978-0134125053 Chapter 12 Part 2

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36) Which section of the Income Statement is reported net of income taxes or net of income tax

savings?

A) All sections are reported net of taxes.

B) Discontinued operations section

C) Continuing operations section

D) Other income (expense) section

Question Type: Concept

37) A comparison of the amounts for the same item in the financial statements of two or more

periods is called:

A) vertical analysis.

B) comparative analysis.

C) horizontal analysis.

D) trend analysis.

Question Type: Concept

38) Which analysis deals with the percentage of changes in certain items over a period of years?

A) Horizontal analysis

B) Vertical analysis

C) Incremental analysis

D) Trend analysis

Question Type: Concept

39) Danio‘s Diagnostics had a loss from discontinued operations of $130,000. If their corporate

tax rate is 40%, at what amount will the loss be shown on the Income Statement?

A) $130,000

B) $78,000

C) $52,000

D) Not enough information is given to answer the question.

Question Type: Application

40) Wolfe Supply Co. sells hiking and other outdoor equipment. It also sells a few trail books

and outdoor guides about the area. In their Income Statement, the revenue from the books and

guides would probably be recorded as:

A) operating income.

B) other income.

C) other expenses.

D) extraordinary income.

Question Type: Application

41) TNT Guitar’s sales were $13,100 in 2016 and $11,600 in 2015. The percentage change in

TNT’s sales from 2015 to 2016 was: (Round your final answer to two decimal places, X.XX%.)

A) +11.45%.

B) -12.93%.

C) +12.93%.

D) –11.45%.

Question Type: Application

42) Winter Coffee’s cash reported on the comparative Balance Sheet was $236,000 in 2015 and

$246,000 in 2016. The percentage change in cash from 2015 to 2016 was: (Round your final

answer to two decimal places, X.XX%.)

A) +4.07%.

B) +4.24%.

C) -4.24%.

D) -4.07%.

Question Type: Application

43) Betta, Inc. reported $23,800 in A/R in 2016 and $25,200 in A/R in 2015. The percentage

change in A/R from 2015 to 2016 was: (Round your final answer to two decimal places,

X.XX%.)

A) +5.56%.

B) +5.88%.

C) -5.56%.

D) -5.88%.

Question Type: Application

44) If cash is $4,170 in 2016 and $3,370 in 2015, what is the percent increase or decrease from

2015 to 2016? (Round your final answer to two decimal places, X.XX%.)

A) +0.81%.

B) +23.74%.

C) -1.24%.

D) +19.18%.

Question Type: Application

45) Net income was $48,000 in 2015 and $60,000 in 2016. The percentage increase or decrease

in net income from 2015 to 2016 was: (Round your final answer to two decimal places,

X.XX%.)

A) +25.00%.

B) +125.00%.

C) -20.00%.

D) –25.00%.

Question Type: Application

46) If current assets were $101,000 in 2015 and $91,000 in 2016, what was the amount of

increase or decrease in percentage terms from 2015 to 2016? (Round your final answer to two

decimal places, X.XX%.)

A) Increase of 11%

B) Decrease of 11%

C) Increase of 10%

D) Decrease of 10%

Question Type: Application

47) What was the percentage of change in Accounts Receivable if the balance was $80,000 in

2015 and $59,000 in 2016? (Round your final answer to two decimal places, X.XX%.)

A) -26.25%.

B) +26.25%.

C) -35.59%.

D) +35.59%.

Question Type: Application

48) The sales of Sassycat, Inc. for the years 2014, 2015, and 2016 are $36,000, $59,000 and

$76,000, respectively. If 2014 is the base year, the trend percentage for 2015 is: (Round your

final answer to two decimal places, X.XX%.)

A) 61.02%.

B) 163.89%.

C) 211.11%.

D) 128.81%.

Question Type: Application

49) The revenue of Lionworks, Inc. for the years 2014, 2015, and 2016 are $79,000, $96,000 and

$197,000, respectively. If 2014 is the base year, the trend percentage for 2015 is: (Round your

final answer to two decimal places, X.XX%.)

A) 21.52%.

B) 100.00%.

C) 121.52%.

D) (59.90%).

Question Type: Application

50) Ironworks, Inc. has cost of goods sold for the years 2016, 2015 and 2014 respectively of

$28,400, $26,400 and $25,100. If 2014 is the base year, the trend percentage for 2016 is: (Round

your final answer to two decimal places, X.XX%.)

A) 113.15%.

B) 13.15%.

C) 105.18%.

D) 5.18%.

Question Type: Application

51) Dolly‘s Diamonds reported Net Sales of $254,000, Cost of Goods Sold of $107,500,

Operating Expenses of $60,400, and Income Tax Expense of $21,600. Dolly’s gross profit

margin percentage was: (Round your final answer to two decimal places, X.XX%.)

A) 33.9%.

B) 42.32%.

C) 57.68%.

D) 25.39%.

Question Type: Application

52) Raven Industries reported Net Sales of $296,000, Cost of Goods Sold of $196,600, Operating

Expenses of $57,900, and Income Tax Expense of 15,300. Raven Industries’ gross profit margin

percentage was: (Round your final answer to two decimal places, X.XX%.)

A) 33.58%.

B) 8.85%.

C) 66.42%.

D) 14.02%.

Question Type: Application

53) Spirit‘s Signs reported Net Sales of $261,000, Cost of Goods Sold of $109,500, Operating

Expenses of $62,400, and Income Tax Expense of 21,500. Spirit‘s net income percentage was:

(Round your final answer to two decimal places, X.XX%.)

A) 34.14%.

B) 41.95%.

C) 58.05%.

D) 25.9%.

Question Type: Application

54) Woods, Inc. reported Net Sales of $326,000, Cost of Goods Sold of $188,600, Operating

Expenses of $59,900, and Income Tax Expense of $9300. Woods’ net income percentage was:

(Round your final answer to two decimal places, X.XX%.)

A) 42.15%.

B) 20.92%.

C) 57.85%.

D) 23.77%.

Question Type: Application

55) Illusions, Inc. has current assets of $52,000, long-term assets of $262,700, current liabilities

of $42,600, and long-term debt of $154,700. Illusions’ debt ratio is: (Round your final answer to

two decimal places, X.XX%.)

A) 75.1%.

B) 49.16%.

C) 62.69%.

D) 58.89%.

Question Type: Application

56) Crowne Cottages, Inc. has current assets of $44,000, long-term assets of $250,900, current

liabilities of $42,600, and long-term debt of $156,700. Crowne’s debt ratio is: (Round your final

answer to two decimal places, X.XX%.)

A) 62.46%.

B) 67.58%.

C) 53.14%.

D) 79.43%.

Question Type: Application

57) S & C Company’s operating income for the year was $106,000. The interest expense was

$14,600 and the income tax expense was $8,200. S & C Company’s interest coverage ratio for

the year is: (Round your final answer to two decimal places.)

A) 7.26.

B) 0.14.

C) 12.93.

D) 4.65.

Question Type: Application

58) Renoir, Inc. has net sales of $990,000, net income of $69,000, average current assets of

$46,000, average fixed assets of $167,000, and average total assets of $207,000. Renoir, Inc.’s

fixed asset turnover ratio is: (Round your final answer to two decimal places.)

A) 5.93.

B) 4.78.

C) 21.52.

D) 0.17.

Question Type: Application

59) Illusions, Inc. has net sales of $950,000, net income of $71,000, average current assets of

$42,000 average fixed assets of $164,000, and average total assets of $208,000. Illusions, Inc.’s

total asset turnover ratio is: (Round your final answer to two decimal places.)

A) 0.22.

B) 4.57.

C) 5.79.

D) 13.38.

60) Mozart, Inc. has net sales of $1,000,000, net income of $68,000, average current assets of

$39,000, average fixed assets of $167,000, and average total assets of $207,000. Mozart, Inc.’s

return on assets is: (Round your final answer to the nearest percentage.)

A) 41%.

B) 174%.

C) 7%.

D) 33%.

Question Type: Application

61) Salieri’s Supply Company has net sales of $1,210,000, net income of $87,000, average

current assets of $49,000, average fixed assets of $186,000, and average total assets of $235,000.

