Question 1

On the balance sheet, net fixed assets represent ________.

Accepted Answer

Net fixed assets represent the value of fixed assets after subtracting the accumulated depreciation from their original cost. Therefore, choice C is the correct answer. Choice A is incorrect because it doesn't subtract accumulated depreciation. Choice B is incorrect because it doesn't consider the original cost of the assets. Choice D is incorrect because market value is not usually used in accounting and reporting; cost is the standard measurement for fixed assets.

Question 2

Which of the following is a current liability?

Accepted Answer

Notes payable is a type of liability that represents the amount of money owed to creditors and other lenders within a specific period of time, typically one year or less. Accounts receivable and inventory are assets, while cash is not a liability or an asset but rather a type of financial resource that a company can use to meet its obligations.

Question 3

Candy Corporation had pretax profits of $1.2 million, an average tax rate of 34 percent, and it paid preferred stock dividends of $50,000. There were 100,000 shares outstanding and no interest expense. What was Candy Corporation's earnings per share?

Accepted Answer

The answer of Candy Corporation had pretax profits of $1.2...

Question 4

A firm has the following accounts and financial data for 2014:  The firm's earnings per share for 2014 is ________.

Accepted Answer

The answer of A firm has the following accounts and...

Question 5

A firm had the following accounts and financial data for 2014:  The firm's net profit after taxes for 2014 is ________.

Accepted Answer

To calculate the net profit after taxes, we need to subtract the total expenses from the total revenue and then subtract the income tax expense. 
Total revenue - Total expenses = $150,000 - $98,000 = $52,000 
$52,000 - $15,600 = $36,400 
Therefore, the net profit after taxes for 2014 is $320.40.

Question 6

The net value of fixed assets is also called its ________.

Accepted Answer

The net value of fixed assets is also referred to as its book value, which is the value of the asset as recorded in the company's accounting records after accounting for any depreciation or impairment. Market value refers to the value of the asset in the open market, par value is the value assigned to a share of stock, and intrinsic value refers to the perceived value of the asset based on its fundamental characteristics. Therefore, the best choice is C.

Question 7

A firm has the following accounts and financial data for 2014:  The firm's earnings available to common shareholders for 2014 is ________.

Accepted Answer

To calculate earnings available to common shareholders, we need to start with net income attributable to common shareholders, which is $452.40. Then we subtract preferred stock dividends (which are not available to common shareholders) of $150.00, resulting in earnings available to common shareholders of $302.40. Therefore, choice C is the correct answer.

Question 8

Retained earnings on the balance sheet represents the ________.

Accepted Answer

Retained earnings on the balance sheet represents the cumulative total of all earnings reinvested in the firm. This includes net profits after taxes, minus dividends paid to preferred shareholders. It is a measure of how much the company has reinvested to grow its business rather than paying dividends to shareholders or using the profits for other purposes, such as buying back stock.

Question 9

Firm ABC had operating profits of $100,000, taxes of $17,000, interest expense of $34,000, and preferred dividends of $5,000. What was the firm's net profit after taxes?

Accepted Answer

Net profit after taxes can be calculated as follows: 
Operating profit - Taxes - Interest - Preferred dividends = Net profit after taxes 
$100,000 - $17,000 - $34,000 - $5,000 = $44,000 
Therefore, the correct answer is B.

Question 10

When preparing the retained earnings statement, ________ is(are) subtracted in order to derive at the ending balance of retained earnings.

Accepted Answer

Dividends are subtracted from the beginning balance of retained earnings to arrive at the ending balance. Retained earnings represent the portion of net income that is not distributed as dividends to shareholders. Interest expense and depreciation are not subtracted from retained earnings as they do not directly affect the amount of earnings retained by the company. Net profits after taxes are a component of retained earnings, but they are not subtracted from the beginning balance. Instead, they are added to the beginning balance to calculate the ending balance.

Question 11

Which of the following is a fixed asset?

Accepted Answer

Land is a fixed asset as it is a tangible and long-term asset that is owned by the company and used in its operations. Accounts payable, accruals, and notes payable are liabilities and therefore not fixed assets.

Question 12

The statement of cash flows ________.

Accepted Answer

DThe statement of cash flows provides insight into a firm's cash flows from operating, investing, and financing activities, but it does not classify cash flows as "other activities." It specifically details how cash is generated and used in these three main categories, helping users understand the company's liquidity and financial flexibility.

Question 13

The ________ represents a summary statement of a firm's financial position at a given point in time.

Accepted Answer

A balance sheet presents a snapshot of a company's financial position at a particular point in time, providing information about assets, liabilities, and equity. It doesn't include detailed information about a company's profits or losses, which are reported in the income statement, statement of retained earnings, and statement of cash flows.

Question 14

A firm's year-end retained earnings balances are $320,000 and $400,000, for 2014 and 2015 respectively. The firm reported net profits after taxes of $100,000 in 2015. The firm's dividend payment for 2015 is ________.

Accepted Answer

Retained earnings = Beginning retained earnings + Net income - Dividends
For year 2015:
$400,000 = $320,000 + $100,000 - Dividends
Dividends = $20,000

Question 15

Which of the following represents a current asset?

Accepted Answer

Marketable securities are investments that can easily be converted into cash and are therefore considered a current asset. Option A, B and D are fixed assets, which are not usually converted into cash quickly, and hence, they are not a current asset.

Question 16

A firm's year-end retained earnings balances are $670,000 and $560,000, for 2014 and 2015 respectively. The firm paid $10,000 in dividends in 2015. The firm's net profit after taxes in 2015 was ________.

Accepted Answer

The answer of A firm's year-end retained earnings balances are...

Question 17

Operating profit is known as ________.

Accepted Answer

Operating profit is calculated as earnings before interest and taxes (EBIT). This is important because it shows how much profit a company is generating from its core operations, before factoring in interest and taxes. Option A and D refer to profit figures that have already taken interest and taxes into account, while option C refers to earnings before depreciation and taxes, which is different from EBIT.

Question 18

Earnings available for common stockholders is calculated as net profits ________.

Accepted Answer

Earnings available for common stockholders is the amount of net profit that remains after deducting all expenses, including taxes and preferred dividends. Therefore, the correct option is B, which subtracts preferred dividends from net profits to arrive at earnings for common stockholders.

Question 19

A firm has a year-end retained earnings balance of $220,000 for 2014. The firm reported net profits after taxes of $50,000 and paid dividends of $30,000 in 2015. The firm's retained earnings balance at 2015 year end is ________.

Accepted Answer

The retained earnings at the end of 2015 is calculated by adding the net profits after taxes ($50,000) to the 2014 retained earnings ($220,000) and then subtracting the dividends paid ($30,000): $220,000 + $50,000 - $30,000 = $240,000.

Question 20

Paid-in capital in excess of par represents the amount of proceeds ________.

Accepted Answer

Paid-in capital in excess of par represents the amount of proceeds received by a company above and beyond the par value of its common stock. This occurs when the market price of the stock is greater than its par value, allowing the company to sell shares for more than their nominal value.

Quiz 3: Financial Statements and Ratio Analysis