Question 1

Excerpts from Hulkster Company's December 31, 2018 and 2017, financial statements are presented below:  
-Hulkster's 2018 inventory turnover is (rounded):

Accepted Answer

11ea937b_365b_8756_a419_2902dd0663e5_TB2599_00 = 3.62

Question 2

Expenses in an income statement prepared under International Financial Reporting Standards (IFRS):

Accepted Answer

Expenses in an income statement prepared under IFRS can be classified either by function or by natural description, depending on which provides more relevant information to the users of the financial statements. This is in contrast to US GAAP, which generally requires the functional classification of expenses.

Question 3

Excerpts from Hulkster Company's December 31, 2018 and 2017, financial statements are presented below: 
- Hulkster's 2018 profit margin is (rounded):

Accepted Answer

$32,500 / $190,000 = 17.1%

Question 4

Excerpts from Dowling Company's December 31, 2018 and 2017, financial statements and key ratios are presented below (all numbers are in millions): 
- Dowling's average inventory balance for 2018 is (rounded):

Accepted Answer

Inventory turnover = Cost of goods sold / (Average inventory), so Average inventory = COGS / (Inventory turnover) = 60/5.22 = 11.5.

Question 5

In a statement of cash flows prepared under International Financial Reporting Standards (IFRS), each of the following items is typically classified as a financing cash flow except:

Accepted Answer

Dividends received are typically classified as an operating cash flow under IFRS, not a financing cash flow. The other options are all examples of financing cash flows: interest paid represents the cost of borrowing funds, dividends paid represent the distribution of profits to shareholders, and proceeds from the issuance of long-term debt represent the inflow of funds from borrowing.

Question 6

Excerpts from Hulkster Company's December 31, 2018 and 2017, financial statements are presented below:  
-Hulkster's 2018 asset turnover is (rounded):

Accepted Answer

11ea937b_365b_ae68_a419_37a088072cbb_TB2599_00 = 0.46

Question 7

Excerpts from Hulkster Company's December 31, 2018 and 2017, financial statements are presented below: 
- Hulkster's 2018 average days in inventory is (rounded):

Accepted Answer

Inventory turnover = 11ea937b_365b_d57c_a419_87576315586c_TB2599_00 = 3.62
Average days in inventory = 365/3.62 = 100.8 days = 101 days rounded.

Question 8

During its 2018 fiscal year, Jacobsen Corporation reported before-tax income of $620,000. This amount does not include the following two items, both of which are considered to be material in amount:  The company's income tax rate is 40%. Jacobsen Corporation prepares its financial statement applying International Financial Reporting Standards (IFRS). In its 2018 income statement, Jacobsen would report income from continuing operations of:

Accepted Answer

$620,000 + 200,000 = $820,000 × (1 - 0.4) = $492,000. The $200,000 gain is included in income from continuing operations.

Question 9

Excerpts from Dowling Company's December 31, 2018 and 2017, financial statements and key ratios are presented below (all numbers are in millions): 
- Dowling's 2018 profit margin is (rounded):

Accepted Answer

$20/$115 = 17.4%

Question 10

Excerpts from Hulkster Company's December 31, 2018 and 2017, financial statements are presented below:  
-Hulkster's 2018 average collection period is:

Accepted Answer

Receivable turnover = $\frac{\$ 190,000}{(40,000+36,000) / 2}$ = 5.0
Average collection period = 365/5.0 = 73 days

Question 11

Excerpts from Hulkster Company's December 31, 2018 and 2017, financial statements are presented below:  
-Hulkster's 2018 return on assets is (rounded):

Accepted Answer

11ea937b_365b_fc8f_a419_0b4cc45fb4bc_TB2599_00 = 7.8%

Question 12

Excerpts from Dowling Company's December 31, 2018 and 2017, financial statements and key ratios are presented below (all numbers are in millions): 
- Dowling's average total assets for 2018 is (rounded):

Accepted Answer

Return on assets = Net income / (Average assets), so Average assets = Net income / ROA = 20 / 0.103 = 194

Question 13

Excerpts from Hulkster Company's December 31, 2018 and 2017, financial statements are presented below: 
- Hulkster's 2018 receivables turnover is:

Accepted Answer

11ea937b_365b_8754_a419_e3579263cd4e_TB2599_00 = 5.0

Question 14

Rowdy's Restaurants Cash Flow ($ in millions) 
- Rowdy's would report net cash inflows (outflows) from financing activities in the amount of:

Accepted Answer

11ea937b_365a_c4fa_a419_81adda22acb4_TB2599_00

Question 15

Excerpts from Dowling Company's December 31, 2018 and 2017, financial statements and key ratios are presented below (all numbers are in millions): 
- Dowling's return on equity for 2018 is (rounded):

Accepted Answer

ROE = ROA × equity multiple = 10.3% × 2.36 = 24.3%

Question 16

In the DuPont formula, return on assets equals:

Accepted Answer

The DuPont formula breaks down return on assets into two components: profit margin on sales (net income divided by total revenue) and asset turnover (total revenue divided by total assets). Multiplying these two components gives us the return on assets. Therefore, the correct answer is choice D: Profit margin on sales × Asset turnover.

