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36 terms

Fin 120 ch2/3

from homework
According to the balance sheet identity, total assets must equal
total liabilities and owners' equity.
Accounting statements are
based on historical data.
The income statement is
like a video recording of a firm's revenues and expenses during a period of time.
Net working capital is a measure of a firm's
During a period of inflation, firms using LIFO will have the
highest cost of goods sold, the lowest net income, and the lowest inventory value.
Which of the following assets is not a tangible asset?
Patents and copyrights
Which of the following liabilities is not a long-term liability?
Commercial paper
Treasury stock represents stock that
the firm has purchased back from investors.
Which of the following equations describes a firm's Net Cash Flow from Operating Activities?
Net Income - Non-Cash Revenues + Non-Cash Expenses.
The average tax rate is
calculated by dividing the total taxes paid by the taxable income.
Which of the following sections do annual reports typically contain?
All three of the above sections are included in the annual report.
Annual reports are prepared by a firm's management to
provide overview of the firm's financial and operating performance.
The generally accepted accounting principles (GAAP) are
rules and procedures that define how companies are to maintain financial records and prepare financial reports.
The going concern assumption implies that
a firm will continue to be in business for the foreseeable future.
Tyson Corporation bought raw materials on April 23, 2008 and also on July 2, 2008. Products produced in the months of May were sold in July. The firm uses FIFO to value its inventory. According to the matching principle, the firm's accountant should associate
the inventory acquired on April 23 with the products sold.
Trekkers Footwear bought a piece of machinery on January 1, 2006 at a cost of 2.3 million, and the machinery is being depreciated annually at an amount of 230,000 for 10 years. Its market value on December 31, 2008 is 1.75 million. The firm's accountant is preparing its financial statement for the fiscal year end on December 31, 2008. The asset's value should be recognized on the balance sheet at
$2.3 million.
Current assets can generally considered to
be converted to cash within one year.
Petra, Inc., has 400,000 as current assets, 1.225 million as plant and equipment, and 250,000 as goodwill. In preparing the balance sheet, these assets should be listed in which of the following orders?
current assets, plant and equipment, and goodwill
When prices are rising, valuing ending inventory using the FIFO method rather than LIFO gives
both inventory and net income a higher value.
When prices are falling, valuing inventory using the LIFO method rather than FIFO gives
both inventory and net income a higher value.
Which one of the following does NOT belong on an income statement?
Which one of the following is NOT a cash flow from operating activities?
cash payments on the principal of long-term debt
Clarity Music Company has a marginal tax rate of 34 percent and an average tax rate of 32 percent this year. It is planning to construct a new recording studio next year. The appropriate tax rate to be applied on the income generated from the new studio is
the marginal tax rate.
Which one of the following is NOT true for a corporation?
Common-stock dividends to be paid this year will be tax deductible if the firm has a net loss for the year.
Maddux, Inc., has completed its fiscal year and reported the following information. The company had current assets of 153,413, net fixed assets of 412,331, and other assets of 7,822. The firm also has current liabilities worth 65,314, long-term debt of 178,334, and common stock of 162,000. How much retained earnings does the firm have?
Total assets = $153,413 + $412,331 + $7,822 = $573,566
Total liabilities = $65,314 + $178,334 = $243,648

Total stockholders' equity= Total assets Total liabilities
= $573,466 $243,648 = $329,918

Retained earnings= Stockholders' equity Common stock
= $329,918 $162,000 = $167,918
Galan Associates prepared its financial statement for 2008 based on the information given here. The company had cash worth 1,234, inventory worth 13,480, and accounts receivables of 7,789. The company's net fixed assets are 42,331, and other assets are 1,822. It had accounts payables of 9,558, notes payables of 2,756, common stock of 22,000, and retained earnings of 14,008. How much long-term debt does the firm have?
Current assets = $1,234 + $7,789 + $13,480 = $22,503

Total assets = $22,503 + $42,331 + $1,822 = $66,656

Current liabilities = $9,558 + $2,756 = $12,314

Stockholders' equity = $22,000 + $14,008 = $36,008

Long-term debt= Total assets Current liabilities Stockholders' equity
= $66,656 $12,314 $36,008 = $18,334
Tumbling Haven, a gymnastic equipment manufacturer, provided the following information to its accountants. The company had current assets of 145,332, net fixed assets of 356,190, and other assets of 4,176. The firm has long-term debt of 76,445, common stock of 200,000, and retained earnings of 134,461. What amount of current liabilities does this firm have?
Total assets = $145,332 + 356,190 + $4,176 = $505,698

Stockholders' equity = $200,000 + $134,461 = $334,461

Current liabilities= Total liabilities Long-term debt Stockholders' equity
= $505,698 $76,445 $334,461 = $94,792
Teakap, Inc., has current assets of 1,456,312 and total assets of 4,812,369 for the year ending September 30, 2006. It also has current liabilities of 1,041,012, common equity of 1,500,000, and retained earnings of 1,468,347. How much long-term debt does the firm have?
Stockholders' equity = $1,500,000 + $1,468,347 = $2,968,347

Long-term debt= Total assets Current liabilities Stockholders' equity
= $4,812,369 $1,041,012 $2,968,347 = $803,010
Chandler Sporting Goods produces baseball and football equipment and lines of clothing. This year the company had cash and marketable securities worth 335,485, accounts payables worth 1,159,357, inventory of 1,651,599, accounts receivables of 1,488,121, short-term notes payable worth 313,663, and other current assets of 121,427. What is the company's net working capital?
Total current assets = $335,485 + 1,488,121 + $1,651,599 + $121,427 = $3,596,632

Total current liabilities = $1,159,357 + $313,663 = $1,473,020

Net working capital = $3,596,632 $1,473,020 = $2,123,612
Spartan, Inc., is a manufacturer of automobile parts located in Greenville, South Carolina. At the end of the current fiscal year, the company had net working capital of 157,903. The company showed accounts payables of 94,233, accounts receivables of 83,112, inventory of 171,284, and cash and marketable securities of 12,311. What amount of notes payables does the firm have?
Total current assets = $12,311 + $83,112 + $171,284 = $266,707

Net working capital = $266,707

Total current liabilities = $157,903

Total current liabilities = $266,707 $157,903 = $108,804

Total current liabilities = $108,804 = Accounts payables + Notes payables

Notes payables = $108,804 - $94,233 = $14,571
Triumph Trading Company provided the following information to its auditors. For the year ended March 31, 2008, the company had revenues of 1,122,878, operating expenses (excluding depreciation and leasing expenses) of 612,663, depreciation expenses of 231,415, leasing expenses of 126,193, and interest expenses equal to 87,125. If the company's tax rate was 34 percent, what is its net income after taxes?
EBIT = $1,122,878 ($612,663 + $231,415 + $126,193) = $152,607

Earnings before taxes = ($152,607 $87,125) = $65,482

Net income = $65,482 (1 0.34) = $43,218
Which of the following assets generally takes the longest time to convert to cash?
Which of the following would not be considered as an asset on a company's balance sheet?
common stock
Which of the following would not be included as a liability of a company's balance sheet?
Preferred stock is similar to a bond because:
it pays a fixed periodic cash flow to investors.
Which of the following is not tax deductible for a corporation?