Deck 2: Introducing Financial Statements

Question 1

In order for an asset to be reported on the balance sheet, it must be owned or controlled by the company and be expected to provide future benefits.

Answer 1

True

Question 2

Assets are reported on the balance sheet at their current market value.

Answer 2

False

Question 3

The book value of stockholders' equity (the amount reported on the balance sheet) is most typically equal to the market value of the equity of a company.

Answer 3

False

Question 4

Assets are listed on the balance sheet in order of liquidity and liabilities are listed in order of maturity.

Question 5

In addition to purchased assets like inventories and equipment, companies also may report on their balance sheets intangible assets such as the value of a brand name.

Question 6

Liabilities and equities are both claims against the assets of a company.

Question 7

A customer's prepayment for services not yet rendered is initially recorded as unearned revenue (a liability). Then, at the end of the accounting period, the unearned revenue is moved from the balance sheet to the income statement. This is an example of the revenue recognition principle.

Question 8

According to the revenue recognition principle, companies are required to record revenue when cash is received as this provides the most objective evidence for the auditors.

Question 9

Under accrual accounting principles, the cost of inventory should be reported as an expense in the income statement when it is sold, regardless of when it was purchased.

Question 10

The statement of cash flows has three main sections: cash flows from operating activities, cash flows from investing activities, and cash flows from capital activities.

Question 11

Articulation refers to the concept that financial statements are linked to each other and linked across time.

Question 12

The income statements of the prior and current year are linked via the balance sheet.

Question 13

Retained earnings articulate across time which means that last period's retained earnings plus current period net income (or loss) is equal to the current period's retained earnings.

Question 14

All companies must file with the SEC a detailed annual report and discussion of their business activities in their Form 10-K.

Question 15

A publicly traded company must file a Form 8-K with the SEC within four business days following a change in its certified public accounting firm.

Question 16

In 2016, Southwest Airlines had negative net working capital of $(2,346) million and current assets of $4,498 million.
The firm's current liabilities are:

A) $2,152 million
B) $6,844 million
C) $2,346 million
D) $5,236 million
E) There is not enough information to calculate the amount.

Question 17

In 2016, Delphi Automotive PLC had current assets of $5,419 million and current liabilities of $4,148 million.
The firm's net working capital is:

A) $ 1,271 million
B) $ 5,419 million
C) $ (1,271) million
D) $ 9,567 million
E) None of the above

Question 18

In 2016, Kohl's Corporation had net working capital of $2,273 million and current liabilities of $2,974 million.
The firm's current assets are:

A) $ 8,221 million
B) $ (8,221) million
C) $ 5,247 million
D) $ 2,974 million
E) None of the above

Question 19

Which of the following is included as a component of stockholders' equity?

A) Buildings
B) Retained earnings
C) Prepaid property taxes
D) Accounts payable
E) Dividends

Question 20

Interest expense appears in which financial statement?

A) Statement of stockholders' equity
B) Balance sheet
C) Income statement
D) Statement of cash flows
E) All of the above

Question 21

During fiscal 2016, Mattel had sales of $5,456,650, total expenses of $5,138,628 and gross profit of $2,554,391.
What was Mattel's cost of sales for 2016? ($ in thousands)

A) $ 2,102,065 thousand
B) $ 5,138,628 thousand
C) $ 2,902,259 thousand
D) $ 903,944 thousand
E) There is not enough information to calculate the cost of sales.

Question 22

During fiscal 2016, Kohl's had sales of $18,686 million, Cost of merchandise sold of $11,944 million, and gross profit of $6,741 million.
What was net income for 2016?

A) $ 6,741 million
B) $ 11,944 million
C) $ 5,299 million
D) $ 18,686 million
E) There is not enough information to calculate the amount.

Question 23

During 2016, Skechers U.S.A., Inc. had Sales of $3,563.3 million, Gross profit of $1,634.6 million and Selling, general, and administrative expenses of $1,278.0 million.
What was Skechers' Cost of sales for 2016?

A) $ 1,115.7 million
B) $ 1,928.7 million
C) $ 88.1 million
D) $ 1,549.5 million
E) There is not enough information to calculate the amount.

Question 24

In its December 31, 2016 financial statements, Harley-Davidson reported the following (in millions):
At December 31, 2016, current assets amount to:

A) $2,863 million
B) $3,854 million
C) $7,970 million
D) $5,519 million
E) None of the above

Question 25

In 2016, Nordstrom, Inc. reported the following (in millions):
What amount did Nordstrom report as total assets?

A) $ 4,616 million
B) $ 3,950 million
C) $ 7,307 million
D) $ 13,170 million
E) None of the above

Question 26

In 2016, Caterpillar Inc. reported the following (in millions):
What amount did Caterpillar report as equity in 2016?

A) $36,721 million
B) $13,213 million
C) $84,896 million
D) $17,457 million
E) None of the above

Question 27

During fiscal year-end 2016, Kohl's Corporation reports the following (in $ millions): net income of $556, retained earnings at the end of the year of $12,522 and retained earnings at the beginning of the year of $12,329. Assume that there were no other retained earnings transactions during fiscal 2016.
What dividends did the firm pay in fiscal year ended January 28, 2017?

A) $ 683 million
B) $ 1,669 million
C) $ 363 million
D) $-0-
E) There is not enough information to calculate the amount.

Question 28

Caterpillar Inc. reports a net loss for 2016 of $(67) million, retained earnings at the end of the year of $27,377 million, and dividends during the year of $1,802 million.
What was the company's retained earnings balance at the start of 2016?

A) $29,246 million
B) $30,361 million
C) $28,065 million
D) $26,572 million
E) There is not enough information to calculate the amount.

Question 29

Pfizer Inc., a pharmaceutical company, reported net income for fiscal 2016 of $7,215 million, retained earnings at the start of the year of $71,993 million and dividends of $7,448 million, and other transactions with shareholders that increased retained earnings during the year by $14 million.
If there were no additional transactions during the year that affected retained earnings, what was the balance of retained earnings at the end of the year?

A) $ 71,774 million
B) $ 38,748 million
C) $ 124,926 million
D) $ 47,729 million
E) There is not enough information to calculate the amount.

Question 30

Intel reports retained earnings at the end of fiscal 2016 of $40,747 million and retained earnings at the end of fiscal 2015 of $37,614 million. The company reported dividends of $4,925 million and other transactions with shareholders that reduced retained earnings during the year by $2,258 million.
How much net income did the firm report in fiscal 2016?

A) $ 3,133 million net income
B) $ 3,133 million net loss
C) $10,316 million net income
D) $10,316 million net loss
E) None of the above

Question 31

In its fiscal 2016 annual report, Nike, Inc. reported cash of $3,138 million at year end. The statement of cash flows reports the following (in millions):
What was the balance in Nike's cash account at the start of fiscal 2016?

A) $3,096 million
B) $1,020 million
C) $3,852 million
D) $4,357 million
E) None of the above

Question 32

In its fiscal 2016 balance sheet, JetBlue Airways Corporation, reported cash of $443 million at year-end. The statement of cash flows reports that cash increased by $115 million during the year and that net cash flow from operating activities was $1,632 million.
What was the cash flow from investing activities during the year?

A) $533 million cash outflow
B) $715 million cash inflow
C) $533 million cash inflow
D) $715 million cash outflow
E) There is not enough information to determine the amount.

Question 33

In its fiscal year ended January 28, 2017 balance sheet, Big Lots, Inc., reported cash and cash equivalents at the start of the year of $54,144 thousand. By the end of the year, the cash and cash equivalents had decreased to $51,164 thousand. The company's statement of cash flows reported cash from operating activities of $311,925 thousand, cash from financing activities of $(230,204) thousand.
What amount did the company report for cash from investing activities?

A) $ 122,391 thousand cash inflow
B) $ 7,966 thousand cash outflow
C) $ 84,701 thousand cash inflow
D) $ 84,701 thousand cash outflow
E) None of the above.

Question 34

On its fiscal year ended February 3, 2017 statement of cash flows, Dell Technologies Inc. reports the following (in millions):
What did Dell report for "Net cash from financing activities" during fiscal year ended 2017?

A) $31,932 million cash inflow
B) $31,932 million cash outflow
C) $2,898 million cash inflow
D) $2,898 million cash outflow
E) None of the above

Question 35

How would a purchase of inventory on credit affect the income statement?

A) It would increase liabilities
B) It would decrease retained earnings
C) It would increase assets
D) Both A and C, above
E) None of the above

Question 36

The cash conversion cycle is computed as

A) Days sales outstanding + Days inventory outstanding - Days payable outstanding
B) Days sales outstanding - Days payable outstanding
C) Days sales outstanding - Days inventory outstanding
D) Days sales outstanding - Days inventory outstanding + Days payable outstanding
E) None of the above

Question 37

Prestige Company has determined the following information for its recent fiscal year.
Compute Prestige Company's cash conversion cycle.

A) 8.2 days
B) 77.2 days
C) 105.4 days
D) 99.5 days
E) None of the above

Question 38

Following is Stanley Black & Decker's income statement for 2016 (in millions):
Compute Stanley Black & Decker's gross profit margin.

A) 63.6%
B) 12.2%
C) 37.4%
D) 8.5%
E) None of the above

Question 39

Identify which of the following items would be reported in the balance sheet.
Items reported in the balance sheet would include:

A) a, b, c, e, and f
B) b, e, f, h, and i
C) c, d, e, h, and i
D) a, c, e, f, and h
E) c, e, f, h, and i

Question 40

Identify which of the following items would be reported in the income statement.
Items reported in the income statement would include:

A) b, e, g, and h
B) a, b, d, and i
C) b, e, f, and g
D) d, f, g, and h
E) b, d, g, and i

Question 41

Identify the financial statements in which you would find each of the items listed below. Some items may appear on more than one statement. Indicate all financial statements that apply to each item. The possible choices are:

-Cost of goods sold

A)Balance Sheet
B)Statement of Stockholders' Equity
C)Income Statement
D)Statement of Cash Flows

Question 42

Identify the financial statements in which you would find each of the items listed below. Some items may appear on more than one statement. Indicate all financial statements that apply to each item. The possible choices are:

-Trademarks

A)Balance Sheet
B)Statement of Stockholders' Equity
C)Income Statement
D)Statement of Cash Flows

Question 43

Identify the financial statements in which you would find each of the items listed below. Some items may appear on more than one statement. Indicate all financial statements that apply to each item. The possible choices are:

-Inventories

A)Balance Sheet
B)Statement of Stockholders' Equity
C)Income Statement
D)Statement of Cash Flows

Question 44

Identify the financial statements in which you would find each of the items listed below. Some items may appear on more than one statement. Indicate all financial statements that apply to each item. The possible choices are:

-Retained earnings

A)Balance Sheet
B)Statement of Stockholders' Equity
C)Income Statement
D)Statement of Cash Flows

Question 45

Identify the financial statements in which you would find each of the items listed below. Some items may appear on more than one statement. Indicate all financial statements that apply to each item. The possible choices are:

-Accrued expenses

A)Balance Sheet
B)Statement of Stockholders' Equity
C)Income Statement
D)Statement of Cash Flows

Question 46

Identify the financial statements in which you would find each of the items listed below. Some items may appear on more than one statement. Indicate all financial statements that apply to each item. The possible choices are:

-Cash

A)Balance Sheet
B)Statement of Stockholders' Equity
C)Income Statement
D)Statement of Cash Flows

Question 47

Identify the financial statements in which you would find each of the items listed below. Some items may appear on more than one statement. Indicate all financial statements that apply to each item. The possible choices are:

-Land

A)Balance Sheet
B)Statement of Stockholders' Equity
C)Income Statement
D)Statement of Cash Flows

Question 48

Identify the financial statements in which you would find each of the items listed below. Some items may appear on more than one statement. Indicate all financial statements that apply to each item. The possible choices are:

-Cash

A)Balance Sheet
B)Statement of Stockholders' Equity
C)Income Statement
D)Statement of Cash Flows

Question 49

Identify the financial statements in which you would find each of the items listed below. Some items may appear on more than one statement. Indicate all financial statements that apply to each item. The possible choices are:

-Prepaid insurance expense

A)Balance Sheet
B)Statement of Stockholders' Equity
C)Income Statement
D)Statement of Cash Flows

Question 50

Identify the financial statements in which you would find each of the items listed below. Some items may appear on more than one statement. Indicate all financial statements that apply to each item. The possible choices are:

-Insurance expense

A)Balance Sheet
B)Statement of Stockholders' Equity
C)Income Statement
D)Statement of Cash Flows

Question 51

Identify the financial statements in which you would find each of the items listed below. Some items may appear on more than one statement. Indicate all financial statements that apply to each item. The possible choices are:

-Revenue

A)Balance Sheet
B)Statement of Stockholders' Equity
C)Income Statement
D)Statement of Cash Flows

Question 52

Identify the financial statements in which you would find each of the items listed below. Some items may appear on more than one statement. Indicate all financial statements that apply to each item. The possible choices are:

-Unearned revenue

A)Balance Sheet
B)Statement of Stockholders' Equity
C)Income Statement
D)Statement of Cash Flows

Question 53

Compute the missing amounts for Nike Inc. for 2016 and 2015, in the table below:

Question 54

choose the best match from the following:

-Common stock

A)Assets
B)Liabilities
C) Equity

Question 55

choose the best match from the following:

-Unearned revenue

A)Assets
B)Liabilities
C) Equity

Question 56

choose the best match from the following:

-Trademark

A)Assets
B)Liabilities
C) Equity

Question 57

Indicate the order of appearance on the balance sheet of the assets listed on the left.

Question 58

Indicate the order of appearance on the balance sheet of the liabilities and equity accounts listed on the left.

Question 59

For each of the following financial statement items, indicate the correct balance sheet classification, from the list below. You may use each balance sheet classification item only once.

Question 60

Caterpillar Inc.'s statement of stockholders' equity for 2016 and 2015 shows the following amounts. Fill in the missing items to show how retained earnings articulate across the years.

Question 61

Super Style Clothing begins operations in November. During the month the company receives $46,000 from a shareholder for common stock and gets a $6,000 loan from a bank. The company buys $38,000 of inventory for cash and sells half of the inventory for $30,000 on credit. The company had no other transactions in November. Fill in the missing amounts below.

Question 62

Consider the effects of the independent transactions, a through d, on a company's balance sheet, income statement, statement of cash flows, and statement of stockholders' equity.
a. Services were performed for cash.
b. Inventory was purchased for cash.
c. Wages were accrued at the end of the period.
d. Rent was paid in cash.
Complete the table below to explain the effects and financial statement linkages. Use "+" to indicate the account increases and "-" to indicate the account decreases.

Question 63

Miguel decided to open a lemonade stand on Saturdays. Match Miguel's business activities to the following balance sheet items. (Note: each balance sheet item can only be used once).

-Borrowed cash from Dad to be repaid in two years.

A) Long-term liability
B) Accounts payable
C) Accounts receivable
D) Long-term asset
E) Inventory
F) Cash

Question 64

Miguel decided to open a lemonade stand on Saturdays. Match Miguel's business activities to the following balance sheet items. (Note: each balance sheet item can only be used once).

-Purchased tent from neighbor, at a garage sale.

A) Long-term liability
B) Accounts payable
C) Accounts receivable
D) Long-term asset
E) Inventory
F) Cash

Question 65

Miguel decided to open a lemonade stand on Saturdays. Match Miguel's business activities to the following balance sheet items. (Note: each balance sheet item can only be used once).

-Bought lemons, sugar and (secret ingredient) grapefruit.

A) Long-term liability
B) Accounts payable
C) Accounts receivable
D) Long-term asset
E) Inventory
F) Cash

Question 66

Miguel decided to open a lemonade stand on Saturdays. Match Miguel's business activities to the following balance sheet items. (Note: each balance sheet item can only be used once).

-The items in (c) will not be paid for until next month.

A) Long-term liability
B) Accounts payable
C) Accounts receivable
D) Long-term asset
E) Inventory
F) Cash

Question 67

Miguel decided to open a lemonade stand on Saturdays. Match Miguel's business activities to the following balance sheet items. (Note: each balance sheet item can only be used once).

-At the end of the day, Miguel has cash in his pocket from sales.

A) Long-term liability
B) Accounts payable
C) Accounts receivable
D) Long-term asset
E) Inventory
F) Cash

Question 68

Miguel decided to open a lemonade stand on Saturdays. Match Miguel's business activities to the following balance sheet items. (Note: each balance sheet item can only be used once).

-Mr. Wisner, a potential customer had no cash with him. Miguel agrees to let Mr. Wisner pay for his lemonade next Monday.

A) Long-term liability
B) Accounts payable
C) Accounts receivable
D) Long-term asset
E) Inventory
F) Cash

Question 69

Consider the transactions listed. Match them to the financial statement effects listed

-Sell common stock for cash

A) Decrease assets and decrease equity
B) Decrease liabilities and decrease assets
C) Increase assets and decrease assets
D) Increase assets and increase equity

Question 70

Consider the transactions listed. Match them to the financial statement effects listed

-Pay accounts payable

A) Decrease assets and decrease equity
B) Decrease liabilities and decrease assets
C) Increase assets and decrease assets
D) Increase assets and increase equity

Question 71

Consider the transactions listed. Match them to the financial statement effects listed

-Repurchase common stock

A) Decrease assets and decrease equity
B) Decrease liabilities and decrease assets
C) Increase assets and decrease assets
D) Increase assets and increase equity

Question 72

Consider the transactions listed. Match them to the financial statement effects listed

-Purchase inventory for cash

A) Decrease assets and decrease equity
B) Decrease liabilities and decrease assets
C) Increase assets and decrease assets
D) Increase assets and increase equity

Question 73

Consider the transactions listed. Match them to the financial statement effects listed

-Pay wages with cash

A) Increase assets and increase liabilities
B) Decrease liabilities and decrease assets
C) Decrease assets and decrease equity
D) Decrease assets and increase assets

Question 74

Consider the transactions listed. Match them to the financial statement effects listed

-Repay bank loan

A) Increase assets and increase liabilities
B) Decrease liabilities and decrease assets
C) Decrease assets and decrease equity
D) Decrease assets and increase assets

Question 75

Consider the transactions listed. Match them to the financial statement effects listed

-Prepay insurance expense

A) Increase assets and increase liabilities
B) Decrease liabilities and decrease assets
C) Decrease assets and decrease equity
D) Decrease assets and increase assets

Question 76

Consider the transactions listed. Match them to the financial statement effects listed

-Receive prepayment from customer

A) Increase assets and increase liabilities
B) Decrease liabilities and decrease assets
C) Decrease assets and decrease equity
D) Decrease assets and increase assets

Question 77

Selected balance sheet amounts for Harley Davidson Inc. for five recent years follow.
Compute the missing balance sheet amounts for each of the five years.

Question 78

Selected balance sheet amounts for Nordstrom Inc. for four recent years follow.
Compute the missing balance sheet amounts for each of the four years.

Question 79

Use the accounts below for Stanley Black & Decker, Inc. to prepare a balance sheet at December 31, 2016.

Question 80

Use the accounts below for Stanley Black & Decker, Inc. to prepare an income statement for the year ended December 31, 2016.