $867,832
B. $900,166
C. $695,832
D. $775,632
E. $1,190,332

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
Difficulty:Basic
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Marketandbookvalues

52.
JensenEnterprisespaid$1,300individendsand$920ininterestthispastyear.Commonstockincreasedby$1,200andretainedearnings
decreasedby$310.Whatisthenetincomefortheyear?



A. $210
B. $990
C. $1,610
D. $1,910
E. $2,190

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Apply
Difficulty:Basic
LearningObjective:0202Thedifferencebetweenaccountingincomeandcashflow.
Section:2.2TheIncomeStatement
Topic:Incomestatement

53.
Andre'sBakeryhassalesof$613,000withcostsof$479,000.Interestexpenseis$26,000anddepreciationis$42,000.Thetaxrateis25
percent.Whatisthenetincome?



A. $42,750
B.
$49,500

C. $39,000
D. $81,000
E. $74,550

54.
KaylorEquipmentRentalpaid$75individendsand$511ininterestexpense.Theadditiontoretainedearningsis$418andnetnew
equityis$500.Thetaxrateis35percent.Salesare$15,900anddepreciationis$680.Whataretheearningsbeforeinterestandtaxes?



A. $589.46
B. $1,269.46
C. $1,331.54
D. $9,560.85
E. $10,949.46

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
Difficulty:Intermediate
LearningObjective:0202Thedifferencebetweenaccountingincomeandcashflow.
Section:2.2TheIncomeStatement
Topic:Incomestatement

55.
Giventhetaxratesasshown,whatistheaveragetaxrateforafirmwithtaxableincomeof$289,740?



A. 26.68percent
B. 35.87percent
C. 33.22percent
D. 34.67percent
E. 39.00percent

AACSB:Analytic
Blooms:Apply
Difficulty:Basic
LearningObjective:0203Thedifferencebetweenaverageandmarginaltaxrates.
Section:2.3Taxes
Topic:Taxes

56.
Thetaxratesareasshown.NevadaMiningcurrentlyhastaxableincomeof$97,800.Howmuchadditionaltaxwillthefirmoweif
taxableincomeincreasesby$21,000?



A. $8,080
B. $8,130
C. $8,155
D. $8,170
E. $8,190

AACSB:Analytic
Blooms:Apply
Difficulty:Basic
LearningObjective:0203Thedifferencebetweenaverageandmarginaltaxrates.
Section:2.3Taxes
Topic:Taxes

57.
WinstonIndustrieshadsalesof$843,800andcostsof$609,900.Thefirmpaid$38,200ininterestand$18,000individends.Italso
increasedretainedearningsby$62,138fortheyear.Thedepreciationwas$76,400.Whatistheaveragetaxrate?



A. 32.83percent
B. 33.33percent
C. 38.17percent
D. 43.39percent
E. 48.87percent

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
Difficulty:Intermediate
LearningObjective:0203Thedifferencebetweenaverageandmarginaltaxrates.
Section:2.3Taxes
Topic:Taxes

58.
RTFOilhastotalsalesof$911,400andcostsof$787,300.Depreciationis$52,600andthetaxrateis34percent.Thefirmdoesnothave
anyinterestexpense.Whatistheoperatingcashflow?



A. $148,410
B. $68,320
C. $79,924
D. $81,417
E. $99,790

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Operatingcashflow

59.
NielsenAutoPartshadbeginningnetfixedassetsof$218,470andendingnetfixedassetsof$209,411.Duringtheyear,assetswitha
combinedbookvalueof$6,943weresold.Depreciationfortheyearwas$42,822.Whatistheamountofnetcapitalspending?



A. $33,763
B. $40,706
C. $58,218
D. $65,161
E. $67,408

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Apply
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Capitalspending

60.
Atthebeginningoftheyear,afirmhadcurrentassetsof$121,306andcurrentliabilitiesof$124,509.Attheendoftheyear,thecurrent
assetswere$122,418andthecurrentliabilitieswere$103,718.Whatisthechangeinnetworkingcapital?



A. $19,679
B. $11,503
C. $9,387
D. $1,809
E. $21,903

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Apply
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Networkingcapital

61.
Atthebeginningoftheyear,thelongtermdebtofafirmwas$72,918andtotaldebtwas$138,407.Attheendoftheyear,longterm
debtwas$68,219andtotaldebtwas$145,838.Theinterestpaidwas$6,430.Whatistheamountofthecashflowtocreditors?



