The change between a firm's beginning cash balance and ending cash balance would equal

 Which of the following represents a source of cash?

A) A decrease in accounts payable

B) A decrease in accounts receivable

C) Payment of dividends

D) An increase in inventories

The change between a firm's beginning cash balance and ending cash balance would equal

A) cash flow from operations + cash flow from investing activities + cash flow from financing activities.

B) the change in current assets minus the change in current liabilities.

C) net income plus new borrowing minus asset purchases.

D) total assets minus total liabilities minus total stockholders' equity.

Which of the following does NOT represent cash outflows to the firm?

A) Taxes

B) Interest payments

C) Dividends

D) Depreciation

The ratio of ________ to ________ is an indicator of the quality of a firm's earnings.

A) cash flow from operations, net income

B) liabilities, assets

C) dividends, interest expense

D) cash flow from operations, capital expenditures

Operating cash flow will increase with a decrease in

A) inventories.

B) current liabilities.

C) depreciation expense.

D) capital expenditures.

Balance sheet and other accounts for GPA are listed below in alphabetical order. Use these accounts to construct GPA's

Balance sheet and other accounts for GPA are listed below in alphabetical order.  Use these accounts to construct GPA's balance sheet for 2013.  All balance sheet accounts are shown, but some accounts will not be used.  All amounts are in millions of dollars.

Accounts payable                 $1900

Accounts receivable                $661

Cash                                         $1,000

Common stock                     $2,000

EBIT                                         $1,968

Interest expense                      $8.00               

Inventories                             $1,620

Long-term debt                         $890

Net plant & equipment     $2,563

Other current assets                $645

Other long-term assets           $576

Retained earnings                $2,080

Short-term debt                        $195

Taxes                                           $778

Answer: 

Balance Sheet: GPA Inc.	2013
Cash	$1,000	Accounts payable	$1,900
Accounts receivable	661	Short-term debt	195
Inventories	1,620	Total current liabilities	$2,095
Other current assets	645	Long-term debt	890
Total current assets	$3,926	Common stock	2,000
Net plant & equipment	2,563	Retained earnings	2,080
Other long-term assets	576
Total assets	$7,065	Total liab. & equity	$7,065

Grass Gadgets had sales of $30 million and net income of $2 million in 2008. Grass paid a dividend of $1.5 million

Grass Gadgets had sales of $30 million and net income of $2 million in 2008. Grass paid a dividend of $1.5 million. Assuming that their beginning balance for retained earnings was $3 million, calculate their ending balance for retained earnings.

A) $2.5 million

B) $3 million

C) $3.5 million

D) $4 million

Total equity on the balance sheet increases as dividends paid increases.

Answer:  FALSE

A balance sheet is a statement of the financial position of the firm on a given date, including its asset holdings, liabilities, and equity.

Answer:  TRUE

Under current accounting rules, plant and equipment appear on a company's balance sheet valued at replacement value.

Answer:  FALSE

When a corporation sells common stock to investors, the amount is added to revenue on the income statement.

Answer:  FALSE

An advantage of balance sheet numbers is that assets reflect current market values.

Answer:  FALSE

A firm's balance sheet provides a representation of the current market value of the company.

Answer:  FALSE

Gross plant and equipment minus accumulated depreciation represents the fair market value of a company's fixed assets.

Answer:  FALSE

Patriot Corporation purchased manufacturing equipment with an expected useful life of five years

Patriot Corporation purchased manufacturing equipment with an expected useful life of five years.  The purchase of the machinery would be shown as

A) an expense on the balance sheet.

B) an expense on the income statement.

C) an asset on the balance sheet.

D) both an expense and an asset.

Which of the following best describes a balance sheet?

A) Reports cash receipts and cash disbursements for a specific accounting period

B) Reports investment activities for a specified accounting period

C) Reports revenues and expenses for a specific accounting period

D) Reports the amount and composition of assets and liabilities at a specified point in time

Which of the following would NOT be included as an asset on a corporate balance sheet?

A) Accounts receivable

B) Common stock

C) Inventory

D) Buildings

Which of the following would NOT be included as a liability in a corporate balance sheet?

A) Notes payable

B) Accounts payable

C) Bonds

D) Accumulated Depreciation

Which of the following would NOT be included as equity in a corporate balance sheet?

