Question 1

Ramakrishnan Inc.reported 2013 net income of $20 million and depreciation of $1,500,000.The top part of Ramakrishnan,Inc.'s 2012 and 2013 balance sheets is listed as follows (in millions of dollars).
Calculate the 2013 net cash flow from operating activities for Ramakrishnan,Inc.

Accepted Answer

The answer of Ramakrishnan Inc.reported 2013 net income of $20...

Question 2

Reed's Birdie Shot,Inc.'s 2013 income statement lists the following income and expenses: EBIT = $555,000,interest expense = $178,000,and taxes = $148,000.Reed's has no preferred stock outstanding and 100,000 shares of common stock outstanding.Calculate the 2013 earnings per share.

Accepted Answer

The answer of Reed's Birdie Shot,Inc.'s 2013 income statement lists...

Question 3

Mr.Husker's Tuxedos,Corp.began the year 2013 with $205 million in retained earnings.The firm earned net income of $30 million in 2013 and paid $5 million to its preferred stockholders and $12 million to its common stockholders.What is the year-end 2013 balance in retained earnings for Mr.Husker's Tuxedos?

Accepted Answer

To find the year-end balance in retained earnings, we start with the beginning balance of $205 million and add the net income of $30 million. Then, we subtract the dividends paid to preferred and common stockholders, which total $17 million ($5 million + $12 million). 
$205 million beginning balance + $30 million net income - $17 million dividends = $218 million year-end balance in retained earnings. Therefore, the answer is D.

Question 4

In 2014,Usher Sports Shop had cash flows from investing activities of ($2,150,000)and cash flows from financing activities of ($3,219,000).The balance in the firm's cash account was $980,000 at the beginning of 2014 and $1,025,000 at the end of the year.Calculate Usher Sports Shop's cash flow from operations for 2014.

Accepted Answer

Using the formula for cash flow statement:
Cash flow from operations = (Ending cash balance - Beginning cash balance) - (Cash flows from investing activities + Cash flows from financing activities)
Cash flow from operations = ($1,025,000 - $980,000) - [($2,150,000) + ($3,219,000)] 
Cash flow from operations = $45,000 - $5,369,000 
Cash flow from operations = -$5,324,000 
Therefore, the best choice is B, which is the closest to the calculated value of -$5,324,000.

Question 5

All of the following would be a result of changing to the MACRS method of depreciation EXCEPT:

Accepted Answer

MACRS (Modified Accelerated Cost Recovery System) results in higher depreciation expenses, lower taxes, and lower taxable income in the early years, so all options except D are true.

Question 6

The 2011 income statement for Duffy's Pest Control shows that depreciation expense is $180 million,EBIT is $420 million,EBT is $240 million,and the tax rate is 30 percent.At the beginning of the year,the balance of gross fixed assets was $1,500 million and net operating working capital was $500 million.At the end of the year gross fixed assets was $1,803 million.Duffy's free cash flow for the year was $425 million.Calculate the end of year balance for net operating working capital.

Accepted Answer

The answer of The 2011 income statement for Duffy's Pest...

Question 7

Ed's Tobacco Shop has total assets of $100 million.Fifty percent of these assets are financed with debt of which $37 million is current liabilities.The firm has no preferred stock but the balance in common stock and paid-in surplus is $32 million.Using this information what is the balance for long-term debt and retained earnings on Ed's Tobacco Shop's balance sheet?

Accepted Answer

Total Assets = $100 million

Debt Financing = 50% of Total Assets = $50 million

Current Liabilities = $37 million

Long-Term Debt = Debt Financing - Current Liabilities = $13 million

Common Stock and Paid-in Surplus = $32 million

Retained Earnings = Total Assets - (Debt Financing + Common Stock and Paid-in Surplus)

Retained Earnings = $100 million - ($50 million + $32 million) = $18 million

Therefore, the balance for long-term debt is $13 million and the balance for retained earnings is $18 million. Answer choice D is the correct answer.

Question 8

Hunt Taxidermy,Inc.is concerned about the taxes paid by the company in 2013.In addition to $36.5 million of taxable income,the firm received $1,250,000 of interest on state-issued bonds and $400,000 of dividends on common stock it owns in Hunt Taxidermy,Inc.Calculate Hunt Taxidermy's taxable income.

Accepted Answer

Taxable income includes all income subject to federal income tax, which includes interest and dividends. Therefore, taxable income would be $36.5 million + $1.25 million + $400,000 = $36.62 million. The correct answer is D.

Question 9

Dogs 4 U Corporation has net cash flow from financing activities for the last year of $10 million.The company paid $8 million in dividends last year.During the year,the change in notes payable on the balance was $9 million,and change in common and preferred stock was $0 million.The end of year balance for long-term debt was $44 million.Calculate the beginning of year balance for long-term debt.

Accepted Answer

Net cash flow from financing activities = Change in long-term debt + dividends paid
$10 million = (Ending long-term debt - Beginning long-term debt) + $8 million
$2 million = Ending long-term debt - Beginning long-term debt
Therefore, Beginning long-term debt = Ending long-term debt - $2 million
Given that the Ending long-term debt was $44 million, the Beginning long-term debt would be $44 million - $2 million = $42 million. However, since we are asked for the Beginning long-term debt balance, we need to subtract the change in notes payable, which was $9 million. 
Beginning long-term debt = $42 million - $9 million = $33 million
Therefore, the correct answer is choice D, $35 million (which is the closest option to $33 million).

Question 10

Tater and Pepper Corp.reported free cash flows for 2013 of $20 million and investment in operating capital of $15 million.Tater and Pepper listed $8 million in depreciation expense and $12 million in taxes on its 2010 income statement.Calculate Tater and Pepper's 2013 EBIT.

Accepted Answer

We can use the formula:

EBIT - taxes + depreciation = operating cash flow

Plugging in the given values:

EBIT - $12 million + $8 million = $20 million + $15 million

EBIT = $39 million

Question 11

Muffin's Masonry,Inc.'s balance sheet lists net fixed assets as $16 million.The fixed assets could currently be sold for $17 million.Muffin's current balance sheet shows current liabilities of $5.5 million and net working capital of $6.5 million.If all the current accounts were liquidated today,the company would receive $10.25 million cash after paying $5.5 million in liabilities.What is the book value of Muffin's Masonry's assets today? What is the market value of these assets?

Accepted Answer

Book Value: Net Fixed Assets ($16m) + Net Working Capital ($6.5m) + Current Liabilities ($5.5m) = $28m. Market Value: Sale Value of Fixed Assets ($17m) + Cash after Liquidation ($10.25m) = $27.25m, but since there's no matching option, considering the closest match, $28m (Book Value) and $32.75m (Market Value) seems to be a typo or calculation misunderstanding in the options provided.

Question 12

You have been given the following information for Corky's Bedding Corp.:
Net sales = $15,250,000;
Cost of goods sold = $5,750,000;
Addition to retained earnings = $4,000,000;
Dividends paid to preferred and common stockholders = $995,000;
Interest expense = $1,150,000.
The firm's tax rate is 30 percent.Calculate the depreciation expense for Corky's Bedding Corp.

Accepted Answer

The answer of You have been given the following information...

Question 13

Oakdale Fashions Inc.had $255,000 in 2013 taxable income.If the firm paid $82,100 in taxes,what is the firm's average tax rate?

Accepted Answer

Average tax rate = Total taxes paid / Taxable income 
Average tax rate = $82,100 / $255,000 = 0.322 = 32.20%

Question 14

Which of the following is NOT a source of cash?

Accepted Answer

Paying off long-term debt uses cash rather than providing it, making it not a source of cash.

Question 15

Is it possible for a firm to have positive net income and yet to have cash flow problems?

Accepted Answer

A firm may have positive net income but still face cash flow problems if it is investing heavily in growth opportunities, such as expanding its operations or investing in research and development. These investments require significant cash outflows, which may not be reflected in the net income statement. Additionally, if the firm has slow-paying customers, it may experience a delay in receiving cash, which can lead to cash flow problems even if the net income is positive.

Question 16

You are considering an investment in Fields and Struthers,Inc.and want to evaluate the firm's free cash flow.From the income statement,you see that Fields and Struthers earned an EBIT of $52 million,paid taxes of $10 million,and its depreciation expense was $5 million.Fields and Struthers' gross fixed assets increased by $38 million from 2012 to 2013.The firm's current assets increased by $20 million and spontaneous current liabilities increased by $12 million.Calculate Fields and Struthers' operating cash flow (OCF),investment in operating capital (IOC),and free cash flow (FCF)for 2013.

Accepted Answer

The answer of You are considering an investment in Fields...

Question 17

Brenda's Bar and Grill has total assets of $17 million of which $5 million are current assets.Cash makes up 12 percent of the current assets and accounts receivable makes up another 40 percent of current assets.Brenda's gross plant and equipment has a cost value of $12 million and other long-term assets have a cost value of $1,000,000.Using this information,what are the balance of inventory and the balance of depreciation on Brenda's Bar and Grill's balance sheet?

Accepted Answer

The answer of Brenda's Bar and Grill has total assets...

Question 18

Reed's Birdie Shot,Inc.'s 2013 income statement lists the following income and expenses: EBIT = $550,000,interest expense = $43,000,and net income = $300,000.Calculate the 2013 taxes reported on the income statement.

Accepted Answer

The answer of Reed's Birdie Shot,Inc.'s 2013 income statement lists...

Question 19

The CEO of Tom and Sue's wants the company to earn a net income of $3.25 million in 2014.Cost of goods sold is expected to be 60 percent of net sales,depreciation expense is $2.9 million,interest expense is expected to increase to $1.050 million,and the firm's tax rate will be 30 percent.Calculate the net sales needed to produce net income of $3.25 million.

Accepted Answer

The answer of The CEO of Tom and Sue's wants...

Question 20

Which of the following is a use of cash?

Accepted Answer

Decreasing accrued wages and taxes involves paying out cash to settle these obligations, thus it is a use of cash.

Quiz 2: Reviewing Financial Statements

Ramakrishnan Inc.reported 2013 net income of $20 million and depreciation of $1,500,000.The top part of Ramakrishnan,Inc.'s 2012 and 2013 balance sheets is listed as follows (in millions of dollars) . Calculate the 2013 net cash flow from operating activities for Ramakrishnan,Inc.