A. $1,731
B. $1,001
C. $11,129
D. $13,861
E. $19,172

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Apply
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Cashflowtocreditors

62.
ErniesHomeRepairhadbeginninglongtermdebtof$51,207andendinglongtermdebtof$36,714.Thebeginningandendingtotal
debtbalanceswere$59,513and$42,612,respectively.Theinterestpaidwas$2,808.Whatistheamountofthecashflowtocreditors?



A. $11,685
B. $11,272
C. $17,301
D. $17,418
E. $11,174

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Apply
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Cashflowtocreditors

63.
TheDailyNewshadnetincomeof$121,600ofwhich40percentwasdistributedtotheshareholdersasdividends.Duringtheyear,the
companysold$75,000worthofcommonstock.Whatisthecashflowtostockholders?



A. $75,000
B. $26,360
C. $2,040
D. $123,640
E. $147,960

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Apply
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow

64.
TheLakesideInnhadoperatingcashflowof$48,450.Depreciationwas$6,700andinterestpaidwas$2,480.Anettotalof$2,620was
paidonlongtermdebt.Thefirmspent$24,000onfixedassetsanddecreasednetworkingcapitalby$1,330.Whatistheamountofthe
cashflowtostockholders?



A. $5,100
B. $7,830
C. $18,020
D. $19,998
E. $20,680

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
Difficulty:Intermediate
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow

65.
ThefollowinginformationpertainstoGalaxyInteriors:

Whatisthenetcapitalspendingfor2015?



A. $382
B. $1,229
C. $127
D. $1,993
E. $1,172

AACSB:Analytic
Blooms:Apply
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Capitalspending

66.
ThefollowinginformationpertainstoGalaxyInteriors:

Whatistheamountofthenoncashexpensesfor2015?



A. $740
B. $1,282
C. $1,333
D. $1,611
E. $2,351

AACSB:Analytic
Blooms:Remember
Difficulty:Basic
LearningObjective:0202Thedifferencebetweenaccountingincomeandcashflow.
Section:2.2TheIncomeStatement
Topic:Noncashitems

67.
ThefollowinginformationpertainstoGalaxyInteriors:

Whatisthecashflowtocreditorsfor2015?



A. $530
B. $432
C. $1,839
D. 2,132
E. $3,094

AACSB:Analytic
Blooms:Apply
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Cashflowtocreditors

68.
ThefollowinginformationpertainstoGalaxyInteriors:

Whatistheoperatingcashflowfor2015?



A. $2,114
B. $2,900
C. $2,985
D. $3,536
E. $4,267

AACSB:Analytic
Blooms:Apply
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Operatingcashflow

69.
ThefollowinginformationpertainstoGalaxyInteriors:

Whatisthefreecashflowfor2015?



A. $1,732
B. $2,247
C. $2,961
D. $3,915
E. $4,267

AACSB:Analytic
Blooms:Analyze
Difficulty:Intermediate
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Freecashflow

70.
ThefollowinginformationpertainstoGalaxyInteriors:

Whatistheamountofdividendspaidfor2015?



A. $0
B. $1,948
C. $1,374
D. 800
E. $574

AACSB:Analytic
Blooms:Apply
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Cashflowtostockholders

71.
ThefollowinginformationpertainstoGalaxyInteriors:

Giventhesefinancialstatements,whichoneofthefollowingiscorrectfor2015?



A. Currentassetsincreased.
B. Thefirmreduceditstotaldebt.
C. Theaveragetaxrateis34percent.
D. Thefirmpaidmoretoitssuppliersthanitborrowed.
E. Thenoncashexpensestotaled$2,893.

72.
YouhavegatheredthisinformationonJJEnterprises:

2014 2015
Sales $6,318 $7,202
COGS 3,945 4,460
Interest 303 277
Depreciation 1,204 1,196
Cash 672 418
Accountsreceivables 601 578
Currentliabilities 414 463
Inventory 1,215 1,598
Longtermdebt 4,780 4,103
Netfixedassets 7,700 7,330
Shareholdersequity 4,994 5,358
Taxes 217 317

Whatisthenetworkingcapitalfor2015?


