Question 1

Irawaddy Company, a retailer, had cost of goods sold of $230,000 last year. The beginning inventory balance was $24,000 and the ending inventory balance was $22,000. The company's average sale period was closest to:
A)36.5 days
B)73.0 days
C)38.1 days
D)34.9 days

Accepted Answer

The answer of Irawaddy Company, a retailer, had cost of...

Question 2

Frantic Corporation had $130,000 in sales on account last year. The beginning accounts receivable balance was $10,000 and the ending accounts receivable balance was $16,000. The corporation's accounts receivable turnover was closest to:
A)5.00
B)13.00
C)10.00
D)8.13

Accepted Answer

Accounts receivable turnover = (Net credit sales) / (Average accounts receivable)

Net credit sales = Sales on account - Sales returns and allowances

Sales on account = $130,000

Sales returns and allowances = Unknown

To calculate sales returns and allowances, we need to know the beginning and ending balances of the allowance for doubtful accounts.

Average accounts receivable = (Beginning accounts receivable + Ending accounts receivable) / 2

Beginning accounts receivable = $10,000

Ending accounts receivable = $16,000

Average accounts receivable = ($10,000 + $16,000) / 2 = $13,000

Therefore, the accounts receivable turnover = ($130,000 - Sales returns and allowances) / $13,000

Since we do not have information on Sales returns and allowances, we cannot calculate the exact accounts receivable turnover. However, the closest option is C) 10.00.

Question 3

During the year just ended, the retailer James Corporation purchased $425,000 of inventory. The inventory balance at the beginning of the year was $175,000. If the cost of goods sold for the year was $450,000, then the inventory turnover for the year was:
A)2.77
B)2.57
C)3.00
D)2.62

Accepted Answer

The answer of During the year just ended, the retailer...

Question 4

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:
A)$1,000,000
B)$1,300,000
C)$1,125,000
D)$1,225,000

Accepted Answer

The answer of Orem Corporation's current liabilities are $75,000, its...

Question 5

Windham Corporation has current assets of $400,000 and current liabilities of $500,000. Windham Corporation's current ratio would be increased by:
A)the purchase of $100,000 of inventory on account.
B)the payment of $100,000 of accounts payable.
C)the collection of $100,000 of accounts receivable.
D)refinancing a $100,000 long-term loan with short-term debt.

Accepted Answer

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

Question 6

Data from Keniston Corporation's most recent balance sheet and income statement appear below: $$\begin{array} { | l r | r | } 
\hline & \text { This Year } & \text { Last Year } \
\hline \text { Accounts receivable } & \$ 128,000 & \$ 114,000 \
\hline \text { Inventory } & \$ 228,000 & \$ 193,000 \
\hline \text { Sales on account } & \$ 813,000 & \
\hline \text { Cost of goods sold } & \$ 597,000 & \
\hline
\end{array}$$ The average collection period for this year is closest to:
A)39.1 days
B)45.1 days
C)54.3 days
D)57.5 days

Accepted Answer

The average collection period is calculated as (Average Accounts Receivable / Sales on Account) * 365. The average accounts receivable is ($128,000 + $114,000) / 2 = $121,000. Thus, ($121,000 / $813,000) * 365 ≈ 54.3 days.

Question 7

Dratif Corporation's working capital is $33,000 and its current liabilities are $80,000. The corporation's current ratio is closest to:
A)1.41
B)0.59
C)3.42
D)0.41

Accepted Answer

The answer of Dratif Corporation's working capital is $33,000 and...

Question 8

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:
A)1.33
B)0.81
C)2.29
D)1.14

Accepted Answer

To calculate the acid-test ratio, we have to exclude inventory from current assets.

Acid-Test Ratio = (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities
Acid-Test Ratio = ($14,000 + $8,000 + $34,000) / $42,000
Acid-Test Ratio = $56,000 / $42,000
Acid-Test Ratio = 1.33

Therefore, the closest answer choice is A) 1.33.

Question 9

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; it has no short-term notes receivable. If Dennisport's current ratio is 3.1, its inventory and prepaid expenses must be:
A)$12,400
B)$24,000
C)$30,000
D)$40,000

Accepted Answer

The acid-test ratio is calculated by dividing current assets minus inventory and prepaid expenses by current liabilities. Therefore, we can set up an equation as follows:

2.5 = (Cash + Marketable securities + Accounts receivable)/(Current liabilities)

We know that the current ratio is 3.1, which is calculated by dividing current assets by current liabilities. We can set up another equation as follows:

3.1 = (Cash + Marketable securities + Accounts receivable + Inventory + Prepaid expenses)/(Current liabilities)

We can use algebraic manipulation to solve for the values of inventory and prepaid expenses. First, we can rearrange the acid-test ratio equation as follows:

Cash + Marketable securities + Accounts receivable = 2.5(Current liabilities) - 2.5(Inventory + Prepaid expenses)

Then, we can substitute the expression for cash, marketable securities, and accounts receivable into the current ratio equation, which gives us:

3.1(Current liabilities) = 2.5(Current liabilities) - 2.5(Inventory + Prepaid expenses) + Inventory + Prepaid expenses + Noncurrent assets

Simplifying this equation, we get:

0.6(Current liabilities) = Noncurrent assets

Substituting in the given values for current liabilities and noncurrent assets, we get:

0.6(40,000) = 70,000

Solving for the unknown inventory and prepaid expenses, we get:

Inventory + Prepaid expenses = $24,000

Therefore, the correct answer is B) $24,000.

Question 10

Harris Corporation, a retailer, had cost of goods sold of $290,000 last year. The beginning inventory balance was $26,000 and the ending inventory balance was $24,000. The corporation's inventory turnover was closest to:
A)12.08
B)11.60
C)5.80
D)11.15

Accepted Answer

Inventory turnover = Cost of goods sold / Average inventory
Average inventory = (Beginning inventory + Ending inventory) / 2
Average inventory = ($26,000 + $24,000) / 2 = $25,000

Inventory turnover = $290,000 / $25,000 = 11.6
Therefore, the answer is B) 11.60.

Question 11

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:
A)1.31
B)0.76
C)0.33
D)0.36

Accepted Answer

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

Question 12

Natcher Corporation's accounts receivable at the end of Year 2 was $126,000 and its accounts receivable at the end of Year 1 was $130,000. The company's inventory at the end of Year 2 was $127,000 and its inventory at the end of Year 1 was $120,000. Sales, all on account, amounted to $1,380,000 in Year 2. Cost of goods sold amounted to $800,000 in Year 2. The company's operating cycle for Year 2 is closest to:
A)44.7 days
B)17.3 days
C)62.8 days
D)90.2 days

Accepted Answer

Inventory turnover = Cost of goods sold ÷ Average inventory*
= $800,000 ÷ $123,500 = 6.48 (rounded)
*Average inventory =
($127,000 + $120,000) ÷ 2 = $123,500
Average sale period = 365 days ÷ Inventory turnover
= 365 days ÷ 6.48 = 56.3 days (rounded)
Accounts receivable turnover = Sales on account ÷ Average accounts receivable*
= $1,380,000 ÷ $128,000 = 10.78 (rounded)
*Average accounts receivable =
($126,000 + $130,000) ÷ 2 = $128,000
Average collection period = 365 days ÷ Accounts receivable turnover
= 365 days ÷ 10.78 = 33.9 days (rounded)
Operating cycle = Average sale period + Average collection period
= 56.3 days + 33.9 days = 90.2 days

Question 13

Kopas Corporation has provided the following data: $$\begin{array} { | l r | r | } 
\hline & \text { This Year } & \text { Last Year } \
\hline \text { Accounts receivable } & \$ 89,000 & \$ 107,000 \
\hline \text { Inventory } & \$ 160,000 & \$ 156,000 \
\hline \text { Sales on account } & \$ 627,000 & \
\hline \text { Cost of goods sold } & \$ 488,000 & \
\hline
\end{array}$$ The inventory turnover for this year is closest to:
A)3.09
B)0.98
C)1.03
D)3.05

Accepted Answer

Inventory turnover = Cost of goods sold / Average inventoryAverage inventory = (Beginning inventory + Ending inventory) / 2= (156,000 + 160,000) / 2= 158,000Inventory turnover = 488,000 / 158,000= 3.09

Question 14

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:
A)$380,000
B)$40,000
C)$250,000
D)$290,000

Accepted Answer

Working capital is calculated as current assets minus current liabilities. 
Working capital = $380,000 - $340,000 = $40,000. Therefore, the best choice is B.

Question 15

Calin Corporation has total current assets of $615,000, total current liabilities of $230,000, total stockholders' equity of $1,183,000, total net plant and equipment of $958,000, total assets of $1,573,000, and total liabilities of $390,000. The company's working capital is:
A)$615,000
B)$1,183,000
C)$385,000
D)$958,000

Accepted Answer

Working capital is calculated by subtracting total current liabilities from total current assets. Therefore, working capital = $615,000 - $230,000 = $385,000.

Question 16

Spomer Corporation's inventory at the end of Year 2 was $114,000 and its inventory at the end of Year 1 was $120,000. Cost of goods sold amounted to $710,000 in Year 2. The company's inventory turnover for Year 2 is closest to:
A)5.92
B)1.05
C)6.07
D)6.23

Accepted Answer

Inventory turnover formula:
Inventory turnover = Cost of goods sold / Average inventory

Average inventory formula:
Average inventory = (Inventory at the end of Year 2 + Inventory at the end of Year 1) / 2

In this case, Average inventory = ($114,000 + $120,000) / 2 = $117,000

Plugging in the values into the inventory turnover formula:
Inventory turnover = $710,000 / $117,000 = 6.07

Therefore, the answer is C) 6.07.

Question 17

Laverde Corporation has provided the following data: $$\begin{array} { | l | r | r | } 
\hline & \text { Year } \mathbf { 2 } & \text { Year 1 } \
\hline \text { Inventory } & \$ 185,000 & \$ 200,000 \
\hline \begin{array} { l } 
\text { Total } \
\text { assets }
\end{array} & \$ 1,489,000 & \$ 1,470,000 \
\hline \text { Sales } & \$ 1,220,000 & \
\hline
\end{array}$$ The company's total asset turnover for Year 2 is closest to:
A)1.22
B)7.60
C)0.13
D)0.82

Accepted Answer

The answer of Laverde Corporation has provided the following data:...

Question 18

Granger Corporation had $180,000 in sales on account last year. The beginning accounts receivable balance was $10,000 and the ending accounts receivable balance was $18,000. The corporation's average collection period was closest to:
A)20.3 days
B)28.4 days
C)36.5 days
D)56.8 days

Accepted Answer

Average accounts receivable balance = ($10,000 + $18,000) ÷ 2 = $14,000
Accounts receivable turnover = Sales on account ÷ Average accounts receivable balance
= $180,000 ÷ $14,000 = 12.86
Average collection period = 365 days ÷ Accounts receivable turnover
= 365 days ÷ 12.86 = 28.4 days

Question 19

Feiler Corporation has total current assets of $483,000, total current liabilities of $347,000, total stockholders' equity of $1,057,000, total net plant and equipment of $1,031,000, total assets of $1,514,000, and total liabilities of $457,000. The company's current ratio is closest to:
A)0.32
B)0.30
C)1.39
D)0.95

Accepted Answer

Current ratio = Total current assets/Total current liabilities

Current ratio = $483,000/$347,000 = 1.39

Therefore, the closest choice is C, with a current ratio of 1.39.

Question 20

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:
A)2.08
B)1.73
C)2.66
D)1.88

Accepted Answer

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

Quiz 13: Financial Statement Analysis

Irawaddy Company, a retailer, had cost of goods sold of $230,000 last year. The beginning inventory balance was $24,000 and the ending inventory balance was $22,000. The company's average sale period was closest to:

Frantic Corporation had $130,000 in sales on account last year. The beginning accounts receivable balance was $10,000 and the ending accounts receivable balance was $16,000. The corporation's accounts receivable turnover was closest to:

During the year just ended, the retailer James Corporation purchased $425,000 of inventory. The inventory balance at the beginning of the year was $175,000. If the cost of goods sold for the year was $450,000, then the inventory turnover for the year was:

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:

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

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

Harris Corporation, a retailer, had cost of goods sold of $290,000 last year. The beginning inventory balance was $26,000 and the ending inventory balance was $24,000. The corporation's inventory turnover was closest to:

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:

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:

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

Spomer Corporation's inventory at the end of Year 2 was $114,000 and its inventory at the end of Year 1 was $120,000. Cost of goods sold amounted to $710,000 in Year 2. The company's inventory turnover for Year 2 is closest to:

Granger Corporation had $180,000 in sales on account last year. The beginning accounts receivable balance was $10,000 and the ending accounts receivable balance was $18,000. The corporation's average collection period was closest to:

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