Question 1

The debt to assets ratio

Accepted Answer

The debt to assets ratio is a solvency ratio as it measures the ability of a company to pay its debts in the long term. It is calculated by dividing total debt by total assets, and it shows the proportion of a company's assets that are financed by debt.

Question 2

Shelly Company reported the following financial information: $\begin{array}{lrr}
&12/31/17&12/31/16\
\text { Accounts receivable } & \$ 340,000 & \$ 360,000 \
\text { Net credit sales } & 2,450,000 & 2,420,000
\end{array}$ Compute (a) the accounts receivable turnover and (b) the average collection period for 2017.

Accepted Answer

The answer of Shelly Company reported the following financial information:...

Question 3

Comparative information taken from the Foren Company financial statements is shown below: A)$\begin{array}{lrr}
&2017&2016\
\text { Notes receivable } &\quad\quad \$ 20,000 &\quad \$-0- \\end{array}$
B)$\begin{array}{lrr}\text { Accounts receivable } &\quad 175,000 &\quad 140,000 \\end{array}$
C)$\begin{array}{lrr}\text { Retained earnings } &\quad\quad 30,000 &\quad (40,000) \\end{array}$
D)$\begin{array}{lrr}\text { Income taxes payable } &\quad 55,000 &\quad 20,000 \\end{array}$
E)$\begin{array}{lrr}\text { Sales } &\quad\quad\quad\quad\quad\quad\quad\quad 900,000 &\quad 750,000 \\end{array}$
F)$\begin{array}{lrr}\text { Operating expenses } &\quad\quad 160,000 &\quad 200,000
\end{array}$ Instructions
Using horizontal analysis show the percentage change from 2016 to 2017 with 2016 as the base year.

Accepted Answer

The answer of Comparative information taken from the Foren Company...

Question 4

Using the following operating data for Complex Corporation prepare a schedule showing a vertical analysis for 2017. $\begin{array}{lrr}
&2017&2016\
\text { Net sales } & \$ 360,000 & \$ 320,000 \
\text { Cost of goods sold } & 210,000 & 180,000 \
\text { Operating expenses } & 112,000 & 100,000 \
\text { Net income } & 38,000 & 40,000
\end{array}$

Accepted Answer

The answer of Using the following operating data for Complex...

Question 5

The acid-test ratio is also known as the

Accepted Answer

The acid-test ratio is also known as the quick ratio, as it measures a company's ability to meet its short-term obligations with its most liquid assets. The other options listed (current ratio, fast ratio, times interest earned ratio) are different ratios that measure different aspects of a company's financial performance.

Question 6

Horizontal analysis (trend analysis) percentages for Staas Company's sales cost of goods sold and expenses are listed here. $\begin{array}{lccl}
 \underline{\text { Horizontal Analysis }} &  \underline{2017 }&  \underline{2016} & \underline{ 2015}\
\text { Sales } & 98.2 \% & 104.8 \% & 100.0 \% \
\text { Cost of goods sold } & 102.5 & 98.0 & 100.0 \
\text { Expenses } & 108.6 & 96.4 & 100.0
\end{array}$ Instructions
Explain whether Staas' net income increased decreased or remained unchanged over the 3-year period.

Accepted Answer

The answer of Horizontal analysis (trend analysis) percentages for Staas...

Question 7

Prepare a partial income statement beginning with income before income taxes using the following information for Stone Corporation for the fiscal year ended December 31 2017: $$\begin{array} { l r } 
\text { Sales } & \$ 720,000 \
\text { Discontinued operation loss } & 80,000 \
\text { Operating expenses } & 180,000 \
\text { Cost of goods sold } & 400,000 \
\text { Loss on sale of land } & 25,000
\end{array}$$ Stone Corporation is subject to a 30% income tax rate.

Accepted Answer

The answer of Prepare a partial income statement beginning with...

Question 8

Using these data from the comparative balance sheet of Banner Company perform vertical analysis. $\begin{array}{lcc}
&\text { December 31, } 2017 &\text { December 31, } 2016\
\text { Accounts receivable } & \$ 480,000 & \$ 336,000 \
\text { Inventory } & 720,000 & 504,000 \
\text { Total assets } & 4,000,000 & 3,000,000
\end{array}$

Accepted Answer

The answer of Using these data from the comparative balance...

Question 9

The comparative balance sheet of Nathan Company appears below: $\begin{array}{c}
\text { NATHAN COMPANY}\
\text {  Comparative Balance Sheet}\
\text {  December 31,}\\\begin{array}{lcc}
 \text { Assets } & 2017 & 2016 \
 \text { Current assets } & \$ 420 & \$ 333 \
 \text { Plant assets } & 780 & 567 \
\text { Total assets } & \$ 1,200 & 690 \
\
\text {Liabilities and stockholders' equity}\
\text {Current liabilities}&\$168&\$144\
\text {Long-term debt}&300&162\
\text {Common stock}&432&306\
\text {Retained earnings}&300&288\
\text {Total liabilities and stockholders' equity}&\$1,200&\$900
\end{array}\end{array}$ Instructions
(a) Using horizontal analysis show the percentage change for each balance sheet item using 2016 as a base year.
(b) Using vertical analysis prepare a common size comparative balance sheet.

Accepted Answer

The answer of The comparative balance sheet of Nathan Company...

Question 10

A loss from the disposal of a segment of a business enterprise should be reported separately in the income statement:

Accepted Answer

The answer of A loss from the disposal of a...

Question 11

The following items were taken from the financial statements of Henager Inc. over a three-year period: $\begin{array}{lccc}
\underline{\text { Item }}&\underline{2017}&\underline{2016}&\underline{2015}\\
\text { Net Sales }&\$355,000&\$340,000&\$300,000 \
\text { Cost of Goods Sold } &\underline{214,000}&\underline{202,000}&\underline{186,000}\
\text { Gross Profit } &\underline{\$ 141,000} &\underline{\$138,000}&\underline{\$114,000}\

\end{array}$ Instructions
Compute the following for each of the above time periods. 
a. The amount and percentage change from 2015 to 2016.
b. The amount and percentage change from 2016 to 2017.

Accepted Answer

The answer of The following items were taken from the...

Question 12

If Dolly Company had net income of $550000 in 2017 and it experienced a 25% increase in net income over 2016 what was its 2016 net income?

Accepted Answer

The answer of If Dolly Company had net income of...

Question 13

Selected financial information for Trant Corporation is presented below. $$\begin{array} { l c c } 
& \text { December 31,2017 } & \text { December 31, 2016 } \
\text { Current assets } & \$ 55,000 & \$ 40,000 \
\text { Long-term liabilities } & 90,000 & 80,000 \
\text { Retained earnings } & 125,000 & 100,000
\end{array}$$ Instructions
Prepare a schedule showing a horizontal analysis for 2017 using 2016 as the base year.

Accepted Answer

The answer of Selected financial information for Trant Corporation is...

Question 14

Ladle Corporation had net income of $2000000 in 2015. Using 2016 as the base year net income decreased by 70% in 2014 and increased by 180% in 2017.
Instructions
Compute the net income reported by Ladle Corporation for 2016 and 2017.

Accepted Answer

The answer of Ladle Corporation had net income of $2000000...

Question 15

Selected financial statement data for Freeman Company are presented below. $\begin{array}{lr}&12/31/17\
\text { Cash } & \$ 10,000 \
\text { Short-term investments } & 20,000 \
\text { Accounts receivable } & 60,000 \
\text { Inventories } & 75,000 \
\text { Total current liabilities } & 100,000
\end{array}$ Instructions
Compute the following ratios at December 31 2017:
(a) Current.
(b) Acid-test.

Accepted Answer

The answer of Selected financial statement data for Freeman Company...

Question 16

Troy Inc. decided on January 1 to discontinue its telescope manufacturing division. On July 1 the division's assets with a book value of $1260000 are sold for $840000. Operating income from January 1 to June 30 for the division amounted to $130000. Ignoring income taxes what total amount should be reported on Troy's income statement for the current year under the caption Discontinued Operations?

Accepted Answer

The answer of Troy Inc. decided on January 1 to...

Question 17

Using the following operating data for Complex Corporation illustrate horizontal analysis. $\begin{array} { l r r r } 
& { 2017 } &  { 2016 } \
\text { Net sales } & \$ 350,000 &  \$ 300,000 \
\text { Cost of goods sold } & 240,000  & 160,000 \
\text { Operating expenses } & 80,000  & 120,000 \
\text { Net income } & 30,000  & 20,000
\end{array}$

Accepted Answer

The answer of Using the following operating data for Complex...

Question 18

The following items were taken from the financial statements of Rug Inc. over a four-year period: $\begin{array}{lrrrr}
\text { Item }&2018&2017&2016&2015\
\text { Net Sales } & \$ 900,000 & \$ 650,000 & \$ 600,000 & \$ 500,000 \
\text { Cost of Goods Sold } &580,000&460,000&420,000&400,000 \
\text { Gross Profit } & \$ 320,000&\$190,000&\$180,000&\$100,000
\end{array}$ Instructions
Using horizontal analysis and 2015 as the base year compute the trend percentages for net sales cost of goods sold and gross profit. Explain whether the trends are favorable or unfavorable for each item.

Accepted Answer

The answer of The following items were taken from the...

Question 19

For each of the ratios listed below indicate by the appropriate code letter whether it is a liquidity ratio (L) a profitability ratio (P) or a solvency ratio (S).

Accepted Answer

The answer of For each of the ratios listed below...

Question 20

Noble Company had net income of $175000 and net sales of $625000 in 2017. The company's total assets for 2013/2017 averaged $4000000. Its common stockholders' equity for the period averaged $2340000. Calculate (a) profit margin (b) return on assets and (c) return on common stockholders' equity.

Accepted Answer

The answer of Noble Company had net income of $175000...

Quiz 18: Financial Statement Analysis