A.
$859

B. $533
C. $1,262
D. $2,131
E. $2,074

73.
YouhavegatheredthisinformationonJJEnterprises:


2014 2015
Sales $6,318 $7,202
COGS 3,945 4,460
Interest 303 277
Depreciation 1,204 1,196
Cash 672 418
Accountsreceivables 601 578
Currentliabilities 414 463
Inventory 1,215 1,598
Longtermdebt 4,780 4,103
Netfixedassets 7,700 7,330
Shareholdersequity 4,994 5,358
Taxes 217 317

Whatisthechangeinnetworkingcapitalfrom2014to2015?


A. $57
B. $70
C. $105
D. $40
E. $326

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
Difficulty:Intermediate
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Networkingcapital

74.
YouhavegatheredthisinformationonJJEnterprises:


2014 2015
Sales $6,318 $7,202
COGS 3,945 4,460
Interest 303 277
Depreciation 1,204 1,196
Cash 672 418
Accountsreceivables 601 578
Currentliabilities 414 463
Inventory 1,215 1,598
Longtermdebt 4,780 4,103
Netfixedassets 7,700 7,330
Shareholdersequity 4,994 5,358
Taxes 217 317

Whatisthenetcapitalspendingfor2015?


A. $117
B. $826
C. $834
D. $370
E. $421

75.
YouhavegatheredthisinformationonJJEnterprises:


2014 2015
Sales $6,318 $7,202
COGS 3,945 4,460
Interest 303 277
Depreciation 1,204 1,196
Cash 672 418
Accountsreceivables 601 578
Currentliabilities 414 463
Inventory 1,215 1,598
Longtermdebt 4,780 4,103
Netfixedassets 7,700 7,330
Shareholdersequity 4,994 5,358
Taxes 217 317

Whatistheoperatingcashflowfor2015?


A. $1,229
B. $1,367
C. $2,425
D. $1,766
E. $1,823

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
Difficulty:Intermediate
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Operatingcashflow

76.
YouhavegatheredthisinformationonJJEnterprises:


2014 2015
Sales $6,318 $7,202
COGS 3,945 4,460
Interest 303 277
Depreciation 1,204 1,196
Cash 672 418
Accountsreceivables 601 578
Currentliabilities 414 463
Inventory 1,215 1,598
Longtermdebt 4,780 4,103
Netfixedassets 7,700 7,330
Shareholdersequity 4,994 5,358
Taxes 217 317

Whatisthecashflowfromassetsfor2015?


A. $1,430
B. $1,542
C. $1,656
D. $2,810
E. $3,308

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
Difficulty:Intermediate
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Cashflowfromassets

77.
YouhavegatheredthisinformationonJJEnterprises:


2014 2015
Sales $6,318 $7,202
COGS 3,945 4,460
Interest 303 277
Depreciation 1,204 1,196
Cash 672 418
Accountsreceivables 601 578
Currentliabilities 414 463
Inventory 1,215 1,598
Longtermdebt 4,780 4,103
Netfixedassets 7,700 7,330
Shareholdersequity 4,994 5,358
Taxes 217 317

Whatisnetnewborrowingfor2015?


A. $677
B. $400
C. $400
D. $677
E. $1,077

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Apply
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Cashflowtocreditors

78.
YouhavegatheredthisinformationonJJEnterprises:


2014 2015
Sales $6,318 $7,202
COGS 3,945 4,460
Interest 303 277
Depreciation 1,204 1,196
Cash 672 418
Accountsreceivables 601 578
Currentliabilities 414 463
Inventory 1,215 1,598
Longtermdebt 4,780 4,103
Netfixedassets 7,700 7,330
Shareholdersequity 4,994 5,358
Taxes 217 317

Whatisthecashflowtocreditorsfor2015?


A. $1,023
B. $1,577
C. $954
D. $954
E. 577

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
Difficulty:Basic
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Cashflowtocreditors

79.
YouhavegatheredthefollowinginformationonJJEnterprises.Thefirmneithersoldnorrepurchasedanystockduringtheyear.


2014 2015
Sales $6,318 $7,202
COGS 3,945 4,460
Interest 303 277
Depreciation 1,204 1,196
Cash 672 418
Accountsreceivables 601 578
Currentliabilities 414 463
Inventory 1,215 1,598
Longtermdebt 4,780 4,103
Netfixedassets 7,700 7,330
Shareholdersequity 4,994 5,358
Taxes 217 317

Whatisthedividendamountpaidin2015?


