Deck 2: Financial Statements, Taxes, and Cash Flow

Question 1

A fundamental difference between Canadian GAAP and IFRS is that fair value accounting plays a
more important role under IFRS.

Answer 1

True

Question 2

According to generally accepted accounting principles (GAAP), assets are generally shown on
financial statements at the higher of current market value or historical cost.

Answer 2

False

Question 3

Statement of financial position is best described as a financial statement summarizing a firm's
performance over a period of time. Formerly called the income statement.

Answer 3

False

Question 4

Impairment loss is the amount by which the carrying value of an asset or cash-generating unit
exceeds its recoverable amount.

Question 5

A firm's marginal tax rate may differ from its average tax rate. However, it is the average tax rate that
is relevant for financial decision-making purposes.

Question 6

If an asset has a carrying value of $1,000 and its recoverable amount is $750, then a $250
impairment loss has been incurred.

Question 7

JanexCorporation had OCF of $250, net capital spending of $500 and change in net working capital of $150. Given this information, determine its cash flow from assets.

A) $400
B) $800
C) $(400)
D) $(800)
E) $150

Question 8

Statement of comprehensive income is also referred to as the balance sheet, is a snapshot of the
firm. It is a convenient means of organizing and summarizing what a firm owns (its assets), what a
firm owes (its liabilities), and the difference between the two (the firm's equity) at a given time.

Question 9

The difference between a firm's current assets and its current liabilities is called net working capital.

Question 10

The financial statement summarizing the value of a firm's equity on a particular date is the
statement of comprehensive income.

Question 11

What is the amount of net new borrowing for 2015 ($ in millions)?

A) -$225
B) -$25
C) $0
D) $25
E) $225

Question 12

Net income divided by the total number of outstanding shares is referred to as the profit margin.

Question 13

Patents on new anti-cholesterol drug are considered intangible fixed assets.

Question 14

Shareholders' equity in a firm is $500. The firm owes a total of $400 of which 75 percent is payable this year. The firm has net fixed assets of $600. What is the amount of the net working capital?

A) -$200
B) -$100
C) $0
D) $100
E) $200

Question 15

What is net capital spending for 2015?

A) -$250
B) -$57
C) $0
D) $57
E) $477

Question 16

If a firm's cash flow to stockholders is negative, then total dividends must have exceeded the value
of net new equity sold by the firm during the year.

Question 17

The financial statement summarizing a firm's performance over a period of time is the statement of
cash flows

Question 18

Conceptually, capital cost allowance (CCA) is equivalent to depreciation.

Question 19

Non-cash items refer to expenses charged against revenues that do not directly affect cash flow.

Question 20

If an asset has a carrying value of $2,000 and its recoverable amount is $2,500, then $500
impairment loss has been incurred.

Question 21

What is the operating cash flow for the year 2015?

A) $361
B) $995
C) $1,725
D) $1,911
E) $2,455

Question 22

A Quebec resident earned $20,000 in interest income and $10,000 in capital gains. Calculate the total tax paid.

A) $8,493
B) $9,493
C) $10,493
D) $11,493
E) $12,493

Question 23

What is the operating cash flow for 2015?

A) $520
B) $800
C) $1,015
D) $1,110
E) $1,390

Question 24

Marla's Homemade Cookies has net income of $1,280. During the year, the company sold $50 worth of common stock and paid dividends of $40. What is the amount of the cash flow to
Stockholders?

A) -$90
B) -$10
C) $10
D) $40
E) $90

Question 25

If there are 100 shares of stock outstanding, what is the amount of the dividends paid per share?

A) $1.48
B) $1.60
C) $1.86
D) $2.01
E) $3.61

Question 26

Dale Corporation had beginning fixed assets of $3,500 an ending fixed asset balance of $4,800 invested and depreciation expense of $200. Given this information, determine the net investment
In fixed assets.

