Chapter 14 – Financial Statement Analysis
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Intangible assets
40,000
Inventory
72,000
Long-term investments
100,000
Long-term liabilities
75,000
Marketable securities
36,000
Notes payable (short-term)
20,000
Property, plant, and equipment
400,000
Prepaid expenses
2,000
97. Based on the data for Privett Company, what is the amount of quick assets?
a.
$168,000
b.
$96,000
c.
$60,000
d.
$61,000
ANSWER:
b
RATIONALE:
Quick assets = Accounts receivable + Cash + Marketable securities = $35,000 +
$25,000 + $36,000 = $96,000
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
data 2
LEARNING OBJECTIVES:
FNMN.WAJO.19.14–03 – LO: 14–03
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.23 – Financial Statement Analysis
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:35 PM
DATE MODIFIED:
10/16/2017 6:37 PM
98. Based on the data for Privett Company, what is the amount of working capital?
a.
$213,000
b.
$113,000
c.
$153,000
d.
$39,000
ANSWER:
b
RATIONALE:
Working Capital = Current Assets – Current Liabilities = (Accounts receivable + Cash
+ Inventory + Marketable securities + Prepaid expenses) – (Accounts payable +
Accrued liabilities + Notes payable) = ($35,000 + $25,000 +$72,000 + $36,000 +
$2,000) – ($30,000 + $7,000 + $20,000) = $170,000 – $57,000 = $113,000
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
data 2
Chapter 14 – Financial Statement Analysis
Copyright Cengage Learning. Powered by Cognero.
Page 44
a.
6.9%
b.
14.5%
c.
16.4%
d.
13.8%
ANSWER:
b
RATIONALE:
Rate Earned on Stockholders’ Equity = Net Income / Average Total Stockholders’
Equity
Average total stockholders’ equity = (Total stockholders’ equity of Year 2 + Total
stockholders’ equity of Year 1) / 2
Average total stockholders’ equity = [($600,000 + $75,000 + $310,000) + ($600,000 +
$75,000 + $210,000)] / 2
Average total stockholders’ equity = ($985,000 + $885,000) / 2 = $1,870,000 / 2 =
$935,000
Rate earned on stockholders’ equity = $150,000 / $935,000 = 16.04%
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
balance sheets
LEARNING OBJECTIVES:
FNMN.WAJO.19.14–05 – LO: 14–05
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.23 – Financial Statement Analysis
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:35 PM
DATE MODIFIED:
10/16/2017 6:37 PM
103. Using the balance sheets for Kellman Company, if net income is $250,000 and interest expense is $30,000 for Year
2, what are the earnings per share on common stock for Year 2?
a.
$4.16
b.
$4.32
c.
$4.02
d.
$2.49
ANSWER:
c
RATIONALE:
Earnings per Share (EPS) on Common Stock for Year 2 = (Net Income − Preferred
Dividends) / Shares of Common Stock Outstanding
Preferred Dividends = $100,000 × 9% = $9,000
Earnings per Share (EPS) on Common Stock for Year 2 = ($250,000 – $9,000) /
($600,000 / 10)
Earnings per Share (EPS) on Common Stock for Year 2 = $241,000 / 60,000 = $4.02
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
balance sheets
Chapter 14 – Financial Statement Analysis
Copyright Cengage Learning. Powered by Cognero.
Page 50
d.
has a high earnings per share
ANSWER:
a
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.14–05 – LO: 14–05
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.23 – Financial Statement Analysis
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:35 PM
DATE MODIFIED:
10/16/2017 6:37 PM
The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and
ending balance figures and that all sales were on credit.
Assets
Cash and short-term investments
$ 30,000
Accounts receivable (net)
20,000
Inventory
15,000
Property, plant, and equipment
185,000
Total assets
$250,000
Liabilities and Stockholders’ Equity
Current liabilities
$ 45,000
Long-term liabilities
70,000
Common stock
80,000
Retained earnings
55,000
Total liabilities and stockholders’ equity
$250,000
Income Statement
Sales
$85,000
Cost of goods sold
45,000
Gross margin
$40,000
Operating expenses
(15,000)
Interest expense
(5,000)
Net income
$20,000
Number of shares of common stock outstanding
6,000
Market price of common stock
$20
Total dividends paid
$9,000
Cash provided by operations
$30,000
115. What is the asset turnover for Diane Company?
a.
1.00
b.
2.94
c.
0.18
d.
0.34
ANSWER:
d