A. $588
B. $0
C. $364
D. $709
E. $515

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
Difficulty:Challenge
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow

80. Usethebelowinformationtoanswerthefollowingquestion.

Costofgoodssold $6,409
Interest 315
Dividends 420
Depreciation 811
Changeinretainedearnings 296
Taxrate 34%

Whatisthetaxableincomegiventheaboveinformation?



A. $1,051.00
B. $1,367.78
C. $1,084.85
D. $2,776.41
E. $636.36

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
Difficulty:Intermediate
LearningObjective:0202Thedifferencebetweenaccountingincomeandcashflow.
Section:2.2TheIncomeStatement
Topic:Incomestatement

81. Usethebelowinformationtoanswerthefollowingquestion.

Costofgoodssold $92,511
Interest 4,608
Dividends 3,200
Depreciation 18,709
Changeinretainedearnings 14,308
Taxrate 35%

Whatistheoperatingcashflowgiventheaboveinformation?



A. $40,825.00
B. $42,122.42
C. $36,462.58
D. $31,543.38
E. $36,741.42

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
Difficulty:Intermediate
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Operatingcashflow

82.
BeachFrontIndustrieshassalesof$546,000,costsof$295,000,depreciationexpenseof$37,000,interestexpenseof$15,000,andatax
rateof32percent.Thefirmpaid$59,000incashdividends.Whatistheadditiontoretainedearnings?



A. $76,320
B. $81,700
C. $95,200
D. $103,460
E. $121,680

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Apply
EOC:203
LearningObjective:0202Thedifferencebetweenaccountingincomeandcashflow.
Section:2.2TheIncomeStatement
Topic:Incomestatement

83.
TheWidgetCo.purchasednewmachinerythreeyearsagofor$4million.ThemachinerycanbesoldtotheRomanCo.todayfor$2
million.TheWidgetCo.'scurrentbalancesheetshowsnetfixedassetsof$2,500,000,currentliabilitiesof$1,375,000,andnetworking
capitalof$725,000.Ifallthecurrentassetswereliquidatedtoday,thecompanywouldreceive$1.9millionincash.Thebookvalueof
theWidgetCo.'sassetstodayis_____andthemarketvalueofthoseassetsis_____.



A. $4,600,000;$3,900,000
B. $4,600,000;$3,125,000
C. $5,000,000;$3,125,000
D. $5,000,000;$3,900,000
E. $6,500,000;$3,900,000

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Apply
EOC:213
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Marketandbookvalues

84.
BoyerEnterpriseshad$200,000intaxableincome.Whatisthefirm'saveragetaxratebasedontheratesshowninthefollowingtable?


Taxableincome Taxrate
$050,000 15%
50,00175,000 25%
75,001100,000 34%
100,001335,000 39%


A. 28.25percent
B. 30.63percent
C. 32.48percent
D. 36.50percent
E. 39.00percent

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Apply
EOC:206
LearningObjective:0203Thedifferencebetweenaverageandmarginaltaxrates.
Section:2.3Taxes
Topic:Taxes

85.
WebsterWorldhassalesof$13,800,costsof$5,800,depreciationexpenseof$1,100,andinterestexpenseof$700.Whatisthe
operatingcashflowifthetaxrateis32percent?



A. $7,704
B. $5,969
C. $6,016
D. $7,036
E. $7,100

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Apply
EOC:207
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Operatingcashflow

86.
Afirmsbalancesheetshowedbeginningnetfixedassetsof$3.6millionandendingnetfixedassetsof$3.4million.Thedepreciation
expenseis$900,000.Whatwasthenetcapitalspendingfortheyear?



A. $500,000
B. $400,000
C. $700,000
D. $1,100,000
E. $1,300,000

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Apply
EOC:208
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Capitalspending

87.
GlobalTourshadcurrentassetsof$1,360andcurrentliabilitiesof$940asofthebeginningoftheyear.Attheendoftheyear,current
assetsare$1,720andcurrentliabilitiesare$1,080.Whatwasthechangeinnetworkingcapitalfortheyear?



