Question 1

Assuming the accounts payable balance at the end of 2017 is $75,000,and it has decreased 20% since the end of 2016,the balance at the end of 2016 (rounded to the nearest whole dollar_was:
A) $60,000
B) $93,750
C) $72,000
D) $90,000

Accepted Answer

If the accounts payable balance at the end of 2017 is $75,000 and it has decreased 20% since the end of 2016, then we can use the following formula to calculate the balance at the end of 2016:

End of 2016 balance = End of 2017 balance / (1 - % decrease)

End of 2016 balance = $75,000 / (1 - 0.20)

End of 2016 balance = $75,000 / 0.80

End of 2016 balance = $93,750

Rounding this to the nearest whole dollar gives us the answer of $94,000.

Therefore, the best choice is B, as it is the closest numerical value to the calculated answer.

Question 2

Selected items from the balance sheet and income statement are shown below for the Carswell Corporation for 2017 and 2016.Calculate the amount of the change and the percentage change for each item.
 $\begin{array}{lll}&2017&2016\
\text { Cash } & \$ 130,000 & \$ 100,000 \
\text { Accounts receivable } & 100,000 & 125,000 \
\text { Merchandise inventory } & 65,000 & 85,000 \
\text { Accounts payable } & 62,500 & 50,000 \
\text { Sales } & 150,000 & 135,000 \
\text { Cost of goods sold } & 73,500 & 67,500
\end{array}$

Accepted Answer

The answer of Selected items from the balance sheet and...

Question 3

When calculating trend percentages,all percentages shown are relative to:
A) the immediately preceding year
B) the current year
C) the base year
D) an average index calculated for all the years shown

Accepted Answer

Trend percentages are used to show the rate of change over time relative to a base year. Therefore, all percentages shown are relative to the base year.

Question 4

Given the following data for total sales: $$\begin{array} { l l } 
2014 & \$ 100,000 \
2015 & \$ 110,000 \
2016 & \$ 115,000 \
2017 & \$ 100,000
\end{array}$$ A table showing trend percentages for 2014-2017,respectively,using 2014 as the base year would show a(n):
A) $$\begin{array} { | l | l | l | l | } 
\hline 2014 & 2015 & 2016 & 2017 \
\hline 100 \% & 110 \% & 105 \% & 108 \% \
\hline
\end{array}$$
B) $$\begin{array} { | l | l | l | l | } 
\hline 2014 & 2015 & 2016 & 2017 \
\hline 100 \% & 110 \% & 115 \% & 108 \% \
\hline
\end{array}$$
C) $$\begin{array} { | l | l | l | l | } 
\hline 2014 & 2015 & 2016 & 2017 \
\hline 100 \% & 110 \% & 105 \% & 24 \% \
\hline
\end{array}$$
D) $$\begin{array} { | l | l | l | l | } 
\hline 2014 & 2015 & 2016 & 2017 \
\hline 22 \% & 102 \% & 106 \% & 100 \% \
\hline
\end{array}$$

Accepted Answer

To calculate trend percentages, the formula is: $(\text{Year Amount} / \text{Base Year Amount}) \times 100$. For 2014 as the base year (100,000), the calculations are: 2015 (110,000/100,000) = 110%, 2016 (115,000/100,000) = 115%, and 2017 (100,000/100,000) = 100%.

Question 5

Assuming the inventory balance at the end of 2017 is $20,000,and it has increased by 10% since the end of 2016,the balance at the end of 2016 (rounded to the nearest whole dollar_was:
A) $18,000
B) $18,182
C) $16,364
D) $22,000

Accepted Answer

If the inventory balance at the end of 2017 is $20,000 and it has increased by 10% since the end of 2016, we can find the inventory balance at the end of 2016 by dividing the current balance by 1.1. 
20,000 / 1.1 = 18,181.81 (rounded to the nearest whole dollar is $18,182). 
Therefore, the balance at the end of 2016 was $18,182, which is option B.

Question 6

Table 18-11 Alpha Products
The following data on Alpha Products, Inc. is available.
 
