Question 1

Ernie's Home Repair had beginning long-term debt of $51,207 and ending long-term debt of $36,714. The beginning and ending total debt balances were $59,513 and $42,612, respectively. The interest paid was $2,808. What is the amount of the cash flow to creditors?

Accepted Answer

A)   −$11,685
B)   −$11,272
C)   $17,301
D)   $17,418
E)   $11,174F) B) and D)
G) All of the above

Question 2

The River Side Stop has a current market value of $26,400 and owes its creditors $31,300. What is the market value of the shareholders' equity?

Accepted Answer

A)   −$4,900
B)   −$5,200
C)   $0
D)   $4,900
E)   $5,200F) All of the above
G) B) and E)

Question 3

The ________ tax rate is equal to total taxes divided by total taxable income.

Accepted Answer

A)   deductible
B)   residual
C)   total
D)   average
E)   marginalF) A) and B)
G) All of the above D

Question 4

Carlisle Carpets has cost of goods sold of $92,511, interest expense of $4,608, dividends paid of $3,200, depreciation of $14,568, an increase in retained earnings of $11,920, and a tax rate of 21 percent. What is the operating cash flow?

Accepted Answer

A)   $34,296.00
B)   $42,122.42
C)   $36,462.58
D)   $31,543.10
E)   $36,741.42F) A) and C)
G) A) and D)

Question 5

JJ Enterprises has inventory of $11,600, fixed assets of $22,400, total liabilities of $12,900, cash of $1,900, accounts receivable of $8,700, and long-term debt of $6,500. What is the net working capital?

Accepted Answer

A)   $44,600
B)   $15,700
C)   $12,600
D)   $15,800
E)   $9,300F) A) and B)
G) B) and D) D

Question 6

Which one of the following is a current liability?

Accepted Answer

A)   Note payable to a supplier in 13 months
B)   Amount due from a customer in two weeks
C)   Account payable to a supplier that is due next week
D)   Loan payable to the bank in 18 months
E)   Amount due from a customer that is past dueF) A) and B)
G) A) and C)

Question 7

At the beginning of the year, Trees Galore had current liabilities of $15,932 and total debt of $68,847. By year end, current liabilities were $13,870 and total debt was $72,415. What is the amount of net new borrowing for the year?

Accepted Answer

A)   $5,630
B)   −$2,480
C)   $3,568
D)   $4,677
E)   −$2,062F) A) and B)
G) B) and E)

Question 8

The book value of a firm is:

Accepted Answer

A)   equivalent to the firm's market value provided that the firm has some fixed assets.
B)   based on historical cost.
C)   generally greater than the market value when fixed assets are included.
D)   more of a financial than an accounting valuation.
E)   adjusted to the market value whenever the market value exceeds the stated book value.F) A) and D)
G) A) and E)

Question 9

A firm has common stock of $6,200, paid-in surplus of $9,100, total liabilities of $8,400, current assets of $5,900, and fixed assets of $21,200. What is the amount of the shareholders' equity?

Accepted Answer

A)   $6,900
B)   $15,300
C)   $18,700
D)   $23,700
E)   $35,500F) A) and B)
G) C) and D) C

Question 10

The What-Not Shop owns the building in which it is located. This building initially cost $647,000 and is currently appraised at $819,000. The fixtures originally cost $148,000 and are currently valued at $65,000. The inventory has a book value of $319,000 and a market value equal to 1.1 times the book value. The shop expects to collect 96 percent of the $21,700 in accounts receivable. The shop has $26,800 in cash and total debt of $414,700. What is the market value of the shop's equity?

Accepted Answer

A)   $867,832
B)   $900,166
C)   $695,832
D)   $775,632
E)   $1,190,332F) A) and C)
G) A) and B)

Question 11

TJH, Inc. purchased $145,000 in new equipment and sold equipment with a net book value of $68,400 during the year. What is the amount of net capital spending if the depreciation was $38,600?

Accepted Answer

A)   $115,200
B)   $76,600
C)   $94,200
D)   $38,000
E)   −$38,000F) All of the above
G) B) and C)

Question 12

Your firm has total assets of $4,900, fixed assets of $3,200, long-term debt of $2,900, and short-term debt of $1,400. What is the amount of net working capital?

Accepted Answer

A)   −$100
B)   $300
C)   $600
D)   $1,700
E)   $1,800F) B) and D)
G) C) and E)

Question 13

Which one of the following statements is correct concerning a corporation with taxable income of $125,000?

Accepted Answer

A)   Taxable income minus dividends paid will equal the ending retained earnings for the year.
B)   An increase in depreciation will increase the operating cash flow.
C)   Net income divided by the number of shares outstanding will equal the dividends per share.
D)   Interest paid will be included in both net income and operating cash flow.
E)   An increase in the tax rate will increase both net income and operating cash flow.F) None of the above
G) B) and E)

Question 14

The Outlet started the year with $650,000 in the common stock account and $1,318,407 in the additional paid-in surplus account. The end-of-year balance sheet showed $720,000 and $1,299,310 in the same two accounts, respectively. What is the cash flow to stockholders if the firm paid $68,500 in dividends?

Accepted Answer

A)   −$17,597
B)   $17,597
C)   −$1,500
D)   $1,500
E)   $68,500F) B) and C)
G) B) and E)

Question 15

Which one of the following statements related to corporate taxes is correct?

Accepted Answer

A)   A company's marginal tax rate must be equal to or lower than its average tax rate.
B)   The tax for a company is computed by multiplying the marginal tax rate times the taxable income.
C)   Additional income is taxed at a firm's average tax rate.
D)   The marginal tax rate will always exceed a company's average tax rate.
E)   The marginal tax rate for a company can be either higher than or equal to the average tax rate.F) A) and B)
G) D) and E)

Question 16

For a tax-paying firm, an increase in ________ will cause the cash flow from assets to increase.

Accepted Answer

A)   depreciation
B)   net capital spending
C)   the change in net working capital
D)   taxes
E)   production costsF) None of the above
G) A) and D)

Question 17

Which one of the following statements concerning net working capital is correct?

Accepted Answer

A)   Net working capital increases when inventory is purchased with cash.
B)   Net working capital excludes inventory.
C)   Total assets must increase if net working capital increases.
D)   Net working capital may be a negative value.
E)   Net working capital is the amount of cash a firm currently has available for spending.F) C) and D)
G) A) and D)

Question 18

Which one of the following is included in a firm's market value but yet is excluded from the firm's accounting value?

Accepted Answer

A)   Real estate investment
B)   Good reputation of the company
C)   Equipment owned by the firm
D)   Money due from a customer
E)   An item held by the firm for future saleF) A) and B)
G) None of the above

Question 19

Cash flow to stockholders is defined as:

Accepted Answer

A)   the total amount of interest and dividends paid during the past year.
B)   the change in total equity over the past year.
C)   cash flow from assets plus the cash flow to creditors.
D)   operating cash flow minus the cash flow to creditors.
E)   dividend payments less net new equity raised.F) B) and C)
G) C) and E)

Question 20

Which one of the following statements related to an income statement is correct?

Accepted Answer

A)   Interest expense increases the amount of tax due.
B)   Depreciation does not affect taxes since it is a non-cash expense.
C)   Net income is distributed to dividends and paid-in surplus.
D)   Taxes reduce both net income and operating cash flow.
E)   Interest expense is included in operating cash flow.F) A) and B)
G) None of the above

Exam 2: Financial Statements, Taxes, and Cash Flow

Ernie's Home Repair had beginning long-term debt of $51,207 and ending long-term debt of $36,714. The beginning and ending total debt balances were $59,513 and $42,612, respectively. The interest paid was $2,808. What is the amount of the cash flow to creditors?

Correct Answer
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The River Side Stop has a current market value of $26,400 and owes its creditors $31,300. What is the market value of the shareholders' equity?

Correct Answer
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The ________ tax rate is equal to total taxes divided by total taxable income.

Correct Answer
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D

Carlisle Carpets has cost of goods sold of $92,511, interest expense of $4,608, dividends paid of $3,200, depreciation of $14,568, an increase in retained earnings of $11,920, and a tax rate of 21 percent. What is the operating cash flow?

Correct Answer
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JJ Enterprises has inventory of $11,600, fixed assets of $22,400, total liabilities of $12,900, cash of $1,900, accounts receivable of $8,700, and long-term debt of $6,500. What is the net working capital?

Correct Answer
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D

Which one of the following is a current liability?