Question 17

Excerpts from Dowling Company's December 31, 2018 and 2017, financial statements and key ratios are presented below (all numbers are in millions):  
-Dowling's 2018 average collection period is (rounded):

Accepted Answer

11ea937b_365b_3a2f_a419_434ddd4b9df0_TB2599_00

Question 18

A company is effectively leveraging when:

Accepted Answer

Effective leveraging occurs when the return on shareholders' equity exceeds the return on assets. This means that the company is using debt to finance its operations and generating a higher return for shareholders than the cost of borrowing. However, if the return on assets is also increasing or the return on shareholders' equity is increasing, it could be an additional positive sign for the company.

Question 19

Rowdy's Restaurants Cash Flow ($ in millions)  
-Rowdy's would report net cash inflows (outflows) from investing activities in the amount of:

Accepted Answer

11ea937b_365a_c4f8_a419_e35b28f0e305_TB2599_00

Question 20

During its 2018 fiscal year, Jacobsen Corporation reported before-tax income of $620,000. This amount does not include the following two items, both of which are considered to be material in amount:  The company's income tax rate is 40%. Jacobsen Corporation prepares its financial statements applying U.S. GAAP. In its 2018 income statement, Jacobsen would report income from continuing operations of:

Accepted Answer

$620,000 + 200,000 = $820,000 × (1 - 0.40) = $492,000. The $200,000 gain is included in income from continuing operations.

Quiz 4: The Income Statement, Comprehensive Income, and the Statement of Cash Flows

Excerpts from Hulkster Company's December 31, 2018 and 2017, financial statements are presented below: -Hulkster's 2018 inventory turnover is (rounded) :

Expenses in an income statement prepared under International Financial Reporting Standards (IFRS) :

Excerpts from Hulkster Company's December 31, 2018 and 2017, financial statements are presented below: - Hulkster's 2018 profit margin is (rounded) :

Excerpts from Dowling Company's December 31, 2018 and 2017, financial statements and key ratios are presented below (all numbers are in millions) : - Dowling's average inventory balance for 2018 is (rounded) :

In a statement of cash flows prepared under International Financial Reporting Standards (IFRS) , each of the following items is typically classified as a financing cash flow except:

Excerpts from Hulkster Company's December 31, 2018 and 2017, financial statements are presented below: -Hulkster's 2018 asset turnover is (rounded) :

Excerpts from Hulkster Company's December 31, 2018 and 2017, financial statements are presented below: - Hulkster's 2018 average days in inventory is (rounded) :

Excerpts from Dowling Company's December 31, 2018 and 2017, financial statements and key ratios are presented below (all numbers are in millions) : - Dowling's 2018 profit margin is (rounded) :

Excerpts from Hulkster Company's December 31, 2018 and 2017, financial statements are presented below: -Hulkster's 2018 average collection period is:

Excerpts from Hulkster Company's December 31, 2018 and 2017, financial statements are presented below: -Hulkster's 2018 return on assets is (rounded) :

Excerpts from Dowling Company's December 31, 2018 and 2017, financial statements and key ratios are presented below (all numbers are in millions) : - Dowling's average total assets for 2018 is (rounded) :

Excerpts from Hulkster Company's December 31, 2018 and 2017, financial statements are presented below: - Hulkster's 2018 receivables turnover is:

Rowdy's Restaurants Cash Flow ($ in millions) - Rowdy's would report net cash inflows (outflows) from financing activities in the amount of:

Excerpts from Dowling Company's December 31, 2018 and 2017, financial statements and key ratios are presented below (all numbers are in millions) : - Dowling's return on equity for 2018 is (rounded) :

In the DuPont formula, return on assets equals:

Excerpts from Dowling Company's December 31, 2018 and 2017, financial statements and key ratios are presented below (all numbers are in millions) : -Dowling's 2018 average collection period is (rounded) :

A company is effectively leveraging when:

Rowdy's Restaurants Cash Flow ($ in millions) -Rowdy's would report net cash inflows (outflows) from investing activities in the amount of: