MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
answers the question.
1)
A firm has common stock of $84, paid-in surplus of $200, total liabilities of $380, current
assets of $330, and net fixed assets of $540. What is the amount of the shareholders' equity?
A)
B)
C)
D)
E)
$664
$510
$160
$490
$870
Question Details
Difficulty : 1 Basic
Topic : Balance sheet
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Bloom's : Understand
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2)
Recently, the owner of Martha's Wares encountered severe legal problems and is trying to
sell her business. The company built a building at a cost of $1,290,000 that is currently appraised
at $1,490,000. The equipment originally cost $770,000 and is currently valued at $517,000. The
inventory is valued on the balance sheet at $460,000 but has a market value of only one-half of
that amount. The owner expects to collect 99 percent of the $250,200 in accounts receivable. The
firm has $11,000 in cash and owes a total of $1,490,000. The legal problems are personal and
unrelated to the actual business. What is the market value of this firm?
A)
B)
C)
D)
E)
Version 1
$1,235,698
$1,005,698
$1,485,898
$1,945,898
$747,000
1
Question Details
Difficulty : 1 Basic
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Topic : Market and book values
Bloom's : Understand
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3)
Ivan's, Incorporated, paid $482 in dividends and $586 in interest this past year. Common
stock increased by $196 and retained earnings decreased by $122. What is the net income for the
year?
A)
B)
C)
D)
E)
$782
$482
$586
$360
$946
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Income statement
Learning Objective : 02-02 Describe the difference between accounting income and cash flow.
Section : 2.2 The Income Statement
Bloom's : Understand
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4)
If the tax rate is 21 percent in 2020. What is the average tax rate for a firm with taxable
income of $124,513?
A)
B)
C)
D)
E)
Version 1
31.90%
39.00%
20.00%
21.00%
23.49%
2
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Taxes
Learning Objective : 02-03 Describe the difference between average and marginal tax rates.
Section : 2.3 Taxes
Bloom's : Understand
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5)
If the tax rate is 21 percent in 2020. Your firm currently has taxable income of $80,200.
How much additional tax will you owe if you increase your taxable income by $21,400?
A)
B)
C)
D)
E)
F)
G)
$4,104
$7,276
$8,346
$8,346
$4,494
$4,114
$4,114
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Taxes
Learning Objective : 02-03 Describe the difference between average and marginal tax rates.
Section : 2.3 Taxes
Bloom's : Understand
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6)
Your firm has net income of $356 on total sales of $1,260. Costs are $700 and
depreciation is $110. The tax rate is 21 percent. The firm does not have interest expenses. What
is the operating cash flow?
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3
A)
B)
C)
D)
E)
$806
$466
$560
$450
$356
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Operating cash flow
Learning Objective : 02-02 Describe the difference between accounting income and cash flow.
Section : 2.4 Cash Flow
Bloom's : Understand
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7)
Teddy's Pillows had beginning net fixed assets of $462 and ending net fixed assets of
$532. Assets valued at $310 were sold during the year. Depreciation was $24. What is the
amount of net capital spending?
A)
B)
C)
D)
E)
$404
$94
$46
$246
$70
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Capital spending
Learning Objective : 02-04 Determine a firm's cash flow from its financial statements.
Section : 2.4 Cash Flow
Bloom's : Understand
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4
8)
At the beginning of the year, a firm has current assets of $326 and current liabilities of
$230. At the end of the year, the current assets are $489 and the current liabilities are $270. What
is the change in net working capital?
A)
B)
C)
D)
E)
$0
$163
–$123
$123
$203
Question Details
Difficulty : 1 Basic
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Topic : Net working capital
Bloom's : Understand
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9)
At the beginning of the year, long-term debt of a firm is $306 and total debt is $338. At
the end of the year, long-term debt is $268 and total debt is $348. The interest paid is $34. What
is the amount of the cash flow to creditors?
A)
B)
C)
D)
E)
–$72
–$38
$34
$38
$72
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Cash flow to creditors
Learning Objective : 02-04 Determine a firm's cash flow from its financial statements.
Section : 2.4 Cash Flow
Bloom's : Understand
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10)
Peggy Grey's Cookies has net income of $430. The firm pays out 35 percent of the net
income to its shareholders as dividends. During the year, the company sold $88 worth of
common stock. What is the cash flow to stockholders?
A)
B)
C)
D)
E)
$150.50
$62.50
$279.50
$238.50
$119.70
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Cash flow to stockholders
Learning Objective : 02-04 Determine a firm's cash flow from its financial statements.
Section : 2.4 Cash Flow
Bloom's : Understand
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11)
A company has total equity of $2,145, net working capital of $235, long-term debt of
$1,060, and current liabilities of $4,290. What is the company's net fixed assets?
A)
B)
C)
D)
E)
Version 1
$3,205
$4,525
$5,375
$2,970
$7,495
6
Question Details
Difficulty : 1 Basic
Topic : Balance sheet
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Bloom's : Understand
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12)
Disturbed, Incorporated, had the following operating results for the past year: sales =
$22,586; depreciation = $1,300; interest expense = $1,048; costs = $16,485. The tax rate for the
year was 21 percent. What was the company's operating cash flow?
A)
B)
C)
D)
E)
$3,753
$5,313
$2,965
$2,980
$7,415
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Operating cash flow
Learning Objective : 02-02 Describe the difference between accounting income and cash flow.
Section : 2.4 Cash Flow
Bloom's : Understand
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13)
A company has net working capital of $1,780. If all its current assets were liquidated, the
company would receive $5,715. What are the company's current liabilities?
A)
B)
C)
D)
E)
Version 1
$3,748
$7,150
$3,935
$4,825
$7,495
7
Question Details
Difficulty : 1 Basic
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Topic : Net working capital
Bloom's : Understand
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14)
You are examining a company's balance sheet and find that it has total assets of $21,156,
a cash balance of $2,424, inventory of $5,169, current liabilities of $6,341, and accounts
receivable of $2,935. What is the company's net working capital?
A)
B)
C)
D)
E)
$14,815
$6,151
$1,763
$982
$4,187
Question Details
Difficulty : 1 Basic
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Topic : Net working capital
Bloom's : Understand
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15)
You find the following financial information about a company: net working capital =
$762; fixed assets = $5,449; total assets = $8,222; and long-term debt = $4,307. What are the
company's total liabilities?
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8
A)
B)
C)
D)
E)
$2,191
$7,185
$5,069
$5,756
$6,318
Question Details
Difficulty : 1 Basic
Topic : Balance sheet
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Bloom's : Understand
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16)
You find the following financial information about a company: net working capital =
$1,233; fixed assets = $7,681; total assets = $11,878; and long-term debt = $4,537. What is the
company's total equity?
A)
B)
C)
D)
E)
$6,211
$4,377
$8,971
$4,197
$10,101
Question Details
Difficulty : 1 Basic
Topic : Balance sheet
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Bloom's : Understand
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17)
Hoodoo Voodoo Company has total assets of $66,150, net working capital of $20,275,
owners' equity of $32,215, and long-term debt of $23,685. What is the company's current assets?
A)
B)
C)
D)
E)
$45,875
$35,625
$30,525
$55,900
$32,215
Question Details
Difficulty : 1 Basic
Topic : Balance sheet
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Bloom's : Understand
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18)
A company has net working capital of $2,047, current assets of $6,375, equity of
$22,035, and long-term debt of $10,475. What is the company's net fixed assets?
A)
B)
C)
D)
E)
$24,082
$28,182
$30,463
$26,135
$38,885
Question Details
Difficulty : 1 Basic
Topic : Balance sheet
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Bloom's : Understand
Accessibility : Keyboard Navigation
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10
19)
Micro, Incorporated, started the year with net fixed assets of $75,800. At the end of the
year, there was $97,400 in the same account, and the company's income statement showed
depreciation expense of $13,650 for the year. What was the company's net capital spending for
the year?
A)
B)
C)
D)
E)
$43,145
$40,735
$21,600
$83,750
$35,250
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Capital spending
Learning Objective : 02-04 Determine a firm's cash flow from its financial statements.
Section : 2.4 Cash Flow
Bloom's : Understand
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20)
At the beginning of the year, Shinedown, Corporation, had a long-term debt balance of
$46,255. During the year, the company repaid a long-term loan in the amount of $11,930. The
company paid $4,415 in interest during the year, and opened a new long-term loan for $10,565.
How much is the ending long-term debt account on the company's balance sheet?
A)
B)
C)
D)
E)
Version 1
$52,405
$44,890
$49,305
$5,780
$47,620
11
Question Details
Difficulty : 1 Basic
Topic : Balance sheet
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Bloom's : Understand
Accessibility : Keyboard Navigation
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21)
At the beginning of the year, Nothing More Corporation had a long-term debt balance of
$37,429. During the year, the company repaid a long-term loan in the amount of $10,139. The
company paid $3,855 in interest during the year, and opened a new long-term loan for $8,945.
What was the cash flow to creditors during the year?
A)
B)
C)
D)
E)
$5,090
$1,194
$14,490
$5,049
$6,284
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Cash flow to creditors
Learning Objective : 02-04 Determine a firm's cash flow from its financial statements.
Section : 2.4 Cash Flow
Bloom's : Understand
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22)
For the past year, Momsen Limited had sales of $44,432, interest expense of $3,074, cost
of goods sold of $14,909, selling and administrative expense of $10,816, and depreciation of
$4,965. If the tax rate was 21 percent, what was the company's net income?
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12
A)
B)
C)
D)
E)
$7,468
$10,668
$8,428
$5,171
$12,890
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Income statement
Learning Objective : 02-02 Describe the difference between accounting income and cash flow.
Section : 2.2 The Income Statement
Bloom's : Understand
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23)
For the past year, Kayla, Incorporated, has sales of $45,797, interest expense of $3,620,
cost of goods sold of $16,134, selling and administrative expense of $11,481, and depreciation of
$5,980. If the tax rate is 21 percent, what is the operating cash flow?
A)
B)
C)
D)
E)
$11,558
$16,380
$5,578
$8,582
$13,805
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Operating cash flow
Learning Objective : 02-04 Determine a firm's cash flow from its financial statements.
Section : 2.4 Cash Flow
Bloom's : Understand
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24)
HUD Company had a beginning retained earnings of $29,045. For the year, the company
had net income of $5,840 and paid dividends of $2,170. The company also issued $3,870 in new
stock during the year. What is the ending retained earnings balance?
A)
B)
C)
D)
E)
$36,585
$31,215
$28,845
$32,915
$32,715
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Statement of retained earnings
Learning Objective : 02-02 Describe the difference between accounting income and cash flow.
Section : 2.2 The Income Statement
Bloom's : Understand
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25)
At the beginning of the year, Vendors, Incorporated, had owners' equity of $48,485.
During the year, net income was $4,925 and the company paid dividends of $3,585. The
company also repurchased $7,335 in equity. What was the owners' equity account at the end of
the year?
A)
B)
C)
D)
E)
Version 1
$47,310
$41,150
$36,225
$42,490
$37,565
14
Question Details
Difficulty : 1 Basic
Topic : Balance sheet
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Bloom's : Understand
Accessibility : Keyboard Navigation
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26)
At the beginning of the year, Vendors, Incorporated, had owners' equity of $51,215.
During the year, net income was $7,375 and the company paid dividends of $4,915. The
company also repurchased $9,365 in equity. What was the cash flow to stockholders for the
year?
A)
B)
C)
D)
E)
−$4,450
$4,450
$11,825
−$14,280
$14,280
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Cash flow to stockholders
Learning Objective : 02-04 Determine a firm's cash flow from its financial statements.
Section : 2.4 Cash Flow
Bloom's : Understand
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27)
Simon's Hot Chicken purchased its building seven years ago at a price of $140,505. The
building could be sold for $180,225 today. The company spent $66,665 on other fixed assets that
could be sold for $59,015. The company has accumulated depreciation of $80,925 on its fixed
assets. The company has current liabilities of $37,370 and net working capital of $18,995. What
is the ending book value of net fixed assets?
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A)
B)
C)
D)
E)
$126,245
$169,800
$163,615
$158,315
$207,170
Question Details
Difficulty : 1 Basic
Topic : Balance sheet
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Bloom's : Understand
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28)
Last year, Bad Tattoo Company had additions to retained earnings of $4,270 on sales of
$94,090. The company had costs of $74,730, dividends of $2,620, and interest expense of
$1,560. If the tax rate was 21 percent, what the depreciation expense?
A)
B)
C)
D)
E)
$13,574
$7,084
$6,890
$8,035
$9,078
Question Details
AACSB : Analytical Thinking
Difficulty : 2 Intermediate
Topic : Income statement
Learning Objective : 02-02 Describe the difference between accounting income and cash flow.
Section : 2.2 The Income Statement
Bloom's : Analyze
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29)
Thornton, Incorporated, had taxable income of $128,462 for the year. The company's
marginal tax rate was 34 percent and its average tax rate was 21 percent. How much did the
company have to pay in taxes for the year?
A)
B)
C)
D)
E)
$26,977
$29,372
$28,014
$29,716
$43,677
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Taxes
Learning Objective : 02-03 Describe the difference between average and marginal tax rates.
Section : 2.3 Taxes
Bloom's : Understand
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30)
Red Barchetta Company paid $27,725 in dividends and $28,626 in interest over the past
year. During the year, net working capital increased from $13,626 to $18,344. The company
purchased $42,550 in fixed assets and had a depreciation expense of $17,030. During the year,
the company issued $25,125 in new equity and paid off $21,175 in long-term debt. What was the
company's cash flow from assets?
A)
B)
C)
D)
E)
Version 1
$46,069
$53,749
$52,401
$52,798
$51,422
17
Question Details
AACSB : Analytical Thinking
Difficulty : 2 Intermediate
Topic : Cash flow from assets
Learning Objective : 02-04 Determine a firm's cash flow from its financial statements.
Section : 2.4 Cash Flow
Bloom's : Analyze
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31)
Evil Pop Company began the year with net fixed assets of $16,943 and had $18,050 in the
account at the end of the year. During the year, the company paid $4,030 in interest and
expensed $3,515 in depreciation. The company purchased $7,510 in fixed assets during the year.
How much in fixed assets did the company sell during the year?
A)
B)
C)
D)
E)
$2,888
$8,656
$592
$4,587
$3,336
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Capital spending
Learning Objective : 02-04 Determine a firm's cash flow from its financial statements.
Section : 2.4 Cash Flow
Bloom's : Understand
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32)
The Primus Corporation began the year with $7,226 in its long-term debt account and
ended the year with $8,802 in long-term debt. The company paid $939 in interest during the year
and issued $2,310 in new long-term debt. How much in long-term debt must the company have
paid off during the year?
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A)
B)
C)
D)
E)
$497
$734
−$1,576
$1,576
−$637
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Cash flow to creditors
Learning Objective : 02-04 Determine a firm's cash flow from its financial statements.
Section : 2.4 Cash Flow
Bloom's : Understand
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33)
Rousey, Incorporated, had a cash flow to creditors of $16,920 and a cash flow to
stockholders of $7,496 over the past year. The company also had net fixed assets of $49,680 at
the beginning of the year and $57,100 at the end of the year. Additionally, the company had a
depreciation expense of $12,228 and an operating cash flow of $51,069. What was the change in
net working capital during the year?
A)
B)
C)
D)
E)
$9,424
$7,005
$5,573
$7,420
$6,280
Question Details
AACSB : Analytical Thinking
Difficulty : 2 Intermediate
Topic : Cash flows
Learning Objective : 02-04 Determine a firm's cash flow from its financial statements.
Section : 2.4 Cash Flow
Bloom's : Analyze
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34)
A company is obligated to pay its creditors $6,280 at the end of the year. If the value of
the company's assets equals $6,052 at that time, what is the value of shareholders' equity?
A)
B)
C)
D)
E)
−$114
−$228
$12,332
$0
$228
Question Details
Difficulty : 1 Basic
Topic : Balance sheet
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Bloom's : Understand
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35)
Maynard Enterprises paid $1,832 in dividends and $1,851 in interest over the past year.
The common stock account increased by $1,656 and retained earnings decreased by $747. What
was the company's net income?
A)
B)
C)
D)
E)
Version 1
$2,403
$2,741
$909
$2,579
$1,085
20
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Statement of retained earnings
Learning Objective : 02-02 Describe the difference between accounting income and cash flow.
Section : 2.2 The Income Statement
Bloom's : Understand
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36)
Mariota Industries has sales of $385,860 and costs of $180,230. The company paid
$33,030 in interest and $14,650 in dividends. It also increased retained earnings by $70,094
during the year. If the company's depreciation was $20,165, what was its average tax rate?
A)
B)
C)
D)
E)
36.20%
44.41%
17.54%
22.52%
79.88%
Question Details
AACSB : Analytical Thinking
Difficulty : 2 Intermediate
Topic : Taxes
Learning Objective : 02-02 Describe the difference between accounting income and cash flow.
Section : 2.2 The Income Statement
Bloom's : Analyze
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37)
During the past year, a company had cash flow to creditors, an operating cash flow, and
net capital spending of $29,009, $64,057, and $25,700, respectively. The net working capital at
the beginning of the year was $11,134 and it was $12,550 at the end of the year. What was the
company's cash flow to stockholders during the year?
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A)
B)
C)
D)
E)
$7,932
$1,416
$9,348
$6,186
$10,764
Question Details
AACSB : Analytical Thinking
Difficulty : 2 Intermediate
Topic : Cash flows
Learning Objective : 02-04 Determine a firm's cash flow from its financial statements.
Section : 2.4 Cash Flow
Bloom's : Analyze
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38)
During the past year, a company had cash flow to stockholders, an operating cash flow,
and net capital spending of $16,497, $40,016, and $18,820, respectively. The net working capital
at the beginning of the year was $7,083 and it was $8,930 at the end of the year. What was the
company's cash flow to creditors during the year?
A)
B)
C)
D)
E)
$2,852
$1,847
$1,106
$6,546
$4,699
Question Details
AACSB : Analytical Thinking
Difficulty : 2 Intermediate
Topic : Cash flows
Learning Objective : 02-04 Determine a firm's cash flow from its financial statements.
Section : 2.4 Cash Flow
Bloom's : Analyze
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39)
Hurricane Industries had a net income of $130,800 and paid 45 percent of this amount to
shareholders in dividends. During the year, the company sold $81,000 in new common stock.
What was the company's cash flow to stockholders?
A)
B)
C)
D)
E)
$58,860
−$58,860
−$22,140
$49,800
$22,140
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Cash flow to stockholders
Learning Objective : 02-04 Determine a firm's cash flow from its financial statements.
Section : 2.4 Cash Flow
Bloom's : Understand
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40)
A company has $509 in inventory, $1,768 in net fixed assets, $198 in accounts
receivable, $73 in cash, and $218 in accounts payable. What are the company's total current
assets?
A)
B)
C)
D)
E)
$2,548
$800
$582
$998
$780
Question Details
Difficulty : 1 Basic
Topic : Balance sheet
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Bloom's : Understand
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41)
A company has $1,350 in inventory, $4,791 in net fixed assets, $640 in accounts
receivable, $282 in cash, $594 in accounts payable, $991 in long-term debt, and $5,386 in equity.
What are the company's total assets?
A)
B)
C)
D)
E)
$7,063
$12,449
$7,657
$10,177
$8,052
Question Details
Difficulty : 1 Basic
Topic : Balance sheet
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Bloom's : Understand
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
42)
A company has $1,308 in inventory, $4,737 in net fixed assets, $604 in accounts
receivable, $258 in cash, $546 in accounts payable, and $5,332 in equity. What is the company's
long-term debt?
A)
B)
C)
D)
E)
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$1,066
$1,208
$1,575
$1,029
$1,517
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Question Details
Difficulty : 1 Basic
Topic : Balance sheet
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Bloom's : Understand
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
43)
Lola Corporation has shareholders' equity of $127,900. The company has a total debt of
$120,400, of which21 percent is payable in the next 12 months. The company also has net fixed
assets of $167,350. What is the company's net working capital?
A)
B)
C)
D)
E)
$9,699
$7,500
$13,022
$55,666
$46,950
Question Details
Difficulty : 1 Basic
Topic : Balance sheet
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Bloom's : Understand
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
44)
Smashed Pumpkins Company paid $80 in dividends and $519 in interest over the past
year. The company increased retained earnings by $432 and had accounts payable of $510. Sales
for the year were $16,020 and depreciation was $692. The tax rate was 21 percent. What was the
company's EBIT?
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25
A)
B)
C)
D)
E)
$1,578
$5,607
$1,184
$788
$1,167
Question Details
AACSB : Analytical Thinking
Difficulty : 2 Intermediate
Topic : Income statement
Learning Objective : 02-02 Describe the difference between accounting income and cash flow.
Section : 2.2 The Income Statement
Bloom's : Analyze
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45)
Kerch Company had beginning net fixed assets of $216,486, ending net fixed assets of
$211,659, and depreciation of $40,417. During the year, the company sold fixed assets with a
book value of $7,930. How much did the company purchase in new fixed assets?
A)
B)
C)
D)
E)
$34,174
$32,487
$35,590
$41,357
$43,520
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Capital spending
Learning Objective : 02-04 Determine a firm's cash flow from its financial statements.
Section : 2.4 Cash Flow
Bloom's : Understand
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46)
Adison Winery had beginning long-term debt of $37,761 and ending long-term debt of
$43,118. The beginning and ending total debt balances were $46,693 and $51,620, respectively.
The company paid interest of $4,201 during the year. What was the company's cash flow to
creditors?
A)
B)
C)
D)
E)
$9,128
$5,357
−$1,156
$726
−$726
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Cash flow to creditors
Learning Objective : 02-04 Determine a firm's cash flow from its financial statements.
Section : 2.4 Cash Flow
Bloom's : Understand
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47)
A company has net working capital of $882. Long-term debt is $4,483, total assets are
$6,741, and fixed assets are $4,353. What is the amount of total liabilities?
A)
B)
C)
D)
E)
$8,836
$5,859
$5,365
$7,623
$5,989
Question Details
Difficulty : 1 Basic
Topic : Balance sheet
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Bloom's : Understand
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
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48)
Muffy's Muffins had net income of $2,185. The firm retains 60 percent of net income.
During the year, the company sold $175 in common stock. What was the cash flow to
shareholders?
A)
B)
C)
D)
E)
$874
$699
$1,486
$1,049
$1,136
Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Topic : Cash flow to stockholders
Learning Objective : 02-04 Determine a firm's cash flow from its financial statements.
Section : 2.4 Cash Flow
Bloom's : Understand
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
49)
A firm has $864 in inventory, $1,790 in fixed assets, $694 in accounts receivable, $438 in
net working capital, and $243 in cash. What is the amount of current liabilities?
A)
B)
C)
D)
E)
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$1,120
$926
$1,375
$1,363
$2,239
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Question Details
Difficulty : 1 Basic
Topic : Balance sheet
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Bloom's : Understand
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
50)
A balance sheet has total assets of $1,930, fixed assets of $1,331, long-term debt of $705,
and short-term debt of $240. What is the net working capital?