A. $220
B. $170
C. $190
D. $940
E. $1,060

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Apply
EOC:209
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Networkingcapital

88.
ThebeginningofyearbalancesheetofTheBeachShoppeshowedlongtermdebtof$2.1million,whiletheendofyearbalancesheet
showedlongtermdebtof$2.3million.Theannualincomestatementshowedaninterestexpenseof$250,000.Whatwasthecashflow
tocreditorsfortheyear?



A. $200,000
B. $150,000
C. $50,000
D. $200,000
E. $450,000

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Apply
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Cashflowtocreditors

89.
Atthebeginningoftheyear,thebalancesheetofTheOutletshowed$800,000inthecommonstockaccountand$2.6millioninthe
additionalpaidinsurplusaccount.Theendofyearbalancesheetshowed$872,000and$4.8millioninthesametwoaccounts,
respectively.Thecompanypaidout$150,000incashdividendsduringtheyear.Whatisthecashflowtostockholdersfortheyear?



A. $1,972,000
B. $2,122,000
C. $628,000
D. $222,000
E. $78,000

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Apply
EOC:211
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow

90.
SupposeyouaregiventhefollowinginformationforBaysideBakery:sales=$30,000;costs=$15,000;additiontoretainedearnings=
$4,221;dividendspaid=$469;interestexpense=$1,300;taxrate=30percent.Whatistheamountofthedepreciationexpense?



A. $4,820
B. $5,500
C. $7,000
D. $8,180
E. $9,500

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
EOC:215
LearningObjective:0202Thedifferencebetweenaccountingincomeandcashflow.
Section:2.2TheIncomeStatement
Topic:Incomestatement

91.
TheOversideMarketisobligatedtopayitscreditors$11,800today.Thefirm'sassetshaveacurrentmarketvalueof$10,900.Whatis
thecurrentmarketvalueoftheshareholders'equity?



A. $600
B. $500
C. $0
D. $500
E. $600

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
EOC:217
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue.
Section:2.1TheBalanceSheet
Topic:Marketandbookvalues

92.
Duringtheyear,RITCorp.hadsalesof$565,600.Costsofgoodssold,administrativeandsellingexpenses,anddepreciationexpenses
were$476,000,$58,800,and$42,800,respectively.Inaddition,thecompanyhadaninterestexpenseof$112,000andataxrateof32
percent.Whatistheoperatingcashflowfortheyear?Ignoreanytaxlosscarrybackorcarryforwardprovisions.



A. $17,920
B. $21,840
C. $30,800
D. $52,600
E. $77,840

AACSB:Analytic
Accessibility:KeyboardNavigation
Blooms:Analyze
EOC:219
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements.
Section:2.4CashFlow
Topic:Operatingcashflow

Chapter02TestBankStaticSummary

Category #ofQuestions
AACSB:Analytic 92
Accessibility:KeyboardNavigation 83
Blooms:Analyze 22
Blooms:Apply 26
Blooms:Remember 26
Blooms:Understand 18
Difficulty:Basic 49
Difficulty:Challenge 2
Difficulty:Intermediate 31
EOC:203 1
EOC:206 1
EOC:207 1
EOC:208 1
EOC:209 1
EOC:211 1
EOC:213 1
EOC:215 1
EOC:217 1
EOC:219 1
LearningObjective:0201Thedifferencebetweenaccountingvalue(orbookvalue)andmarketvalue. 28
LearningObjective:0202Thedifferencebetweenaccountingincomeandcashflow. 18
LearningObjective:0203Thedifferencebetweenaverageandmarginaltaxrates. 9
LearningObjective:0204Howtodetermineafirmscashflowfromitsfinancialstatements. 43
Section:2.1TheBalanceSheet 28
Section:2.2TheIncomeStatement 17
Section:2.3Taxes 9
Section:2.4CashFlow 44
Topic:Balancesheet 3
Topic:Capitalspending 5
Topic:Cashflowfromassets 6
Topic:Cashflowtocreditors 8
Topic:Cashflowtostockholders 1
Topic:Depreciation 2
Topic:Financialandoperatingleverage 1
Topic:Financialstatements 1
Topic:Fixedandvariablecosts 1
Topic:Freecashflow 2
Topic:GenerallyAcceptedAccountingPrinciples(GAAP) 2
Topic:Incomestatement 10
Topic:Liquidity 3
Topic:Marketandbookvalues 8
Topic:Networkingcapital 12
Topic:Noncashitems 2
Topic:Operatingcashflow 8
Topic:Taxes 8