Correct Answer
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At the beginning of the year, Trees Galore had current liabilities of $15,932 and total debt of $68,847. By year end, current liabilities were $13,870 and total debt was $72,415. What is the amount of net new borrowing for the year?

Correct Answer
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The book value of a firm is:

Correct Answer
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A firm has common stock of $6,200, paid-in surplus of $9,100, total liabilities of $8,400, current assets of $5,900, and fixed assets of $21,200. What is the amount of the shareholders' equity?

Correct Answer
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C

Correct Answer
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TJH, Inc. purchased $145,000 in new equipment and sold equipment with a net book value of $68,400 during the year. What is the amount of net capital spending if the depreciation was $38,600?

Correct Answer
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Your firm has total assets of $4,900, fixed assets of $3,200, long-term debt of $2,900, and short-term debt of $1,400. What is the amount of net working capital?

Correct Answer
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Which one of the following statements is correct concerning a corporation with taxable income of $125,000?

Correct Answer
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Correct Answer
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Which one of the following statements related to corporate taxes is correct?

Correct Answer
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For a tax-paying firm, an increase in ________ will cause the cash flow from assets to increase.

Correct Answer
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Which one of the following statements concerning net working capital is correct?

Correct Answer
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Which one of the following is included in a firm's market value but yet is excluded from the firm's accounting value?

Correct Answer
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Cash flow to stockholders is defined as:

Correct Answer
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Which one of the following statements related to an income statement is correct?

Correct Answer
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Exam 2: Financial Statements, Taxes, and Cash Flow

Ernie's Home Repair had beginning long-term debt of $51,207 and ending long-term debt of $36,714. The beginning and ending total debt balances were $59,513 and $42,612, respectively. The interest paid was $2,808. What is the amount of the cash flow to creditors?

Correct AnswerverifiedShow Answer

The River Side Stop has a current market value of $26,400 and owes its creditors $31,300. What is the market value of the shareholders' equity?

Correct AnswerverifiedShow Answer

The ________ tax rate is equal to total taxes divided by total taxable income.

Correct AnswerverifiedD

Carlisle Carpets has cost of goods sold of $92,511, interest expense of $4,608, dividends paid of $3,200, depreciation of $14,568, an increase in retained earnings of $11,920, and a tax rate of 21 percent. What is the operating cash flow?

Correct AnswerverifiedShow Answer

JJ Enterprises has inventory of $11,600, fixed assets of $22,400, total liabilities of $12,900, cash of $1,900, accounts receivable of $8,700, and long-term debt of $6,500. What is the net working capital?

Correct AnswerverifiedD

Which one of the following is a current liability?

Correct AnswerverifiedShow Answer

At the beginning of the year, Trees Galore had current liabilities of $15,932 and total debt of $68,847. By year end, current liabilities were $13,870 and total debt was $72,415. What is the amount of net new borrowing for the year?

Correct AnswerverifiedShow Answer

The book value of a firm is:

Correct AnswerverifiedShow Answer

A firm has common stock of $6,200, paid-in surplus of $9,100, total liabilities of $8,400, current assets of $5,900, and fixed assets of $21,200. What is the amount of the shareholders' equity?

Correct AnswerverifiedC

Correct AnswerverifiedShow Answer

TJH, Inc. purchased $145,000 in new equipment and sold equipment with a net book value of $68,400 during the year. What is the amount of net capital spending if the depreciation was $38,600?

Correct AnswerverifiedShow Answer

Your firm has total assets of $4,900, fixed assets of $3,200, long-term debt of $2,900, and short-term debt of $1,400. What is the amount of net working capital?

Correct AnswerverifiedShow Answer

Which one of the following statements is correct concerning a corporation with taxable income of $125,000?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following statements related to corporate taxes is correct?

Correct AnswerverifiedShow Answer

For a tax-paying firm, an increase in ________ will cause the cash flow from assets to increase.

Correct AnswerverifiedShow Answer

Which one of the following statements concerning net working capital is correct?

Correct AnswerverifiedShow Answer

Which one of the following is included in a firm's market value but yet is excluded from the firm's accounting value?

Correct AnswerverifiedShow Answer

Cash flow to stockholders is defined as:

Correct AnswerverifiedShow Answer

Which one of the following statements related to an income statement is correct?

Correct AnswerverifiedShow Answer

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D

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D

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C

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