Deck 2: Reviewing Financial Statements

Question 1

Which financial statement shows the total revenues that a firm earns and the total expenses the firm incurs to generate those revenues over a specific period of time-generally one year?

A)balance sheet
B)income statement
C)statement of retained earnings
D)statement of cash flows

Answer 1

income statement

Question 2

Which financial statement reconciles net income earned during a given period and any cash dividends paid within that period using the change in retained earnings between the beginning and end of the period?

A)balance sheet
B)income statement
C)statement of retained earnings
D)statement of cash flows

Answer 2

statement of retained earnings

Question 3

When a firm alters its capital structure to include more or less debt (and, in turn, less or more equity), it impacts which of the following?

A)the residual cash flows available for stockholders
B)the number of shares of stock outstanding
C)the earnings per share (EPS)
D)all of these choices are correct.

Answer 3

all of these choices are correct.

Question 4

These are cash inflows and outflows associated with buying and selling of fixed or other long-term assets.

A)cash flows from operations
B)cash flows from investing activities
C)cash flows from financing activities
D)net change in cash and cash equivalents

Question 5

Common stockholders' calculating equity divided by number of shares of common stock outstanding is the formula for

A)earnings per share (EPS).
B)dividends per share (DPS).
C)book value per share (BVPS).
D)market value per share (MVPS).

Question 6

For which of the following would one expect the book value of the asset to differ widely from its market value?

A)cash
B)accounts receivable
C)inventory
D)fixed assets

Question 7

Free cash flow is defined as

A)cash flows available for payments to stockholders of a firm after the firm has made payments to all others with claims against it.
B)cash flows available for payments to stockholders and debt holders of a firm after the firm has made payments necessary to vendors.
C)cash flows available for payments to stockholders and debt holders of a firm after the firm has made investments in assets necessary to sustain the ongoing operations of the firm.
D)cash flows available for payments to stockholders and debt holders of a firm that would be tax-free to the recipients.

Question 8

An equity-financed firm will

A)pay more in income taxes than a debt-financed firm.
B)pay less in income taxes than a debt-financed firm.
C)pay the same in income taxes as a debt-finance firm.
D)not pay any income taxes.

Question 9

Financial statements of publicly traded firms can be found in a number of places. Which of the following is NOT an option for finding publicly traded firms' financial statements?

A)Facebook
B)a firm's website
C)Securities and Exchange Commission's (SEC) website
D)websites such as finance.yahoo.com

Question 10

Deferred taxes occur when a company postpones taxes on profits pertaining to

A)tax years they are under an audit by the Internal Revenue Service.
B)funds they have not collected because they use the accrual method of accounting.
C)a loss they intend to carry back or carry forward on their income tax returns.
D)a particular period as they end up postponing part of their tax liability on this year's profits to future years.

Question 11

Which financial statement reports a firm's assets, liabilities, and equity at a particular point in time?

A)balance sheet
B)income statement
C)statement of retained earnings
D)statement of cash flows

Question 12

This is the amount of additional taxes a firm must pay out for every additional dollar of taxable income it earns.

A)average tax rate
B)marginal tax rate
C)progressive tax system
D)earnings before tax

Question 13

On which of the four major financial statements would you find the increase in inventory?

A)balance sheet
B)income statement
C)statement of cash flows
D)statement of retained earnings

Question 14

Which of the following activities result in an increase in a firm's cash?

A)decrease fixed assets
B)decrease accounts payable
C)pay dividends
D)repurchase of common stock

Question 15

Which financial statement reports the amounts of cash that the firm generated and distributed during a particular time period?

A)balance sheet
B)income statement
C)statement of retained earnings
D)statement of cash flows

Question 16

On which of the four major financial statements would you find net plant and equipment?

A)balance sheet
B)income statement
C)statement of cash flows
D)statement of retained earnings

Question 17

Net operating profit after taxes (NOPAT) is defined as which of the following?

A)net profit a firm earns before taxes, but after any financing costs
B)net profit a firm earns after taxes, and after any financing cost
C)net profit a firm earns after taxes, but before any financing costs
D)net profit a firm earns before taxes, and before any financing cost

Question 18

This is cash flow available for payments to stockholders and debt holders of a firm after the firm has made investments in assets necessary to sustain the ongoing operations of the firm.

A)net income available to common stockholders
B)cash flow from operations
C)net cash flow
D)free cash flow

Question 19

On which of the four major financial statements would you find the common stock and paid-in surplus?

A)balance sheet
B)income statement
C)statement of cash flows
D)statement of retained earnings

Question 20

If a company reports a large amount of net income on its income statement during a year, the firm will have

A)positive cash flow.
B)negative cash flow.
C)zero cash flow.
D)all of these choices are correct.

Question 21

The Sarbanes-Oxley Act requires public companies to ensure which of the following individuals have considerable experience applying generally accepted accounting principles (GAAP) for financial statements?

A)external auditors
B)internal auditors
C)chief financial officers
D)corporate boards' audit committees

Question 22

Glo's Glasses balance sheet lists net fixed assets as $20 million. The fixed assets could currently be sold for $25 million. Glo's current balance sheet shows current liabilities of $7 million and net working capital of $3 million. If all the current accounts were liquidated today, the company would receive $9 million cash after paying $7 million in liabilities. What is the book value of Glo's assets today? What is the market value of these assets?

A)$10 million, $16 million
B)$10 million, $35 million
C)$30 million, $35 million
D)$30 million, $41 million

Question 23

In 2018, Upper Crust had cash flows from investing activities of ($250,000) and cash flows from financing activities of ($150,000). The balance in the firm's cash account was $90,000 at the beginning of 2018 and $105,000 at the end of the year. What was Upper Crust's cash flow from operations for 2018?

A)$15,000
B)$105,000
C)$400,000
D)$415,000

Question 24

Scuba, Inc. is concerned about the taxes paid by the company in 2018. In addition to $5 million of taxable income, the firm received $80,000 of interest on state-issued bonds and $500,000 of dividends on common stock it owns in Boating Adventures, Inc. What are Scuba's tax liability, average tax rate, and marginal tax rate, respectively?

A)$1,637,100, 31.79%, 34%
B)$1,751,000, 34.00%, 34%
C)$1,870,000, 34.00%, 34%
D)$1,983,900, 36.07%, 34%

Question 25

Night Scapes, Corp. began the year 2018 with $10 million in retained earnings. The firm suffered a net loss of $2 million in 2018 and yet paid $2 million to its preferred stockholders and $1 million to its common stockholders. What is the year-end 2018 balance in retained earnings for Night Scapes?

A)$5 million
B)$8 million
C)$9 million
D)$15 million

Question 26

TriCycle, Corp. began the year 2018 with $25 million in retained earnings. The firm earned net income of $7 million in 2018 and paid $1 million to its preferred stockholders and $3 million to its common stockholders. What is the year-end 2018 balance in retained earnings for TriCycle?

A)$25 million
B)$28 million
C)$32 million
D)$36 million

Question 27

Ted's Taco Shop has total assets of $5 million. Forty percent of these assets are financed with debt of which $400,000 is current liabilities. The firm has no preferred stock but the balance in common stock and paid-in surplus is $1 million. Using this information what is the balance for long-term debt and retained earnings on Ted's Taco Shop's balance sheet?

A)$400,000, $1 million
B)$1.6 million, $2 million
C)$1.6 million, $3 million
D)$2 million, $3 million

Question 28

School Books, Inc. has total assets of $18 million of which $6 million are current assets. Cash makes up 10 percent of the current assets and accounts receivable makes up another 40 percent of current assets. School Books' gross plant and equipment has an original cost of $13 million and other long-term assets have a cost value of $2 million. Using this information, what are the balance of inventory and the balance of depreciation on School Books' balance sheet?

A)$3 million, $2 million
B)$3 million, $3 million
C)$2.4 million, $2 million
D)$2.4 million, $3 million

Question 29

Rupert's Rims balance sheet lists net fixed assets as $15 million. The fixed assets could currently be sold for $17 million. Rupert's current balance sheet shows current liabilities of $5 million and net working capital of $3 million. If all the current accounts were liquidated today, the company would receive $6 million cash after paying $5 million in liabilities. What is the book value of Rupert's assets today? What is the market value of these assets?

A)$8 million, $23 million
B)$23 million, $25 million
C)$23 million, $28 million
D)$31 million, $28 million

Question 30

Hair Etc. has total assets of $15 million. Twenty percent of these assets are financed with debt of which $1 million is current liabilities. The firm has no preferred stock but the balance in common stock and paid-in surplus is $8 million. Using this information what is the balance for long-term debt and retained earnings on Hair Etc.'s balance sheet?

A)$1 million, $8 million
B)$2 million, $4 million
C)$2 million, $8 million
D)$3 million, $4 million

Question 31

Jack and Jill Corporation's year-end 2018 balance sheet lists current assets of $250,000, fixed assets of $800,000, current liabilities of $195,000, and long-term debt of $300,000. What is Jack and Jill's total stockholders' equity?

A)$495,000
B)$555,000
C)$1,050,000
D)There is not enough information to calculate total stockholders' equity.Recall the balance sheet identity in Equation 2-1: Assets = Liabilities + Equity.Rearranging this equation: Equity = Assets - Liabilities. Thus, the balance sheets would appear as follows:

Question 32

Harvey's Hamburger Stand has total assets of $3 million of which $1 million are current assets. Cash makes up 20 percent of the current assets and accounts receivable makes up another 5 percent of current assets. Harvey's gross plant and equipment has a book value of $1.5 million and other long-term assets have a book value of $1 million. Using this information, what is the balance of inventory and the balance of depreciation on Harvey's Hamburger Stand's balance sheet?

A)$250,000, $500,000
B)$250,000, $1 million
C)$750,000, $500,000
D)$750,000, $1 million

Question 33

You are evaluating the balance sheet for Campus Corporation. From the balance sheet you find the following balances: cash and marketable securities = $400,000, accounts receivable = $200,000, inventory = $100,000, accrued wages and taxes = $10,000, accounts payable = $300,000, and notes payable = $600,000. What is Campus's net working capital?

A)-$210,000
B)$700,000
C)$910,000
D)$1,610,000

Question 34

Catering Corp. reported free cash flows for 2018 of $8 million and investment in operating capital of $2 million. Catering listed $1 million in depreciation expense and $2 million in taxes on its 2018 income statement. What was Catering's 2018 EBIT?

A)$7 million
B)$10 million
C)$11 million
D)$13 million

Question 35

Bullseye, Inc.'s 2018 income statement lists the following income and expenses: EBIT = $900,000, interest expense = $85,000, and net income = $570,000. What are the 2018 taxes reported on the income statement?

A)$245,000
B)$330,000
C)$815,000
D)There is not enough information to calculate 2018 taxes.

Question 36

Consider a firm with an EBIT of $5,000,000. The firm finances its assets with $20,000,000 debt (costing 5 percent) and 70,000 shares of stock selling at $50.00 per share. To reduce the firm's risk associated with this financial leverage, the firm is considering reducing its debt by $5,000,000 by selling an additional 100,000 shares of stock. The firm is in the 40 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain $5,000,000. What is the change in the firm's EPS from this change in capital structure?

A)decrease EPS by $9.29
B)decrease EPS by $18.70
C)decrease EPS by $19.29
D)increase EPS by $2.14

Question 37

You are considering an investment in Cruise, Inc. and want to evaluate the firm's free cash flow. From the income statement, you see that Cruise earned an EBIT of $202 million, paid taxes of $51 million, and its depreciation expense was $75 million. Cruise's gross fixed assets increased by $70 million from 2017 to 2018. The firm's current assets decreased by $10 million and spontaneous current liabilities increased by $6 million. What is Cruise's operating cash flow, investment in operating capital, and free cash flow for 2018, respectively, in millions?

A)$202, $70, $130
B)$226, $70, $156
C)$226, $54, $172
D)$226, $74, $152

Question 38

Acme Bricks balance sheet lists net fixed assets as $40 million. The fixed assets could currently be sold for $50 million. Acme's current balance sheet shows current liabilities of $15 million and net working capital of $12 million. If all the current accounts were liquidated today, the company would receive $77 million cash after paying $15 million in liabilities. What is the book value of Acme's assets today? What is the market value of these assets?

A)$12 million, $77 million
B)$27 million, $92 million
C)$40 million, $50 million
D)$67 million, $142 million

Question 39

Consider a firm with an EBIT of $500,000. The firm finances its assets with $2,000,000 debt (costing 6 percent) and 50,000 shares of stock selling at $20.00 per share. To reduce the firm's risk associated with this financial leverage, the firm is considering reducing its debt by $1,000,000 by selling an additional 50,000 shares of stock. The firm is in the 40 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain $500,000. What is the change in the firm's EPS from this change in capital structure?

A)decrease EPS by $1.68
B)decrease EPS by $1.92
C)decrease EPS by $3.20
D)increase EPS by $0.72

Question 40

Barnyard, Inc.'s 2018 income statement lists the following income and expenses: EBIT = $500,000, interest expense = $45,000, and taxes = $152,000. Barnyard's has no preferred stock outstanding and 200,000 shares of common stock outstanding. What are its 2018 earnings per share?

A)$2.50
B)$2.275
C)$1.74
D)$1.515

Question 41

You have been given the following information for Sherry's Sandwich Corp.: Net sales = $300,000; Gross profit = $100,000; Addition to retained earnings = $30,000; Dividends paid to preferred and common stockholders = $8,500; Depreciation expense = $25,000. The firm's tax rate is 30 percent. What are the cost of goods sold and the interest expense for Sherry's Sandwich Corp.?

A)$20,000, and $200,000, respectively
B)$100,000, and $20,000, respectively
C)$200,000, and $20,000, respectively
D)$200,000, and $36,500, respectively

Question 42

Suppose that in addition to the $300,000 of taxable income from operations, Liam's Burgers, Inc. received $25,000 of interest on state-issued bonds and $50,000 of dividends on common stock it owns in Sodas, Inc. Using the tax schedule in

A)$106,100, 33.68%, 39%, respectively
B)$122,850, 39.00%, 39%, respectively
C)$129,500, 34.53%, 39%, respectively
D)$139,250, 37.13%, 39%, respectively

Question 43

Crispy Corporation has net cash flow from financing activities for the last year of $20 million. The company paid $5 million in dividends last year. During the year, the change in notes payable on the balance sheet was an increase of $2 million, and change in common and preferred stock was an increase of $3 million. The end of year balance for long-term debt was $45 million. What was their beginning of year balance for long-term debt?

A)$15 million
B)$20 million
C)$25 million
D)$35 million

Question 44

You have been given the following information for Romeo's Rockers Corp.: Net sales = $5,200,000; Cost of goods sold = $2,100,000; Addition to retained earnings = $1,000,000; Dividends paid to preferred and common stockholders = $400,000; Interest expense = $200,000. The firm's tax rate is 30 percent. What is the depreciation expense for Romeo's Rockers Corp.?

A)$900,000
B)$1,100,000
C)$1,500,000
D)$1,600,000

Question 45

Zoe's Dog Biscuits, Inc. has net cash flows from operating activities for the last year of $226 million. The income statement shows that net income is $150 million and depreciation expense is $85 million. During the year, the change in inventory on the balance sheet was an increase of $14 million, change in accrued wages and taxes was an increase of $15 million and change in accounts payable was an increase of $10 million. At the beginning of the year the balance of accounts receivable was $45 million. What was the end of year balance for accounts receivable?

A)$20 million
B)$25 million
C)$45 million
D)$65 million

Question 46

You are considering a stock investment in one of two firms (AllDebt, Inc. and AllEquity, Inc.), both of which operate in the same industry and have identical operating income of $400,000. AllDebt, Inc. finances its $800,000 in assets with $600,000 in debt (on which it pays 5 percent interest annually) and $200,000 in equity. AllEquity, Inc. finances its $800,000 in assets with no debt and $800,000 in equity. Both firms pay a tax rate of 30 percent on their taxable income. What are the asset funders' (the debt holders and stockholders) resulting return on assets for the two firms?

A)32.375%, and 35.00%, respectively
B)36.125%, and 35.00%, respectively
C)46.25%, and 50%, respectively
D)50%, and 50%, respectively

Question 47

Full Moon Productions Inc. has net cash flow from financing activities for the last year of $105 million. The company paid $15 million in dividends last year. During the year, the change in notes payable on the balance sheet was an increase of $40 million, and change in common and preferred stock was an increase of $50 million. The end of year balance for long-term debt was $50 million. What was their beginning of year balance for long-term debt?

A)$5 million
B)$20 million
C)$30 million
D)$35 million

Question 48

The 2010 income statement for Pete's Pumpkins shows that depreciation expense is $250 million, EBIT is $500 million, EBT is $320 million, and the tax rate is 30 percent. At the beginning of the year, the balance of gross fixed assets was $1,600 million and net operating working capital was $640 million. At the end of the year gross fixed assets was $2,000 million. Pete's free cash flow for the year was $630 million. What is their end of year balance for net operating working capital?

A)$24 million
B)$264 million
C)$654 million
D)$1,064 million

Question 49

You are considering a stock investment in one of two firms (AllDebt, Inc. and AllEquity, Inc.), both of which operate in the same industry and have identical operating income of $3 million. AllDebt, Inc. finances its $6 million in assets with $5 million in debt (on which it pays 5 percent interest annually) and $1 million in equity. AllEquity, Inc. finances its $6 million in assets with no debt and $6 million in equity. Both firms pay a tax rate of 40 percent on their taxable income. What are the asset funders' (the debt holders and stockholders) resulting return on assets for the two firms?

A)27.5%, and 30%, respectively
B)31.67%, and 30%, respectively
C)33%, and 30%, respectively
D)50%, and 50%, respectively

Question 50

Café Creations Inc. has net cash flow from financing activities for the last year of $25 million. The company paid $15 million in dividends last year. During the year, the change in notes payable on the balance sheet was a decrease of $40 million, and change in common and preferred stock was an increase of $50 million. The end of year balance for long-term debt was $40 million. What was their beginning of year balance for long-term debt?

A)$10 million
B)$20 million
C)$30 million
D)$40 million

Question 51

The 2018 income statement for Paige's Purses shows that depreciation expense is $10 million, EBIT is $25 million, EBT is $15 million, and the tax rate is 30 percent. At the beginning of the year, the balance of gross fixed assets was $80 million and net operating working capital was $30 million. At the end of the year gross fixed assets was $100 million. Paige's free cash flow for the year was $20 million. What is their end of year balance for net operating working capital?

A)$10.5 million
B)$14 million
C)$20.5 million
D)$30.5 million

Question 52

You have been given the following information for Fina's Furniture Corp.: Net sales = $25,500,000; Cost of goods sold = $10,250,000; Addition to retained earnings = $305,000; Dividends paid to preferred and common stockholders = $500,000; Interest expense = $2,000,000. The firm's tax rate is 30 percent. What is the depreciation expense for Fina's Furniture Corp.?

A)$12,100,000
B)$12,400,000
C)$14,100,000
D)$14,400,000

Question 53

You are considering a stock investment in one of two firms (AllDebt, Inc. and AllEquity, Inc.), both of which operate in the same industry and have identical operating income of $600,000. AllDebt, Inc. finances its $1.2 million in assets with $1 million in debt (on which it pays 10 percent interest annually) and $0.2 million in equity. AllEquity, Inc. finances its $1.2 million in assets with no debt and $1.2 million in equity. Both firms pay a tax rate of 30 percent on their taxable income. What are the asset funders' (the debt holders and stockholders) resulting return on assets for the two firms?

A)29.17%, and 35%, respectively
B)37.5%, and 35%, respectively
C)37.5%, and 37.5%, respectively
D)50%, and 50%, respectively

Question 54

Suppose that in addition to the $5.5 million of taxable income from operations, Emily's Flowers, Inc. received $500,000 of interest on state-issued bonds and $300,000 of dividends on common stock it owns in Amy's Iris Bulbs, Inc. Using the tax schedule in

A)$1,900,600, 34%, 34%, respectively
B)$1,972,000, 34%, 34%, respectively
C)$2,070,600, 34%, 34%, respectively
D)$2,142,000, 34%, 34%, respectively

Question 55

Fina's Faucets, Inc. has net cash flows from operating activities for the last year of $17 million. The income statement shows that net income is $15 million and depreciation expense is $6 million. During the year, the change in inventory on the balance sheet was an increase of $4 million, change in accrued wages and taxes was an increase of $1 million and change in accounts payable was an increase of $1 million. At the beginning of the year the balance of accounts receivable was $5 million. What was the end of year balance for accounts receivable?

A)$2 million
B)$3 million
C)$7 million
D)$9 million

Question 56

You have been given the following information for Nicole's Neckties Corp.: Net sales = $2,500,000; Cost of goods sold = $1,300,000; Addition to retained earnings = $30,000; Dividends paid to preferred and common stockholders = $300,000; Interest expense = $50,000. The firm's tax rate is 40 percent. What is the depreciation expense for Nicole's Neckties Corp.?

A)$550,000
B)$600,000
C)$650,000
D)$820,000

Question 57

You have been given the following information for Kaye's Krumpet Corp.: Net sales = $150,000; Gross profit = $100,000; Addition to retained earnings = $20,000; Dividends paid to preferred and common stockholders = $8,000; Depreciation expense = $50,000. The firm's tax rate is 30 percent. What are the cost of goods sold and the interest expense for Kaye's Krumpet Corp.?

A)$10,000, and $50,000, respectively
B)$50,000, and $10,000, respectively
C)$50,000, and $22,000, respectively
D)$62,000, and $10,000, respectively

Question 58

The 2018 income statement for Lou's Shoes shows that depreciation expense is $2 million, EBIT is $5 million, EBT is $3 million, and the tax rate is 40 percent. At the beginning of the year, the balance of gross fixed assets was $16 million and net operating working capital was $6 million. At the end of the year gross fixed assets was $20 million. Lou's free cash flow for the year was $4 million. What is their end of year balance for net operating working capital?

A)$1.8 million
B)$3.8 million
C)$5.8 million
D)$12.2 million

Question 59

You have been given the following information for Ross's Rocket Corp.: Net sales = $1,000,000; Gross profit = $400,000; Addition to retained earnings = $60,000; Dividends paid to preferred and common stockholders = $90,000; Depreciation expense = $50,000. The firm's tax rate is 40 percent. What are the cost of goods sold and the interest expense for Ross's Rocket Corp.?

A)$100,000, and $600,000, respectively
B)$600,000, and $100,000, respectively
C)$600,000, and $200,000, respectively
D)$700,000, and $100,000, respectively

Question 60

Nickolas's Nut Farms, Inc. has net cash flows from operating activities for the last year of $25 million. The income statement shows that net income is $15 million and depreciation expense is $6 million. During the year, the change in inventory on the balance sheet was a decrease of $4 million, change in accrued wages and taxes was a decrease of $1 million and change in accounts payable was a decrease of $1 million. At the beginning of the year the balance of accounts receivable was $5 million. What was the end of year balance for accounts receivable?

A)$2 million
B)$3 million
C)$7 million
D)$9 million

Question 61

Reed's Birdie Shot, Inc.'s 2018 income statement lists the following income and expenses: EBIT = $550,000, interest expense = $43,000, and net income = $300,000. Calculate the 2018 taxes reported on the income statement.

A)$85,000
B)$107,000
C)$309,000
D)$207,000

Question 62

The 2018 income statement for John's Gym shows that depreciation expense is $20 million, EBIT is $80 million, and taxes are $24 million. At the end of the year, the balance of gross fixed assets was $102 million. The increase in net operating working capital during the year was $18 million. John's free cash flow for the year was $41 million. What was the beginning of year balance for gross fixed assets?

A)$43 million
B)$85 million
C)$84 million
D)$163 million

Question 63

Reed's Birdie Shot, Inc.'s 2018 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 2018 earnings per share.

A)$3.49
B)$2.29
C)$3.14
D)$2.79

Question 64

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?

A)$18 million; $27 million
B)$12 million; $12 million
C)$14 million; $29 million
D)$13 million; $18 million

Question 65

Tater and Pepper Corp. reported free cash flows for 2018 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 2018 income statement. Calculate Tater and Pepper's 2018 EBIT.

A)$49,000,000
B)$42,000,000
C)$39,000,000
D)$47,000,000

Question 66

Martha's Moving Van 4U, Inc. had free cash flow during 2018 of $1 million, EBIT of $30 million, tax expense of $8 million, and depreciation of $4 million. Using this information, what was Martha's Accounts Payable ending balance in 2018?

A)$5 million
B)$15 million
C)$35 million
D)$45 million

Question 67

In 2018, 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 2018 and $1,025,000 at the end of the year. Calculate Usher Sports Shop's cash flow from operations for 2018.

A)$6,219,000
B)$5,414,000
C)$4,970,000
D)$5,980,000

Question 68

Hunt Taxidermy, Inc. is concerned about the taxes paid by the company in 2018. 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.

A)$40,250,000
B)$38,150,000
C)$36,900,000
D)$36,620,000

Question 69

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.

A)$1,210,000
B)$1,970,000
C)$1,520,000
D)$1,725,000

Question 70

Bike and Hike, Inc. started the year with a balance of retained earnings of $100 million and ended the year with retained earnings of $128 million. The company paid dividends of $9 million to the preferred stockholders and $22 million to common stock holders. What was Bike and Hike's net income for the year?

A)$28 million
B)$31 million
C)$59 million
D)$128 million

Question 71

Zoeckler Mowing & Landscaping's year-end 2011 balance sheet lists current assets of $350,000, fixed assets of $325,000, current liabilities of $145,000, and long-term debt of $185,000. Calculate Zoeckler's total stockholders' equity.

A)$115,000
B)$490,000
C)$345,000
D)$500,000

Question 72

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?

A)$2.4 million; $1 million
B)$3.4 million; $2 million
C)$1.4 million; $1 million
D)$0.4 million; $3 million

Question 73

Mr. Husker's Tuxedos, Corp. began the year 2018 with $205 million in retained earnings. The firm earned net income of $30 million in 2018 and paid $5 million to its preferred stockholders and $12 million to its common stockholders. What is the year-end 2018 balance in retained earnings for Mr. Husker's Tuxedos?

A)$193,000,000
B)$200,000,000
C)$213,000,000
D)$218,000,000

Question 74

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?

A)Book Value: $28m; Market Value: $32.75m
B)Book Value: $32m; Market Value: $42.25m
C)Book Value: $32m; Market Value: $32.75m
D)Book Value: $28m; Market Value: $42.25m

Question 75

Jamaican Ice Cream Corp. started the year with a balance of retained earnings of $100 million. The company reported net income for the year of $45 million, paid dividends of $2 million to the preferred stockholders and $15 million to common stockholders. What is Jamaican Ice Cream's end of year balance in retained earnings?

A)$38 million
B)$55 million
C)$128 million
D)$162 million

Question 76

You are evaluating the balance sheet for Goodman's Bees Corporation. From the balance sheet you find the following balances: cash and marketable securities = $200,000, accounts receivable = $1,100,000, inventory = $2,000,000, accrued wages and taxes = $500,000, accounts payable = $600,000, and notes payable = $100,000. Calculate Goodman's Bees' net working capital.

A)$2,000,000
B)$2,100,000
C)$1,400,000
D)$1,900,000

Question 77

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.

A)OCF = $42,000,000; IOC = $37,000,000; FCF = $5,000,000
B)OCF = $47,000,000; IOC = $37,000,000; FCF = $10,000,000
C)OCF = $42,000,000; IOC = $46,000,000; FCF = -$4,000,000
D)OCF = $47,000,000; IOC = $46,000,000; FCF = $1,000,000

Question 78

The 2018 income statement for Betty's Barstools shows that depreciation expense is $100 million, EBIT is $400 million, and taxes are $120 million. At the end of the year, the balance of gross fixed assets was $510 million. The increase in net operating working capital during the year was $94 million. Betty's free cash flow for the year was $625 million. What was the beginning of year balance for gross fixed assets?

A)$359 million
B)$380 million
C)$849 million
D)$1,094 million

Question 79

Soccer Starz, Inc. started the year with a balance of retained earnings of $25 million and ended the year with retained earnings of $32 million. The company paid dividends of $2 million to the preferred stockholders and $6 million to common stockholders. What was Soccer Starz's net income for the year?

A)$7 million
B)$15 million
C)$40 million
D)$49 million

Question 80

Oakdale Fashions Inc. had $255,000 in 2018 taxable income. If the firm paid $82,100 in taxes, what is the firm's average tax rate?

A)34.70%
B)32.20%
C)29.90%
D)28.20%