Question 1

McRae Corporation's total current assets are $452,000, its noncurrent assets are $554,000, its total current liabilities are $376,000, its long-term liabilities are $304,000, and its stockholders' equity is $326,000. Working capital is:

Accepted Answer

Working capital is calculated by subtracting total current liabilities from total current assets:

Working capital = Total current assets - Total current liabilities 
Working capital = $452,000 - $376,000 
Working capital = $76,000

Therefore, the correct answer is B.

Question 2

Windham Corporation has current assets of $400,000 and current liabilities of $500,000. Windham Corporation's current ratio would be increased by:

Accepted Answer

The answer of Windham Corporation has current assets of $400,000...

Question 3

Calin Corporation has total current assets of $639,000, total current liabilities of $248,000, total stockholders' equity of $1,207,000, total plant and equipment (net) of $982,000, total assets of $1,621,000, and total liabilities of $414,000. The company's working capital is:

Accepted Answer

The answer of Calin Corporation has total current assets of...

Question 4

Feiler Corporation has total current assets of $483,000, total current liabilities of $347,000, total stockholders' equity of $1,057,000, total plant and equipment (net) of $1,031,000, total assets of $1,514,000, and total liabilities of $457,000. The company's current ratio is closest to:

Accepted Answer

Current Ratio = Total Current Assets / Total Current Liabilities
Current Ratio = $483,000 / $347,000
Current Ratio = 1.39 (rounded to two decimal places)

Question 5

Dennisport Corporation has an acid-test ratio of 2.6. It has current liabilities of $49,000 and noncurrent assets of $79,000. The corporation's current assets consist of cash, marketable securities, accounts receivable, prepaid expenses, and inventory. If Dennisport's current ratio is 4.1, its inventory and prepaid expenses must be:

Accepted Answer

The acid-test ratio excludes inventory and prepaid expenses. Using the acid-test ratio (2.6), we find quick assets: 2.6 = Quick Assets / $49,000, so Quick Assets = $127,400. The current ratio (4.1) includes all current assets: 4.1 = Current Assets / $49,000, so Current Assets = $200,900. Inventory and prepaid expenses = Current Assets - Quick Assets = $200,900 - $127,400 = $73,500.

Question 6

Calin Corporation has total current assets of $615,000, total current liabilities of $230,000, total stockholders' equity of $1,183,000, total plant and equipment (net) of $958,000, total assets of $1,573,000, and total liabilities of $390,000. The company's working capital is:

Accepted Answer

Working capital is calculated by subtracting current liabilities from current assets. Therefore, Calin Corporation's working capital is $385,000 ($615,000 - $230,000). None of the other given values are relevant to calculating working capital.

Question 7

Gnas Corporation's total current assets are $252,000, its noncurrent assets are $632,000, its total current liabilities are $188,000, its long-term liabilities are $518,000, and its stockholders' equity is $178,000. The current ratio is closest to:

Accepted Answer

The current ratio is calculated as total current assets divided by total current liabilities. For Gnas Corporation, this is $252,000 / $188,000 = 1.34.

Question 8

Dennisport Corporation has an acid-test ratio of 2.5. It has current liabilities of $40,000 and noncurrent assets of $70,000. The corporation's current assets consist of cash, marketable securities, accounts receivable, prepaid expenses, and inventory. If Dennisport's current ratio is 3.1, its inventory and prepaid expenses must be:

Accepted Answer

To find the inventory and prepaid expenses, we need to use the formula for the current ratio:

Current Ratio = Current Assets / Current Liabilities

We know that the current ratio is 3.1 and the current liabilities are $40,000, so we can solve for current assets:

3.1 = Current Assets / $40,000

Current Assets = 3.1 * $40,000 = $124,000

We also know that the acid-test ratio is 2.5, which means that the current assets excluding inventory and prepaid expenses are $70,000 (noncurrent assets).

Acid-Test Ratio = (Current Assets - Inventory - Prepaid Expenses) / Current Liabilities

2.5 = ($70,000 + Inventory + Prepaid Expenses) / $40,000

$100,000 = $70,000 + Inventory + Prepaid Expenses

Inventory + Prepaid Expenses = $30,000

Therefore, the inventory and prepaid expenses must be $24,000 each ($30,000 total), which is answer choice B.

Question 9

Stimac Corporation has total cash of $300,000, no marketable securities, total current receivables of $371,000, total inventory of $187,000, total prepaid expenses of $71,000, total current assets of $929,000, total current liabilities of $315,000, total stockholders' equity of $2,814,000, total assets of $4,115,000, and total liabilities of $1,301,000. The company's acid-test (quick) ratio is closest to:

Accepted Answer

The answer of Stimac Corporation has total cash of $300,000,...

Question 10

Erastic Corporation has $16,000 in cash, $9,000 in marketable securities, $37,000 in account receivable, $44,000 in inventories, and $44,000 in current liabilities. The corporation's current assets consist of cash, marketable securities, accounts receivable, and inventory. The corporation's acid-test ratio is closest to:

Accepted Answer

The acid-test ratio is calculated as (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities. For Erastic Corporation, this is ($16,000 + $9,000 + $37,000) / $44,000 = $62,000 / $44,000 = 1.41.

Question 11

McRae Corporation's total current assets are $380,000, its noncurrent assets are $500,000, its total current liabilities are $340,000, its long-term liabilities are $250,000, and its stockholders' equity is $290,000. Working capital is:

Accepted Answer

Working capital is calculated as current assets minus current liabilities. Therefore, working capital for McRae Corporation is:

$380,000 (total current assets) - $340,000 (total current liabilities) = $40,000.

Choice B is the correct answer.

Question 12

Orem Corporation's current liabilities are $75,000, its long-term liabilities are $225,000, and its working capital is $100,000. If the corporation's debt-to-equity ratio is 0.30, total long-term assets must equal:

Accepted Answer

The debt-to-equity ratio is calculated as total liabilities divided by total equity. If the debt-to-equity ratio is 0.30, then total liabilities are 30% of total equity. In this case, total liabilities are $75,000 + $225,000 = $300,000. Therefore, total equity must be $300,000 / 0.30 = $1,000,000. Total assets are equal to total liabilities plus total equity, so total long-term assets must be $300,000 + $1,000,000 - $100,000 = $1,200,000.

Question 13

Dratif Corporation's working capital is $60,000 and its current liabilities are $192,000. The corporation's current ratio is closest to:

Accepted Answer

The current ratio is calculated as current assets divided by current liabilities. If working capital is $60,000 and current liabilities are $192,000, then current assets are $252,000 ($192,000 + $60,000). The current ratio is $252,000 / $192,000 = 1.31.

Question 14

Windham Corporation has current assets of $660,000 and current liabilities of $825,000. Windham Corporation's current ratio would be increased by:

Accepted Answer

The answer of Windham Corporation has current assets of $660,000...

Question 15

Feiler Corporation has total current assets of $497,000, total current liabilities of $361,000, total stockholders' equity of $1,071,000, total plant and equipment (net) of $1,045,000, total assets of $1,542,000, and total liabilities of $471,000. The company's current ratio is closest to:

Accepted Answer

Current Ratio = Total Current Assets / Total Current Liabilities 
= $497,000 / $361,000 
= 1.38 (rounded to two decimal places)

Question 16

Dratif Corporation's working capital is $33,000 and its current liabilities are $80,000. The corporation's current ratio is closest to:

Accepted Answer

The current ratio is calculated as current assets divided by current liabilities. With working capital of $33,000 and current liabilities of $80,000, current assets are $113,000 ($80,000 + $33,000). Thus, the current ratio is $113,000 / $80,000 = 1.41.

Question 17

Stimac Corporation has total cash of $210,000, no marketable securities, total current receivables of $281,000, total inventory of $151,000, total prepaid expenses of $53,000, total current assets of $695,000, total current liabilities of $261,000, total stockholders' equity of $1,014,000, total assets of $1,415,000, and total liabilities of $401,000. The company's acid-test (quick) ratio is closest to:

Accepted Answer

The answer of Stimac Corporation has total cash of $210,000,...

Question 18

Erastic Corporation has $14,000 in cash, $8,000 in marketable securities, $34,000 in account receivable, $40,000 in inventories, and $42,000 in current liabilities. The corporation's current assets consist of cash, marketable securities, accounts receivable, and inventory. The corporation's acid-test ratio is closest to:

Accepted Answer

The acid-test ratio is calculated as (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities. For Erastic Corporation, this is ($14,000 + $8,000 + $34,000) / $42,000 = $56,000 / $42,000 = 1.33.

Question 19

Orem Corporation's current liabilities are $254,840, its long-term liabilities are $1,327,560, and its working capital is $356,800. If the corporation's debt-to-equity ratio is 0.46, total long-term assets must equal:

Accepted Answer

We can use the formula for debt-to-equity ratio to find the total equity of the corporation:

Debt-to-equity ratio = Total liabilities / Total equity
0.46 = (254,840 + 1,327,560) / Total equity
Total equity = 2,175,400

We can then use the formula for total assets to find the total long-term assets:

Total assets = Total liabilities + Total equity
Total assets = 254,840 + 1,327,560 + 2,175,400
Total assets = 3,757,800

Finally, we can use the formula for working capital to find the current assets:

Working capital = Current assets - Current liabilities
356,800 = Current assets - 254,840
Current assets = 611,640

We can now use the formula for total assets again to find the current assets:

Total assets = Current assets + Total long-term assets
3,757,800 = 611,640 + Total long-term assets
Total long-term assets = 4,146,160

Therefore, the correct answer is C: $4,410,760.

Question 20

Gnas Corporation's total current assets are $210,000, its noncurrent assets are $590,000, its total current liabilities are $160,000, its long-term liabilities are $490,000, and its stockholders' equity is $150,000. The current ratio is closest to:

Accepted Answer

Current ratio = Total current assets / Total current liabilities
Current ratio = ($210,000) / ($160,000) = 1.31

Quiz 16: Financial Statement Analysis