-Refer to Table 18-11.What was the percent increase or decrease in net accounts payable from 2016 to 2017?
A) 28.6% increase
B) 28.6% decrease
C) 40.1% increase
D) 40.1% decrease

Accepted Answer

B) Calculations: ($108,200-151,600)/151,600 = 28.6% decrease

Question 7

Please refer to the following trend analysis of Pathways Company: $$\begin{array} { | l | c | c | c | c | c | c | } 
\hline & 2015 & 2014 & 2013 & 2012 & 2011 & 2010 \
\hline \text { Net sales } & \$ 4,970 & \$ 4,500 & \$ 3,980 & \$ 3,270 & \$ 4,750 & \$ 4,400 \
\hline \text { Percentages } & 113.0 \% & 102.3 \% & 90.5 \% & 74.3 \% & 108.0 \% & 100.0 \% \
\hline
\end{array}$$ Which of the following is a correct conclusion from the above analysis?
A) Net sales in 2014 were equal to 102.3% of net sales for the previous year.
B) Net sales in 2014 were up 2.3% over the previous year.
C) Net sales in 2014 were 2.3% higher than 2010 net sales.
D) Net sales in 2014 were down 90.5% from year 2010.

Accepted Answer

The answer of Please refer to the following trend analysis...

Question 8

La Paz Company reported the following data:  
Which of the following statements is an accurate conclusion about the 2017 results,based on the above data?
A) Revenues fell and expenses rose over the 2-year period, resulting in a drop in net income.
B) Net income improved, despite a rise in operating expenses.
C) Gross margin declined over two years, resulting in a drop in net income.
D) The increase in net income resulted primarily from an increase in gross margin coupled with a decrease in operating expenses.

Accepted Answer

The given data includes a code "TB5022_00," which suggests that it represents the financial statement of La Paz Company for the year 2017. The increase in net income could only occur when either revenues increase, expenses decrease, or the gross margin increases. From the given data, we can see that revenue has not been provided, and the only information provided is about the expenses and gross margin. We can see that both operating and non-operating expenses have decreased from $25,500 to $23,200, resulting in lower total expenses. Additionally, the gross margin has improved from 43% to 48%, which has had a significant impact on net income, resulting in an increase. Thus, it is safe to conclude that the increase in net income resulted primarily from an increase in gross margin coupled with a decrease in operating expenses. Therefore, option D is correct.

Question 9

Assuming the inventory balance at the end of 2017 is $30,000,and it has decreased 5% since the end of 2016,the balance at the end of 2016 (rounded to the nearest whole dollar_was:
A) $27,075
B) $28,500
C) $33,241
D) $31,579

Accepted Answer

To find the 2016 balance, divide the 2017 balance by 0.95 (since it decreased by 5%): $30,000 / 0.95 = $31,579.

Question 10

Assuming the accounts receivable balance at the end of 2017 is $50,000,and it has increased by 10% per year since the end of 2016,the balance at the end of 2016 (rounded to the nearest whole dollar_was:
A) $45,455
B) $37,566
C) $41,322
D) $55,000

Accepted Answer

The balance at the end of 2017 is $50,000, which represents a 10% increase from the end of 2016. To find the original amount before the increase, divide by 1.10 (100% + 10% = 110% = 1.10). So, $50,000 / 1.10 = $45,454.55, which rounds to $45,455.

Question 11

In 2016,inventory was $356,400 and in 2017,inventory was $275,000.The percent change is calculated by dividing:
A) $356,400 by 275,000 multiply by 100
B) $275,000 by $356,400 multiply by 100
C) ($81,400) by $356,400 multiply by 100
D) ($81,400) by $275,000 multiply by 100

Accepted Answer

The percent change is calculated by taking the difference between the two values ($356,400 - $275,000 = $81,400), dividing by the original value ($356,400), and then multiplying by 100 to get the percentage.

Question 12

Comparing operating expenses in 2017 with operating expenses in 2016 is an example of:
A) horizontal analysis
B) vertical analysis
C) ratio analysis
D) economic-value-added analysis

Accepted Answer

Comparing operating expenses in two different years is an example of horizontal analysis, which evaluates changes in financial statement items over time. Vertical analysis compares financial statement items as a percentage of a single base amount, while ratio analysis involves analyzing the relationship between different financial statement items. Economic-value-added analysis involves assessing whether a company is generating value for its shareholders after accounting for the cost of capital.

Question 13

Table 18 -4
The following is a summary of information presented on the financial statements of The Cake Company on December 31, 2017.
 
