Deck 16: How to Read, Analyze, and Interpret Financial Reports

Question 1

Complete:

Answer 1

A. $51,000;
B. 52.94%;
C. 23.53%;
D. 7.84%;
E. 15.69%

Question 2

Al Ring received a memo requesting that he complete a trend analysis of the following, using 2010 as the base year. (Round each percent to nearest whole percent.) Can you help Al with this request?
*For simplicity, operating expenses have been omitted.

Answer 2

A. 44%;
B. 35%;
C. 60%;
D. 63%;
E. 47%;
F. 91%;
G. 84%
H. 70%;
I. 109%;
J. 100%;
K. 100%;
L. 100%
A. $42,000/$95,000 = 44%
B. $21,000/$60,000 = 35%
C. $21,000/$35,000 = 60%
D. $60,000/$95,000 = 63%
E. $28,000/$60,000 = 47%
F. $32,000/$35,000 = 91%
G. $80,000/$95,000 = 84%
H. $42,000/$60,000 = 70%
I. $38,000/$35,000 = 109%
J. $95,000/$95,000 = 100%
K. $60,000/$60,000 = 100%
L. $35,000/$35,000 = 100%

Question 3

Complete the partial comparative balance sheet. Round to nearest hundredth percent.

Answer 3

A. $10,500;
B. $13,500;
C. 57.14% ($6,000/$10,500);
D. 28.57% ($3,000/$10,500);
E. 9.52% ($1,000/$10,500);
F. 4.76% ($500/$10,500);
G. 51.85% ($7,000/$13,500);
H. 25.93% ($3,500/$13,500);
I. 14.81% ($2,000/$13,500);
J. 7.41% ($1,000/$13,500)

Question 4

Al Flynn has gathered the following information. Could you help Al calculate his gross profit?

Question 5

Solve for (A) current ratio, (B) acid test (quick), (C) average day's collection (D) asset turnover, and (E) profit margin on sales. Round to nearest hundredth or hundredth percent as needed.

Question 6

A balance sheet shows the financial condition of a business at a particular date.

Question 7

Solve for (A) current ratio, (B) acid test (quick), (C) average day's collection, (D) asset turnover, and (E) profit margin on sales. Round to nearest hundredth or hundredth percent as needed.

Question 8

The income statement shows the financial condition of a business over a period of time.

Question 9

From the following information, could you help Bill calculate his cost of merchandise sold?

Question 10

Complete a trend analysis for sales (round to nearest whole percent and use 2010 as the base year).

Question 11

Complete

Question 12

Complete:

Question 13

Mel King has asked you to prepare a classified balance sheet for Pad Co. as of December 31, 2014. Ending merchandise inventory was $1,800:

Question 14

Calculate the amount of increase or decrease and the percent change of each title (round to nearest hundredth percent):

Question 15

Complete using trend analyses for sales. (Round to nearest percent and use 2010 as the base year.)

Question 16

From the following, prepare a balance sheet for Roe Co. as of December 31, 2015.

Question 17

Complete using trend analyses for sales. (Round to nearest percent and use 2010 as the base year.)

Question 18

Complete:

Question 19

As the accountant of Roe Hairdresser, you have been asked to prepare an income statement from the following data for the month ended June 2014:

Question 20

The computer is the only tool needed in monitoring a business's financial condition.

Question 21

Net purchases are the cost of purchases minus purchase discounts minus purchase returns and allowances.

Question 22

Reductions in the selling price for early payment are called sales returns and allowances.

Question 23

Cost of merchandise sold is equal to beginning inventory minus net purchases minus ending inventory.

Question 24

Net income is equal to gross profit minus operating expenses.

Question 25

A relationship of one number to another is a ratio.

Question 26

Horizontal analysis need not be done using comparative reports.

Question 27

Assets that last longer than one year are called plant and equipment.

Question 28

Land does not depreciate.

Question 29

Retained earnings is the same as cash.

Question 30

Cash is a liability.

Question 31

Vertical analysis need not be done only on comparative reports since calculations were within each period of time.

Question 32

Assets, liabilities, capital, and revenues are listed on the balance sheet.

Question 33

Income statements are prepared only once a year.

Question 34

Horizontal analysis can analyze balance sheets for two or more periods.

Question 35

Assets represent things of value owed by the business.

Question 36

Vertical analysis cannot be done on a comparative statement.

Question 37

Cash is recorded on the income statement.

Question 38

Trend analysis expresses each number as a percent of the base year.

Question 39

A comparative statement contains data for less than two successive accounting periods.

Question 40

In horizontal analysis the old year is the base.

Question 41

In using horizontal analysis, comparative reports are:

A)Always used
B)Never used
C)Infrequently used
D)Often used
E)None of these

Question 42

When each asset is analyzed as a percent of total assets for a single period, this is known as:

A)Horizontal analysis
B)Comparative analysis
C)Ratio analysis
D)Vertical analysis
E)None of these

Question 43

Selecting a base year and expressing each amount as a percent of the base year amount is called:

A)Trend analysis
B)Horizontal analysis
C)Vertical analysis
D)Ratio analysis
E)None of these

Question 44

The balance sheet lists:

A)Assets, liabilities, expenses
B)Assets, liabilities, equity
C)Assets, revenues, expenses
D)Assets, revenues, equity
E)None of these

Question 45

Which of the following is not a current asset?