A) Cash

B) Paid in capital

C) Retained earnings

D) Common stock

When a company pays a dividend on common stock, it appears as

A) an expense on the income statement.

B) a reduction in the amount of retained earnings.

C) a current liability on the balance sheet.

D) dividend payments have no effect on the financial statements.

Your firm has the following balance sheet statement items: total current liabilities of $805,000; total assets of $2,655,000

Your firm has the following balance sheet statement items: total current liabilities of $805,000; total assets of $2,655,000; fixed and other assets of $1,770,000; and long-term debt of $200,000. What is the amount of the firm's total current assets?

A) $885,000

B) $1,550,000

C) $600,000

D) $325,000

 

Which of the following is not a current asset?

A) Accounts payable

B) Marketable securities

C) Accounts receivable

D) Inventory

2) Net plant and equipment is

A) plant and equipment purchases less amount borrowed to finance purchases.

B) current year plant and equipment purchases less current year's depreciation expense.

C) gross plant and equipment less accumulated depreciation.

D) plant and equipment at current market valuations.

Your firm has the following balance sheet statement items: total current liabilities of $805,000; total assets of $2,655,000; fixed and other assets of $1,770,000; and long-term debt of $200,000. What is the amount of the firm's net working capital?

A) $25,000

B) $325,000

C) $770,000

D) $80,000

Goodwin Enterprises had a gross profit of $2,500,000 for the year. Operating expenses and interest expense incurred

Goodwin Enterprises had a gross profit of $2,500,000 for the year. Operating expenses and interest expense incurred in that same year were $595,000 and $362,000, respectively. Goodwin had 200,000 shares of common stock and 180,000 shares of preferred stock outstanding. Management declared a $2.50 dividend per share on the common and a $1.50 dividend per share on the preferred. Securities purchased at a cost of $37,500 in a previous year were resold at a price of $50,500. Compute the taxable income and the resulting tax liability for Goodwin Enterprises for the year.

Use the following tax rates:

                 Income                   Tax rate

              $0-$50,000                     15%

        $50,001-$75,000                25%

       $75,001-$100,000               34%

      $100,001-$335,000              39%

           over $335,001                  34%

Answer: 

Gross profit                    $2,500,000

Operating expenses        (595,000)

Interest expense               (362,000)

Income before tax         $1,543,000

Add: Gain on sales              13,000

Taxable Income             $1,556,000

        Income          Marginal Tax Rate             Tax Liability

       $50,000       ×                 15%                                   $7,500

       $25,000       ×                 25%                                   $6,250

       $25,000       ×                 34%                                   $8,500

     $235,000       ×                 39%                                $91,650

  $1,221,000       ×                 34%                              $415,140

  $1,556,000                                                                $529,040

By design, the marginal and the average tax rates are the same, 34%, for corporate incomes between $335,000 and $10,000,000.

Pearls, Inc. had sales in 2013 of $2.1 million. The common stockholders received $600,000 in cash dividends

Pearls, Inc. had sales in 2013 of $2.1 million. The common stockholders received $600,000 in cash dividends.  Interest totaling $150,000 was paid on outstanding debts. Operating expenses totaled $300,000, and cost of goods sold was $500,000.  What is the tax liability of Pearls, Inc.? 2013 U.S. Corporate tax rates are shown below:

Taxable Income	Marginal Tax Rate
$0-$50,000	15%
$50,001-$75,000	25%
$75,001-$100,000	34%
$100,001-$335,000	39%
$335,001-$10,000,000	34%
$10,000,001-$15,000,000	35%
$15,000,001-$18,333,333	38%
Over $18,333,333	35%

Answer:  Pearls Taxable Income

Sales                                                          $2,100,000

Less:

Cost of goods sold                                    $500,000

Operating expenses                                  300,000

Earnings before interest & taxes       $1,300,000

Interest expense                                          150,000

Taxable income                                       1,150,000

Total taxes owed                                      $391,000

Taxes on operating earnings = (.15)(50,000) + (.25)(25,000) + (.34) 25,000) + (.39)(235,000) +.(34)(735,000)= 7,500 + 6,250 + 8500 + 91,650+277,100 = $391,000 or

                                Because taxable income is over $335,000

                                taxes can be computed 1,150,000 × .34 =

                                $391,000