A)
B)
C)
D)
E)
$359
$599
$1,225
$465
$386
Question Details
Difficulty : 1 Basic
Learning Objective : 02-01 Describe the difference between accounting value (or book value) and marke
AACSB : Analytical Thinking
Section : 2.1 The Balance Sheet
Topic : Net working capital
Bloom's : Understand
Accessibility : Keyboard Navigation
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Answer Key
Test name: Fundamentals of Corporate Finance 13e Ross TB Algo 02
1) D
Shareholders' equity = Current assets + Net fixed assets – Total
liabilities.
Shareholders’ equity = $330 + 540 – 380 = $490
2) B
Market value = $1,490,000 (building) + 517,000(equipment) + (.5 ×
$460,000) (inventory) + (.99 × $250,200) (accounts receivable) +
11,000cash – 1,490,000 (amount owed)
Market value = $1,005,698
3) D
Net income = Dividends paid + Change in retained earnings
Net income = $482 + (– $122) = $360
In this case, the change in retained earnings was a negative value.
4) D
Taxes paid = .21($124,513)
Taxes paid = $26,147.73
Average tax rate = $26,147.73/$124,513
Average tax rate = .2100, or 21.00%
5) E
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Taxes on .21($80,200) = $16,842
New taxable income = $80,200 + 21,400 = $101,600
Taxes on $.21(101,600) = $21,336
Additional tax = $21,336 – 16,842 = $4,494
6) B
EBIT = Sales – Costs – Depreciation
EBIT = $1,260 – 700 – 110
EBIT = $450
Taxes = Tax rate × EBIT
Taxes = .21 × $450
Taxes = $94
OCF = EBIT + Depreciation – Taxes
OCF = $450 + 110 – 94
OCF = $466
7) B
Net capital spending = $532 (ending net fixed assets) + 24
(Depreciation) – 462 (beginning net fixed assets)
Net capital spending = $94
8) D
Change in net working capital = ($489 – 270) – ($326 – 230) = $123
9) E
CFC = $34 – ($268 – 306) = $72
10) B
CFS = (.35 × $430) – $88 = $62.50
11) D
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Total liabilities and equity = Total assets = $2,145 + 1,060 + 4,290 =
$7,495
NWC = Current assets − Current liabilities
$235 = CA − $4,290
Current assets = $4,525
Net fixed assets = $7,495 − 4,525 = $2,970
12) B
EBIT = $22,586 − 16,485 − 1,300 = $4,801
EBT = $4,801 − 1,048 = $3,753
Taxes = $3,753(.21) = $788
OCF = $4,801 + 1,300 − 788 = $5,313
13) C
NWC = Current assets − Current liabilities
$1,780 = $5,715 − CL
CL = $3,935
14) E
NWC = Current assets − Current liabilities
NWC = ($2,424 + 2,935 + 5,169) − 6,341
NWC = $4,187
15) E
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Current assets = $8,222 − 5,449 = $2,773
$762 = $2,773 − CL
CL = $2,011
Total liabilities = $2,011 + 4,307 = $6,318
16) B
Current assets = $11,878 − 7,681 = $4,197
$1,233 = $4,197 − CL
CL = $2,964
Total equity = $11,878 − 4,537 − 2,964 = $4,377
17) C
Current liabilities = $66,150 − 32,215 − 23,685 = $10,250
Current assets = $20,275 + 10,250 = $30,525
18) C
Current liabilities = $6,375 − 2,047 = $4,328
Total liabilities and equity = Total assets = $22,035 + 10,475 + 4,328 =
$36,838
Net fixed assets = $36,838 − 6,375 = $30,463
19) E
Net capital spending = $97,400 − 75,800 + 13,650 = $35,250
20) B
Ending long-term debt = $46,255 + 10,565 − 11,930 = $44,890
21) D
Cash flow to creditors = $10,139 + 3,855 − 8,945 = $5,049
22) C
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EBT = $44,432 − 14,909 − 10,816 − 4,965− 3,074 = $10,668
Taxes = $10,668(.21) = $2,240
Net income = $10,668 − 2,240 = $8,428
23) B
EBIT = $45,797 − 16,134 − 11,481 − 5,980 = $12,202
EBT = $12,202 − 3,620 = $8,582
Taxes = $8,582(.21) = $1,802
OCF = $12,202 + 5,980 − 1,802 = $16,380
24) E
Retained earnings = $29,045 + ($5,840 − 2,170) = $32,715
25) D
Ending owners' equity = $48,485 + 4,925 − 3,585 − 7,335 = $42,490
26) E
Cash flow to stockholders = $4,915 + 9,365 = $14,280
27) A
Net fixed assets = $140,505 + 66,665 − 80,925 = $126,245
28) E
EBIT = ($4,270 + 2,620)/(1 − .21) + $1,560 = $10,282
Depreciation = $94,090 − 74,730 − 10,282 = $9,078
29) A
Taxes = $128,462(.21) = $26,977
30) C
Cash flow from assets = ($28,626 + 21,175) + ($27,725 − 25,125) =
$52,401
31) A
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Net capital spending = $18,050 − 16,943 + 3,515 = $4,622
Fixed assets sold = $7,510 − 4,622 = $2,888
32) B
Net new borrowing = $8,802 − 7,226 = $1,576
Debt retired = $2,310 − 1,576 = $734
33) B
Cash flow from assets = $16,920 + 7,496 = $24,416
Net capital spending = $57,100 − 49,680 + 12,228 = $19,648
Change in net working capital = $51,069 − 19,648 − 24,416 = $7,005
34) D
Equity = Max[($6,052 − 6,280) , 0] = $0
35) E
Net income = $1,832 − 747 = $1,085
36) B
Net income = $14,650 + 70,094 = $84,744
EBT = $385,860 − 180,230 − 20,165 − 33,030 = $152,435
Taxes = $152,435 − 84,744 = $67,691
Average tax rate = $67,691/152,435 = .4441, or 44.41%
37) A
Change in NWC = $12,550 − 11,134 = $1,416
CFA = $64,057 − 25,700 − 1,416 = $36,941
Cash flow to stockholders = $36,941 − 29,009 = $7,932
38) A
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Change in NWC = $8,930 − 7,083 = $1,847
CFA = $40,016 − 18,820 − 1,847 = $19,349
Cash flow to creditors = $19,349 − 16,497 = $2,852
39) C
Cash flow to stockholders = $130,800(.45) − 81,000 = −$22,140
40) E
Current assets = $73 + 198 + 509 = $780
41) A
Total assets = $282 + 640 + 1,350 + 4,791 = $7,063
42) D
Total assets = $258 + 604 + 1,308 + 4,737 = $6,907
Long-term debt = $6,907 − 546 − 5,332 = $1,029
43) D
Current liabilities = .21($120,400) = $25,284
Total L&E = Total assets = $120,400 + 127,900 = $248,300
Current assets = $248,300 − 167,350 = $80,950
Net working capital = $80,950 − 25,284 = $55,666
44) E
Net income = $80 + 432 = $512
EBT = $512/( 1 − .21) = $648
EBIT = $648 + 519 = $1,167
45) E
Net capital spending = $211,659 − 216,486 + 40,417 = $35,590
Fixed assets bought = $35,590 + 7,930 = $43,520
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46) C
Cash flow to creditors = $4,201 − ($43,118 − 37,761) = −$1,156
47) E
Current assets = $6,741 − 4,353 = $2,388
Current liabilities = $2,388 − 882 = $1,506
Total liabilities = $1,506 + 4,483 = $5,989
48) B
Cash flow to stockholders = (1 − .60) × $2,185 − 175 = $699
49) D
Current liabilities = ($243 + 694 + 864) − $438 = $1,363
50) A
Net working capital = ($1,930 − 1,331) − $240 = $359
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