A)Cash
B)Building
C)Prepaid expense
D)Accounts receivable
E)None of these

Question 46

Could we speed up our collections? could be one question raised about the average day's collection ratio.

Question 47

A current ratio is calculated by current assets times current liabilities.

Question 48

In the acid test ratio, inventory and prepaid expenses are not excluded.

Question 49

Which one is not used to calculate net sales?

A)Purchases
B)Sales discount
C)Sales returns and allowance
D)Gross sales
E)None of these

Question 50

The asset turnover of Ryan Company is 7.2. The total assets of Ryan are $88,000. Ryan's net sales were:

A)$6,336
B)$63,360
C)$633,000
D)$633,600
E)None of these

Question 51

A ratio of 4:5:2 means that out of 11 parts it is divided up as 4/11, 5/11, 2/11.

Question 52

Cost of merchandise sold equals beginning inventory:

A)Plus net purchases plus ending inventory
B)Plus net purchases minus ending inventory
C)Minus net purchases minus ending inventory
D)Minus net purchases plus ending inventory
E)None of these

Question 53

The asset turnover is gross sales divided by total assets.

Question 54

The return on equity ratio looks at how effectively assets are being utilized.

Question 55

From 2013 to 2014, accounts receivable increased from $4,000 to $4,800. The percent increase is:

A)120%
B)16 2/3%
C)20%
D)55%
E)None of these

Question 56

Lee Company has a current ratio of 2.65. The acid test ratio is 2.01. The current liabilities of Lee are $45,000. The dollar amount of merchandise inventory is (assume no prepaid expenses):

A)$28,008
B)$28,800
C)$90,450
D)$90,540
E)None of these

Question 57

The acid test ratio does not include:

A)Cash
B)Accounts receivable
C)Supplies
D)Inventory
E)None of these

Question 58

A ratio of 2:2:1 means:

A)There are six parts
B)2/4, 2/4, 1/4
C)2/5, 2/5, 1/5
D)2/4, 2/5, 1/4
E)None of these

Question 59

The total debt to total assets of Logan Company was .71. The total of Logan's assets was $270,000. The amount of total debt is:

A)$146,700
B)$191,700
C)$119,700
D)$461,700
E)None of these

Question 60

Debt management ratios show a company how well its assets are managed.

Question 61

Jay Corporation has earned $175,900 after tax. The accountant calculated the return on equity as 12.5%. Jay Corporation's stockholders' equity to the nearest dollar is:

A)$140,720
B)$14,720
C)$1,407,200
D)$140,720,000
E)None of these

Question 62

Complete the following average day's collection:
Account receivables = $66,000; net sales = $360,000 (assume 360 days)

Question 63

In analyzing the income statement of Bob Company, cost of goods sold decreased from 2013 to 2014 by 8.2%. The cost of goods sold was $19,000 in 2014. The cost of goods sold to the nearest cent in 2013 was:

A)$20,697.17
B)$20,679.71
C)$20,769.71
D)$20,796.71
E)None of these

Question 64

Complete the horizontal analysis below:

A)($3,809), 4.1%
B)$3809, 4.1%
C)$180,485, 51.1%
D)$8,300, 15%
E)None of these

Question 65

As the accountant of Roe Hairdresser, you have been asked to prepare an income statement from the following data for the month ended June 2014:

Question 66

Bill's Pizza has an asset turnover of 3.5. The total assets of Bill's were $95,000. The net sales of Bill's Pizza is:

A)$27,142.85
B)$332,500.00
C)$271,428.50
D)$33,250.00
E)None of these

Question 67

The company's gross profit based on the following is sales $48,000, sales returns and allowances $6,000, operating expenses $6,200, beginning inventory $900, net purchases $9,100, ending inventory $2,300.

A)$34,000
B)$43,000
C)$34,003
D)$34,300
E)None of these

Question 68

Given the following: By trend analysis (base year is 2010), sales in 2012 to the nearest percent of the base year is:

A)117%
B)116%
C)118%
D)119%
E)None of these

Question 69

The asset turnover from the following is (round to nearest tenth):

A)1.7
B)1.5
C)1.9
D)1.6
E)None of these

Question 70

From the following, prepare a balance sheet for Roe Co. as of December 31, 2015.

Question 71

The cost of merchandise sold from the following data is as follows: sales $80,000, beginning inventory $5,000, purchases $21,800, purchase discounts $790, ending inventory $5,100.

A)$21,560
B)$20,190
C)$20,910
D)$21,650
E)None of these

Question 72

Mel King has asked you to prepare a classified balance sheet for Pad Co. as of December 31, 2014. Ending merchandise inventory was $1,800:

Question 73

Complete the following the current ratio for the following: Total current assets = $12,000; current liabilities = $10,000

A)1.5
B)1.7
C).7
D)1.2
E)None of these

Question 74

Given gross sales of $40,000 and sales returns and allowances of $6,000, what are the net sales?

A)$50,000
B)$46,000
C)$34,500
D)$34,000
E)None of these