A) $1,200
B) $1,300
C) $1,400
D) $1,500
E) $1,600

Question 27

If the firm has 180 million shares of stock outstanding, what is the firm's 2015 dividends per share?

A) $0.50
B) $0.61
C) $1.41
D) $1.83
E)

Question 28

What is the change in the net working capital from 2014 to 2015 ($ in millions)?

A) $1,235
B) $1,035
C) $1,335
D) $3,405
E) $4,740

Question 29

What is the amount of the net capital spending for 2015 ($ in millions)?

A) $240
B) $620
C) $1,480
D) $1,860
E) $2,340

Question 30

What is the cash flow to stockholders for 2015?

A) -$2,160
B) -$1,840
C) $1,840
D) $2,160
E) $2,320

Question 31

What is the operating cash flow for 2015 ($ in millions)?

A) $1,060
B) $1,560
C) $1,830
D) $1,920
E) $1,960

Question 32

What is the cash flow from assets for 2015?

A) $111
B) $355
C) $1,307
D) $2,259
E) $2,503

Question 33

The Burger Joint paid $420 in dividends and $611 in interest expense. The addition to retained earnings is $397.74 and net new equity is $750. The tax rate is 34 percent. Sales are $6,250 and
Depreciation is $710. What are the earnings before interest and taxes?

A) $1,576.67
B) $1,582.16
C) $1,660.00
D) $1,780.82
E) $1,850.00

Question 34

Calculate EBIT given the following information: Cash flow from assets = $24,500; operating cash flow = $8,500; depreciation = $1,000; taxes = $2,500; capital spending = ($14,000); change in net
Working capital = ($2,000).

A) $8,000
B) $9,000
C) $10,000
D) $11,000
E) $12,000

Question 35

What is the cash flow from assets for 2015 ($ in millions)?

A) $430
B) $485
C) $1,340
D) $2,590
E) $3,100

Question 36

What is the amount of the net capital spending for 2015 ($ in millions)?

A) -$290
B) $795
C) $1,080
D) $1,660
E) $2,165

Question 37

What is the amount of the cash flow to creditors?

A) -$10
B) $0
C) $10
D) $40
E) $50

Question 38

If there are 250 shares of stock outstanding, what is the amount of the earnings per share?

A) $0.64
B) $0.80
C) $1.21
D) $1.44
E) $2.19

Question 39

Martha's Enterprises spent $2,400 to purchase equipment three years ago. This equipment is currently valued at $1,800 on today's statement of financial position but could actually be sold for
$2,000. Net working capital is $200 and long-term debt is $800. What is the book value of
Shareholders' equity?

A) $200
B) $800
C) $1,200
D) $1,400
E) The answer cannot be determined from the information provided.

Question 40

RDJ Manufacturing had 300 million shares of stock outstanding at the end of 2015. During 2015, the company reported net income of $600 million, retained earnings of $900 million, and $240 million
In dividends paid. What is RDJ's earnings per share?

A) $0.50
B) $0.67
C) $0.80
D) $1.25
E) $2.00

Question 41

BassiCorporation had a beginning and ending fixed asset balance of $400 and $650 respectively. During the year its net capital spending was $330. Given this information, determine the company's
Depreciation expense.

A) $80
B) $100
C) $120
D) $140
E) $160

Question 42

Cantrell Industries spent $386,000 to purchase equipment three years ago. This equipment is currently valued at $276,000 on today's statement of financial position but could actually be sold
For $298,000. Net working capital is $56,000 and long-term debt is $171,000. What is the book
Value of shareholders' equity?

A) $49,000
B) $71,000
C) $105,000
D) $161,000
E) $183,000

Question 43

At the start of the year, Gershon, Inc. had total shareholders' equity = $12,000. If net income during the year was a $200 loss, dividends paid = $400, and $1,000 was raised from the sale of new stock,
What is the end of year value for total shareholders' equity?

A) $10,060
B) $11,800
C) $12,400
D) $12,800
E) $13,200

Question 44

A firm has common stock of $5,500, paid-in surplus of $8,200, total liabilities of $6,600, current assets of $7,200, and fixed assets of $16,900. What is the amount of the shareholders' equity?

A) $10,300
B) $13,700
C) $15,600
D) $17,500
E) $20,300

Question 45

If a firm has taxable income = $74,000, how much will it pay in taxes?

A) $10,050
B) $11,750
C) $13,500
D) $16,750
E) $18,500

Question 46

What is the change in the net working capital from 2014 to 2015 ($ in millions)?

A) -$40
B) $75
C) $125
D) $2,005
E) $2,140

Question 47

The total tax on an income of $289,600 is:

A) $89,544
B) $96,194
C) $112,944
D) $113,900
E) $128,544

Question 48

A Nova Scotia resident earned $20,000 in interest income and $10,000 in capital gains. Calculate the total tax paid.

A) $12,500
B) $13,000
C) $13,500
D) $14,000
E) $14,500

Question 49

Given the following statement of financial position data, calculate net working capital: cash = $110, accounts receivable = $410, inventory = $350, net fixed assets = $1,000, accounts payable = $60,
Short-term debt = $375, and long-term debt = $510.

A) -$590
B) $0
C) $100
D) $435
E) $535

Question 50

An Ontario resident earned $30,000 in capital gains and $30,000 in non-eligible dividends. Calculate the total tax paid.

A) $15,470
B) $16,470
C) $17,470
D) $18,470
E) $19,470

Question 51

An Alberta resident earned $30,000 in capital gains and $30,000 in non-eligible dividends. Calculate the total tax paid.

A) $13,105
B) $13,658
C) $14,105
D) $14,658
E) $15,105

Question 52

What is the change in net working capital for 2015?

A) -$643
B) -$122
C) $122
D) $643
E) $765

Question 53

A $40,000 asset was purchased and classified as a Class 10 asset for CCA purposes. If the CCA rate is 30%, calculate UCC for the end of year 3.

A) $15,800
B) $16,660
C) $17,400
D) $18,300
E) $19,200

Question 54

What is the cash flow to creditors for 2015?

A) -$170
B) -$35
C) $135
D) $170
E) $205

Question 55

A New Brunswick resident earned $20,000 in interest income and $10,000 in capital gains. Calculate the total tax paid.

A) $12,710
B) $11,710
C) $10,710
D) $9,710
E) $8,710

Question 56

The Row Boat Cafe has operating cash flow of $36,407. Depreciation is $4,609 and interest paid is $1,105. A net total of $3,780 was paid on long-term debt. The firm spent $18,000 on fixed assets and
Increased net working capital by $3,247. What is the amount of the cash flow to stockholders?

A) $10,275
B) $12,933
C) $15,160
D) $19,998
E) $20,045

Question 57

A Prince Edward Island resident earned $20,000 in interest income and $10,000 in capital gains. Calculate the total tax paid.

A) $9,843
B) $10,843
C) $11,843
D) $12,843
E) $13,843

Question 58

Mylexhas current assets of $95, net fixed assets of $250, long-term debt of $40, and owners' equity of $200, what is the value of current liabilities if that is the only other item on the statement of
financial position?

A) -$50
B) $50
C) $105
D) $145
E) $545

Question 59

What is the firm's cash flow to creditors for 2015 ($ in millions)?

A) $30
B) $47
C) $100
D) $130
E)

Question 60

What is the firm's net capital spending for 2015 ($ in millions)?

A) -$32
B) $32
C) $148
D) $328
E)

Question 61

A Saskatchewan resident earned $30,000 in capital gains and $30,000 in non-eligible dividends. Calculate the total tax paid.

A) $17,073
B) $17,973
C) $18,073
D) $18,973
E) $19,073

Question 62

What is the net new equity for 2015?

A) -$40
B) -$20
C) $20
D) $40
E) $60

Question 63

What is the operating cash flow for 2015 ($ in millions)?

A) $845
B) $1,930
C) $2,215
D) $2,845
E) $3,060

Question 64

If total assets = $550, fixed assets = $375, current liabilities = $140, equity = $265, long-term debt = $145, and current assets is the only remaining item on the statement of financial position, what is
The value of net working capital?

A) -$265
B) $35
C) $190
D) $230
E) $265

Question 65

Blaze Corporation had OCF of $400, change in net working capital of 300 and cash flow from assets of $320. Given this information, calculate its net capital spending.

A) $(170)
B) $(220)
C) $170
D) $220
E) $150

Question 66

A British Columbia resident earned $30,000 in capital gains and $30,000 in non-eligible dividends. Calculate the total tax paid.

A) $17,624
B) $18,264
C) $18,808
D) $19,206
E) $19,759

Question 67

What is the cash flow to stockholders for 2015?

A) $124.40
B) $168.80
C) $171.10
D) $173.60
E) $175.90

Question 68

Given the following statement of comprehensive income data, calculate operating cash flow: net sales = $16,500, cost of goods sold = $10,350, operating expenses = $3,118, depreciation = $1,120,
Interest expense = $900, tax rate = 34%.

A) $667.92
B) $1,912.00
C) $2,201.12
D) $2,381.92
E) $2,687.92

Question 69

If provincial tax rates are 16% on the first $40,100; 20% on the next $40,100; and 24% on any income after that. If a resident had income of $95,000 then determine the total tax paid.

A) $16,228
B) $17,988
C) $18,288
D) $19,398
E) $20,328

Question 70

Toby's Pizza has total sales of $987,611 and costs of $724,268. Depreciation is $39,740 and the tax rate is 34 percent. The firm does not have any interest expense. What is the operating cash flow?

A) $147,577.98
B) $187,317.98
C) $191,417.06
D) $213,008.14
E) $223,603.00

Question 71

What is the firm's cash flow to stockholders for 2015 ($ in millions)?

A) $89
B) $129
C) $188
D) $363
E)

Question 72

At the beginning of the year, a firm has current assets of $91,807 and current liabilities of $102,343. At the end of the year, the current assets are $89,476 and the current liabilities are $92,638. What
Is the change in net working capital?

A) -$13,698
B) -$8,407
C) $2,109
D) $7,374
E) $11,991

Question 73

What is net new borrowing for 2015?

A) -$40
B) -$20
C) $20
D) $40
E) $60

Question 74

What is the operating cash flow for 2015?

A) $872
B) $2,013
C) $2,413
D) $2,688
E) $2,813

Question 75

The cash flow to creditors for 2015 is ______ while the cash flow to stockholders for 2015 is _____.

A) -$640; $705
B) -$175; $255
C) $175; $255
D) $175; $450
E) $640; $450

Question 76

A Manitoba resident earned $30,000 in capital gains and $30,000 in non-eligible dividends. Calculate the total tax paid.

A) $17,191
B) $18,191
C) $19,191
D) $20,191
E) $21,191

Question 77

What is the firm's cash flow from assets for 2015 ($ in millions)?

A) $21
B) $159
C) $197
D) $431
E)

Question 78

What is the net working capital for 2015?

A) $643
B) $1,408
C) $2,055
D) $3,115
E) $5,509

Question 79

If provincial tax rates are 16% on the first $40,100; 20% on the next $40,100; and 24% on any income after that. If a resident had income of $102,000, then determine the total tax paid.

A) $19,220
B) $19,668
C) $20,280
D) $20,930
E) $21,320

Question 80

Amy's Dress Shoppe has sales of $421,000 with costs of $342,000. Interest expense is $18,000 and depreciation is $33,000. The tax rate is 34 percent. What is the net income?

A) $9,520
B) $12,420
C) $18,480
D) $30,360
E) $52,140