Salieri’s fixed asset turnover ratio is: (Round your final answer to two decimal places.)

A) 5.15.

B) 0.15.

C) 6.51.

D) 24.69.

Question Type: Application

62) Wildling Supply Company has net sales of $1,150,000, net income of $90,000, average

current assets of $50,000, average fixed assets of $182,000, and average total assets of $232,000.

Wildling’s total asset turnover ratio is: (Round your final answer to two decimal places.)

A) 23.00.

B) 0.16.

C) 6.32.

D) 4.96.

63) Cersei’s Cutlery has net sales of $1,200,000, net income of $88,000, average current assets of

$48,000, average fixed assets of $186,000, and average total assets of $234,000. Cersei’s return

on assets is: (Round your final answer to the nearest percentage.)

A) 38%.

B) 7%.

C) 47%.

D) 183%.

Question Type: Application

64) For vertical analysis purposes, the base item on the Balance Sheet is:

A) total assets.

B) total equity.

C) total liabilities.

D) net equity.

Question Type: Concept

65) For vertical analysis purposes, the base item on the Income Statement is:

A) net income.

B) net sales.

C) total expenses.

D) gross profit.

Question Type: Concept

66) If Net Sales at Good Dog Bakery increased from $36,000 to $63,000 and its cost of goods

sold increased from $20,000 to $38,000, the vertical analysis based on net sales would show the

following percentages for cost of goods sold: (Round your final answer to the nearest

percentage.)

A) 36% and 20%.

B) 20% and 36%.

C) 56% and 60%.

D) 60% and 36%.

Question Type: Application

67) If Crane Legal Supply’s net sales increased from $42,000 to $84,000 and its operating

expenses increased from $28,000 to $49,000, the vertical analysis based on net sales would show

the following for operating expenses for the two periods: (Round your final answer to the nearest

percentage.)

A) 67% and 58%.

B) 58% and 67%.

C) 150% and 171%.

D) 171% and 150%.

Question Type: Application

68) If Sydney Tea‘s net sales decreased from $90,000in year 1 to $49,000 in year 2 and its cost of

goods sold decreased from $33,000 in year 1 to $19,000 in year 2, the vertical analysis based on

sales would show the following for cost of goods sold for the two periods: (Round your final

answer to the nearest percentage.)

A) 37% and 39%.

B) 39% and 37%.

C) 273% and 258%.

D) 258% and 273%.

Question Type: Application

69) Comparative reports in which each item is expressed as a percentage of a base amount

without dollar amounts are called:

A) comparative financial statements.

B) common-size statements.

C) cash flow analysis.

D) horizontal analysis.

Question Type: Concept

70) Statements that are often used to compare different size businesses are called:

A) comparative analysis.

B) cash flow analysis.

C) common-size statements.

D) horizontal analysis.

Question Type: Concept

71) A common-size comparative statement shows:

A) dollars and percents.

B) dollars only.

C) percents only.

D) dollar increases and decreases.

Question Type: Concept

72) If total assets are $5000, what is the common-size figure of Cash, assuming that Cash has a

balance of $2400? (Round your final answer to the nearest percentage.)

A) 208%

B) 100%

C) 48%

D) 52%

Question Type: Application

73) In a common-size Income Statement, selling expenses are 55%. This means that they are

55% of:

A) net income.

B) net sales.

C) gross profit.

D) net profit.

Question Type: Application

74) The following is a common-sized Income Statement for Sydney and Caesar Companies.

(in thousands)

Sydney %

Caesar%

Net Sales

100.0%

Cost of Goods Sold

64.6%

60.8%

Gross Profit

35.4%

39.2%

Operating Expenses

Selling, General and Adm.

15.4%

15.3%

Other

1.4%

1.5%

Income Before Income Tax

18.7%

22.4%

Income Tax Expense

2.7%

3.1%

Net Income

16.0%

19.3%

Which company has the biggest sales increase from 2015 to 2016?

A) Not enough information is given to assess the question.

B) Sydney Company

C) Caesar Company

D) Too close to make a solid determination.

Question Type: Critical Thinking