-Refer to Table 18-4.What would a horizontal analysis report with respect to net income before income tax expense and net income show?
A) that both net income before income tax expense and net income are 45.45% of net sales revenue
B) a $25,000 increase in both net income before income tax expense and net income
C) a 45.45% increase in both net income before income tax expense and net income
D) a 145% increase in both net income before income tax expense and net income

Accepted Answer

C) Calculations:
 11ea8586_2df0_d0c2_a31f_cdc7cca24393_TB5022_00

Question 14

Table 18-11 Alpha Products
The following data on Alpha Products, Inc. is available.
 
-Refer to Table 18-11.What was the percent increase or decrease in net property,plant and equipment from 2016 to 2017?
A) 12.2% decrease
B) 12.2% increase
C) 13.8% increase
D) 13.8% decrease

Accepted Answer

A) Calculations: ($710,500 - $808,800)/$808,800 = 12.2% decrease

Question 15

Table 18 -4
The following is a summary of information presented on the financial statements of The Cake Company on December 31, 2017.
 
-Refer to Table 18-4.What would a horizontal analysis report with respect to current liabilities show?
A) that current liabilities are 38.46% of total capital
B) a 50.00% increase in current liabilities
C) a current ratio of 0.87
D) a 33.33% increase in current liabilities

Accepted Answer

B) Calculations: ($75,000 - $50,000)/$50,000 = 50%

Question 16

Data for the most recent four fiscal years of Colt Corporation are given below:
 $\begin{array}{lllll}&2017 & 2016 & 2015 & 2014 \
\text { Net Sales } & \$ 78,000 & 75,000 & \$ 67,000 & \$ 60,000 \
\text { Cost of goods sold } & 33,000 & 32,000 & 30,000 & 26,000 \
\text { Gross margin } & 45,000 & 43,000 & 37,000 & 34,000 \
\text { Operating expenses } & 25,000 & 22,000 & 19,000 & 14,000 \
\text { Net income } & 20,000 & 21,000 & 18,000 & 20,000
\end{array}$ a_Prepare an analysis showing the trend percentages for the four-year period using 2014 as the base year.
b_What do the trend percentages indicate regarding Colt Corporation's income statement data?

Accepted Answer

The answer of Data for the most recent four fiscal...

Question 17

Given the following data for total sales: $$\begin{array} { l l } 
2014 & \$ 90,000 \
2015 & \$ 110,000 \
2016 & \$ 125,000 \
2017 & \$ 155,000
\end{array}$$ A table showing trend percentages for 2014-2017,respectively,using 2014 as the base year would show a(n):
A) $$\begin{array} { | l | l | l | l | } 
\hline 2014 & 2015 & 2016 & 2017 \
\hline 100 \% & 110 \% & 125 \% & 155 \% \
\hline
\end{array}$$
B) $$\begin{array} { | l | l | l | l | } 
\hline 2014 & 2015 & 2016 & 2017 \
\hline 100 \% & 120 \% & 115 \% & 130 \% \
\hline
\end{array}$$
C) $$\begin{array} { | l | l | l | l | } 
\hline 2014 & 2015 & 2016 & 2017 \
\hline 100 \% & 122 \% & 139 \% & 172 \% \
\hline
\end{array}$$
D) $$\begin{array} { | l | l | l | l | } 
\hline 2014 & 2015 & 2016 & 2017 \
\hline 75 \% & 92 \% & 104 \% & 129 \% \
\hline
\end{array}$$

Accepted Answer

To calculate trend percentages, the formula is: $(\text{Year Amount} / \text{Base Year Amount}) \times 100$. Using 2014 as the base year (with its sales being $90,000), the calculations for each year are as follows: 2015: $(110,000 / 90,000) \times 100 = 122\%$, 2016: $(125,000 / 90,000) \times 100 = 139\%$, 2017: $(155,000 / 90,000) \times 100 = 172\%$. Therefore, the correct table is the one that shows these percentages.

Question 18

Table 18 -4
The following is a summary of information presented on the financial statements of The Cake Company on December 31, 2017.
 
-Refer to Table 18-4.What would a horizontal analysis report with respect to long-term liabilities show?
A) that long-term liabilities decreased by $30,000
B) that long-term liabilities decreased by 40%
C) that long-term liabilities decreased by 60%
D) that long-term liabilities decreased by 67%

Accepted Answer

B) Calculations: ($50,000 - $30,000)/$50,000 = 0.40

Question 19

Assuming the inventory balance at the end of 2017 is $35,000,and it has increased 10% since the end of 2016,the balance at the end of 2016 (rounded to the nearest whole dollar_was:
A) $31,818
B) $38,500
C) $30,000
D) $32,500

Accepted Answer

The inventory balance at the end of 2017 is $35,000, which represents a 10% increase from the end of 2016. To find the original amount before the increase, divide the final amount by 1.10 (100% + 10% = 110% or 1.10). So, $35,000 / 1.10 = $31,818 (rounded to the nearest whole dollar).

Question 20

Following is a comparative income statement for Chui Corporation:
 Chui Corporation
Comparative Income Statement
For the Years Ended December 31, 2017 and 2016 $\begin{array} { l r r } 
& 2017 & 2016 \
\text { Net sales } & \$ 122,000 & \$ 120,000
\end{array}$ Expenses:
 $\begin{array}{lrr}
\text { Cost of goods sold } & 62,000 & 57,000 \
\text { Selling and general expenses } & 20,000 & 12,000 \
\text { Interest expense } & 12,000 & 14,000 \
\text { Income tax expense } & 6,000 & 7,000 \
\text { Total expenses }&100,000&90,000\
\text { Net income }&\$22,000&\$30,000
\end{array}$ a_Prepare a horizontal analysis of Chui income statement.
b_What positive/negative changes do you see that may have contributed to the $8,000 decrease in net income?

Accepted Answer

The answer of Following is a comparative income statement for...

Quiz 7: Financial Statement Analysis

Assuming the accounts payable balance at the end of 2017 is $75,000,and it has decreased 20% since the end of 2016,the balance at the end of 2016 (rounded to the nearest whole dollar_was:

When calculating trend percentages,all percentages shown are relative to:

Given the following data for total sales: $\begin{array} { l l } 2014 & \$ 100,000 \\2015 & \$ 110,000 \\2016 & \$ 115,000 \\2017 & \$ 100,000\end{array}$ A table showing trend percentages for 2014-2017,respectively,using 2014 as the base year would show a(n) :

Assuming the inventory balance at the end of 2017 is $20,000,and it has increased by 10% since the end of 2016,the balance at the end of 2016 (rounded to the nearest whole dollar_was:

Table 18-11 Alpha Products The following data on Alpha Products, Inc. is available. -Refer to Table 18-11.What was the percent increase or decrease in net accounts payable from 2016 to 2017?

La Paz Company reported the following data: Which of the following statements is an accurate conclusion about the 2017 results,based on the above data?

Assuming the inventory balance at the end of 2017 is $30,000,and it has decreased 5% since the end of 2016,the balance at the end of 2016 (rounded to the nearest whole dollar_was:

Assuming the accounts receivable balance at the end of 2017 is $50,000,and it has increased by 10% per year since the end of 2016,the balance at the end of 2016 (rounded to the nearest whole dollar_was:

In 2016,inventory was $356,400 and in 2017,inventory was $275,000.The percent change is calculated by dividing:

Comparing operating expenses in 2017 with operating expenses in 2016 is an example of:

Table 18 -4 The following is a summary of information presented on the financial statements of The Cake Company on December 31, 2017. -Refer to Table 18-4.What would a horizontal analysis report with respect to net income before income tax expense and net income show?

Table 18-11 Alpha Products The following data on Alpha Products, Inc. is available. -Refer to Table 18-11.What was the percent increase or decrease in net property,plant and equipment from 2016 to 2017?

Table 18 -4 The following is a summary of information presented on the financial statements of The Cake Company on December 31, 2017. -Refer to Table 18-4.What would a horizontal analysis report with respect to current liabilities show?

Given the following data for total sales: $\begin{array} { l l } 2014 & \$ 90,000 \\2015 & \$ 110,000 \\2016 & \$ 125,000 \\2017 & \$ 155,000\end{array}$ A table showing trend percentages for 2014-2017,respectively,using 2014 as the base year would show a(n) :

Table 18 -4 The following is a summary of information presented on the financial statements of The Cake Company on December 31, 2017. -Refer to Table 18-4.What would a horizontal analysis report with respect to long-term liabilities show?

Assuming the inventory balance at the end of 2017 is $35,000,and it has increased 10% since the end of 2016,the balance at the end of 2016 (rounded to the nearest whole dollar_was: