Chapter 14 Analyzing Financial Statements: A Managerial Perspective
14–21
108. Comparative financial statements for Bent Stew Enterprises are shown below:
December 31
2018 2017
Assets
Current assets:
Cash $ 3,000 $ 800
Accounts receivable 8,500 6,000
Inventory 12,000 8,200
Prepaid expenses 1,400 900
Total current assets 24,900 15,900
Property, plant, and equipment, net 103,600 123,300
Intangible assets, net 64,000 47,000
Total assets $192,500 $186,200
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 11,000 $ 12,000
Other current liabilities 11,800 3,200
Total current liabilities 22,800 15,200
Long-term debt 120,000 128,000
Total liabilities 142,800 143,200
Stockholders’ equity:
Common stock 15,000 15,000
Additional paid-in capital 20,000 20,000
Retained earnings 14,700 8,000
Total stockholders’ equity 49,700 43,000
Total liabilities and stockholders’ equity $192,500 $186,200
Year Ended December 31
2018 2017
Sales $250,000 $ 230,000
Cost of goods sold 164,000 142,300
Gross margin 86,000 87,700
Operating expenses 64,000 54,000
Operating income 22,000 33,700
Interest expense 7,500 5,900
Earnings before income taxes 14,500 27,800
Income taxes 7,800 7,140
Net earnings $ 6,700 $ 20,660
The company’s stock is selling for a market price of $31.00 per share at the end of 2018,
up from $28.00 per share at the end of 2017. There are 5,000 shares of common stock
outstanding at the end of 2018. How much is the company’s price-earnings ratio at the
end of 2018?
A. $23.13
B. $1.34
C. $4.32
D. $41.55
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
14–22
109. Comparative financial statements for Bent Stew Enterprises are shown below:
December 31
2018 2017
Assets
Current assets:
Cash $ 3,000 $ 800
Accounts receivable 8,500 6,000
Inventory 12,000 8,200
Prepaid expenses 1,400 900
Total current assets 24,900 15,900
Property, plant, and equipment, net 103,600 123,300
Intangible assets, net 64,000 47,000
Total assets $192,500 $186,200
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 11,000 $ 12,000
Other current liabilities 11,800 3,200
Total current liabilities 22,800 15,200
Long-term debt 120,000 128,000
Total liabilities 142,800 143,200
Stockholders’ equity:
Common stock 15,000 15,000
Additional paid-in capital 20,000 20,000
Retained earnings 14,700 8,000
Total stockholders’ equity 49,700 43,000
Total liabilities and stockholders’ equity $192,500 $186,200
Year Ended December 31
2018 2017
Sales $250,000 $ 230,000
Cost of goods sold 164,000 142,300
Gross margin 86,000 87,700
Operating expenses 64,000 54,000
Operating income 22,000 33,700
Interest expense 7,500 5,900
Earnings before income taxes 14,500 27,800
Income taxes 7,800 7,140
Net earnings $ 6,700 $ 20,660
How much is Bent Stew’s asset turnover in 2018?
A. 1.034
B. 0.027
C. 0.770
D. 1.299
Chapter 14 Analyzing Financial Statements: A Managerial Perspective
14–23
110. Comparative financial statements for Bent Stew Enterprises are shown below:
December 31
2018 2017
Assets
Current assets:
Cash $ 3,000 $ 800
Accounts receivable 8,500 6,000
Inventory 12,000 8,200
Prepaid expenses 1,400 900
Total current assets 24,900 15,900
Property, plant, and equipment, net 103,600 123,300
Intangible assets, net 64,000 47,000
Total assets $192,500 $186,200
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 11,000 $ 12,000
Other current liabilities 11,800 3,200
Total current liabilities 22,800 15,200
Long-term debt 120,000 128,000
Total liabilities 142,800 143,200
Stockholders’ equity:
Common stock 15,000 15,000
Additional paid-in capital 20,000 20,000
Retained earnings 14,700 8,000
Total stockholders’ equity 49,700 43,000
Total liabilities and stockholders’ equity $192,500 $186,200
Year Ended December 31
2018 2017
Sales $250,000 $ 230,000
Cost of goods sold 164,000 142,300
Gross margin 86,000 87,700
Operating expenses 64,000 54,000
Operating income 22,000 33,700
Interest expense 7,500 5,900
Earnings before income taxes 14,500 27,800
Income taxes 7,800 7,140
Net earnings $ 6,700 $ 20,660
How much is return on common stockholders’ equity for Bent Stew for 2018?
A. 15.26%
B. 44.67%
C. 19.14%
D. 13.48%
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
14–24
111. Comparative financial statements for Bent Stew Enterprises are shown below:
December 31
2018 2017
Assets
Current assets:
Cash $ 3,000 $ 800
Accounts receivable 8,500 6,000
Inventory 12,000 8,200
Prepaid expenses 1,400 900
Total current assets 24,900 15,900
Property, plant, and equipment, net 103,600 123,300
Intangible assets, net 64,000 47,000
Total assets $192,500 $186,200
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 11,000 $ 12,000
Other current liabilities 11,800 3,200
Total current liabilities 22,800 15,200
Long-term debt 120,000 128,000
Total liabilities 142,800 143,200
Stockholders’ equity:
Common stock 15,000 15,000
Additional paid-in capital 20,000 20,000
Retained earnings 14,700 8,000
Total stockholders’ equity 49,700 43,000
Total liabilities and stockholders’ equity $192,500 $186,200
Year Ended December 31
2018 2017
Sales $250,000 $ 230,000
Cost of goods sold 164,000 142,300
Gross margin 86,000 87,700
Operating expenses 64,000 54,000
Operating income 22,000 33,700
Interest expense 7,500 5,900
Earnings before income taxes 14,500 27,800
Income taxes 7,800 7,140
Net earnings $ 6,700 $ 20,660
The income tax rate is 54%. How would you best describe the company’s use of
financial leverage in 2018?
A. The company is highly leveraged and is using leverage well to generate a high
return for stockholders.
B. The company is poorly leveraged.
C. The company is highly leveraged, but the leverage has a negative impact on
stockholders.
D. The company has no financial leverage.
Chapter 14 Analyzing Financial Statements: A Managerial Perspective
14–25
112. Comparative financial statements for Bent Stew Enterprises are shown below:
December 31
2018 2017
Assets
Current assets:
Cash $ 3,000 $ 800
Accounts receivable 8,500 6,000
Inventory 12,000 8,200
Prepaid expenses 1,400 900
Total current assets 24,900 15,900
Property, plant, and equipment, net 103,600 123,300
Intangible assets, net 64,000 47,000
Total assets $192,500 $186,200
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 11,000 $ 12,000
Other current liabilities 11,800 3,200
Total current liabilities 22,800 15,200
Long-term debt 120,000 128,000
Total liabilities 142,800 143,200
Stockholders’ equity:
Common stock 15,000 15,000
Additional paid-in capital 20,000 20,000
Retained earnings 14,700 8,000
Total stockholders’ equity 49,700 43,000
Total liabilities and stockholders’ equity $192,500 $186,200
Year Ended December 31
2018 2017
Sales $250,000 $ 230,000
Cost of goods sold 164,000 142,300
Gross margin 86,000 87,700
Operating expenses 64,000 54,000
Operating income 22,000 33,700
Interest expense 7,500 5,900
Earnings before income taxes 14,500 27,800
Income taxes 7,800 7,140
Net earnings $ 6,700 $ 20,660
How much is Bent Stew’s inventory turnover for 2018?
A. 7.32 times
B. 26.70 times
C. 49.86 times
D. 13.67 times
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
14–26
113. Comparative financial statements for Bent Stew Enterprises are shown below:
December 31
2018 2017
Assets
Current assets:
Cash $ 3,000 $ 800
Accounts receivable 8,500 6,000
Inventory 12,000 8,200
Prepaid expenses 1,400 900
Total current assets 24,900 15,900
Property, plant, and equipment, net 103,600 123,300
Intangible assets, net 64,000 47,000
Total assets $192,500 $186,200
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 11,000 $ 12,000
Other current liabilities 11,800 3,200
Total current liabilities 22,800 15,200
Long-term debt 120,000 128,000
Total liabilities 142,800 143,200
Stockholders’ equity:
Common stock 15,000 15,000
Additional paid-in capital 20,000 20,000
Retained earnings 14,700 8,000
Total stockholders’ equity 49,700 43,000
Total liabilities and stockholders’ equity $192,500 $186,200
Year Ended December 31
2018 2017
Sales $250,000 $ 230,000
Cost of goods sold 164,000 142,300
Gross margin 86,000 87,700
Operating expenses 64,000 54,000
Operating income 22,000 33,700
Interest expense 7,500 5,900
Earnings before income taxes 14,500 27,800
Income taxes 7,800 7,140
Net earnings $ 6,700 $ 20,660
How much is Bent Stew’s accounts receivable turnover for 2018?
A. 29.41 times
B. 37.31 times
C. 12.31 times
D. 0.03 times
Chapter 14 Analyzing Financial Statements: A Managerial Perspective
14–27
114. Comparative financial statements for Bent Stew Enterprises are shown below:
December 31
2018 2017
Assets
Current assets:
Cash $ 3,000 $ 800
Accounts receivable 8,500 6,000
Inventory 12,000 8,200
Prepaid expenses 1,400 900
Total current assets 24,900 15,900
Property, plant, and equipment, net 103,600 123,300
Intangible assets, net 64,000 47,000
Total assets $192,500 $186,200
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 11,000 $ 12,000
Other current liabilities 11,800 3,200
Total current liabilities 22,800 15,200
Long-term debt 120,000 128,000
Total liabilities 142,800 143,200
Stockholders’ equity:
Common stock 15,000 15,000
Additional paid-in capital 20,000 20,000
Retained earnings 14,700 8,000
Total stockholders’ equity 49,700 43,000
Total liabilities and stockholders’ equity $192,500 $186,200
Year Ended December 31
2018 2017
Sales $250,000 $ 230,000
Cost of goods sold 164,000 142,300
Gross margin 86,000 87,700
Operating expenses 64,000 54,000
Operating income 22,000 33,700
Interest expense 7,500 5,900
Earnings before income taxes 14,500 27,800
Income taxes 7,800 7,140
Net earnings $ 6,700 $ 20,660
What is the company’s days’ sales in receivables for 2018?
A. 29.41 days
B. 37.31 days
C. 12.41 days
D. 8.06 days
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
14–28
115. Comparative financial statements for Bent Stew Enterprises are shown below:
December 31
2018 2017
Assets
Current assets:
Cash $ 3,000 $ 800
Accounts receivable 8,500 6,000
Inventory 12,000 8,200
Prepaid expenses 1,400 900
Total current assets 24,900 15,900
Property, plant, and equipment, net 103,600 123,300
Intangible assets, net 64,000 47,000
Total assets $192,500 $186,200
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 11,000 $ 12,000
Other current liabilities 11,800 3,200
Total current liabilities 22,800 15,200
Long-term debt 120,000 128,000
Total liabilities 142,800 143,200
Stockholders’ equity:
Common stock 15,000 15,000
Additional paid-in capital 20,000 20,000
Retained earnings 14,700 8,000
Total stockholders’ equity 49,700 43,000
Total liabilities and stockholders’ equity $192,500 $186,200
Year Ended December 31
2018 2017
Sales $250,000 $ 230,000
Cost of goods sold 164,000 142,300
Gross margin 86,000 87,700
Operating expenses 64,000 54,000
Operating income 22,000 33,700
Interest expense 7,500 5,900
Earnings before income taxes 14,500 27,800
Income taxes 7,800 7,140
Net earnings $ 6,700 $ 20,660
How much is Bent Stew’s day’s sales in inventory for 2018?
A. 7.32 days
B. 26.70 days
C. 49.86 days
D. 13.67 days
Chapter 14 Analyzing Financial Statements: A Managerial Perspective
14–29
116. Comparative financial statements for Bent Stew Enterprises are shown below:
December 31
2018 2017
Assets
Current assets:
Cash $ 3,000 $ 800
Accounts receivable 8,500 6,000
Inventory 12,000 8,200
Prepaid expenses 1,400 900
Total current assets 24,900 15,900
Property, plant, and equipment, net 103,600 123,300
Intangible assets, net 64,000 47,000
Total assets $192,500 $186,200
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 11,000 $ 12,000
Other current liabilities 11,800 3,200
Total current liabilities 22,800 15,200
Long-term debt 120,000 128,000
Total liabilities 142,800 143,200
Stockholders’ equity:
Common stock 15,000 15,000
Additional paid-in capital 20,000 20,000
Retained earnings 14,700 8,000
Total stockholders’ equity 49,700 43,000
Total liabilities and stockholders’ equity $192,500 $186,200
Year Ended December 31
2018 2017
Sales $250,000 $ 230,000
Cost of goods sold 164,000 142,300
Gross margin 86,000 87,700
Operating expenses 64,000 54,000
Operating income 22,000 33,700
Interest expense 7,500 5,900
Earnings before income taxes 14,500 27,800
Income taxes 7,800 7,140
Net earnings $ 6,700 $ 20,660
How much is Bent Stew’s current ratio at the end of 2018?
A. 0.92
B. 1.09
C. 1.06
D. 1.34
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
14–30
117. Comparative financial statements for Bent Stew Enterprises are shown below:
December 31
2018 2017
Assets
Current assets:
Cash $ 3,000 $ 800
Accounts receivable 8,500 6,000
Inventory 12,000 8,200
Prepaid expenses 1,400 900
Total current assets 24,900 15,900
Property, plant, and equipment, net 103,600 123,300
Intangible assets, net 64,000 47,000
Total assets $192,500 $186,200
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 11,000 $ 12,000
Other current liabilities 11,800 3,200
Total current liabilities 22,800 15,200
Long-term debt 120,000 128,000
Total liabilities 142,800 143,200
Stockholders’ equity:
Common stock 15,000 15,000
Additional paid-in capital 20,000 20,000
Retained earnings 14,700 8,000
Total stockholders’ equity 49,700 43,000
Total liabilities and stockholders’ equity $192,500 $186,200
Year Ended December 31
2018 2017
Sales $250,000 $ 230,000
Cost of goods sold 164,000 142,300
Gross margin 86,000 87,700
Operating expenses 64,000 54,000
Operating income 22,000 33,700
Interest expense 7,500 5,900
Earnings before income taxes 14,500 27,800
Income taxes 7,800 7,140
Net earnings $ 6,700 $ 20,660
How much is Bent Stew’s quick ratio at the end of 2018?
A. 1.09
B. 1.03
C. 0.57
D. 0.50
Chapter 14 Analyzing Financial Statements: A Managerial Perspective
14–31
118. Comparative financial statements for Bent Stew Enterprises are shown below:
December 31
2018 2017
Assets
Current assets:
Cash $ 3,000 $ 800
Accounts receivable 8,500 6,000
Inventory 12,000 8,200
Prepaid expenses 1,400 900
Total current assets 24,900 15,900
Property, plant, and equipment, net 103,600 123,300
Intangible assets, net 64,000 47,000
Total assets $192,500 $186,200
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 11,000 $ 12,000
Other current liabilities 11,800 3,200
Total current liabilities 22,800 15,200
Long-term debt 120,000 128,000
Total liabilities 142,800 143,200
Stockholders’ equity:
Common stock 15,000 15,000
Additional paid-in capital 20,000 20,000
Retained earnings 14,700 8,000
Total stockholders’ equity 49,700 43,000
Total liabilities and stockholders’ equity $192,500 $186,200
Year Ended December 31
2018 2017
Sales $250,000 $ 230,000
Cost of goods sold 164,000 142,300
Gross margin 86,000 87,700
Operating expenses 64,000 54,000
Operating income 22,000 33,700
Interest expense 7,500 5,900
Earnings before income taxes 14,500 27,800
Income taxes 7,800 7,140
Net earnings $ 6,700 $ 20,660
How much is Bent Stew’s debt–to-equity ratio at the end of 2018?
A. 0.35
B. 2.87
C. 2.41
D. 0.74
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
14–32
119. Comparative financial statements for Bent Stew Enterprises are shown below:
December 31
2018 2017
Assets
Current assets:
Cash $ 3,000 $ 800
Accounts receivable 8,500 6,000
Inventory 12,000 8,200
Prepaid expenses 1,400 900
Total current assets 24,900 15,900
Property, plant, and equipment, net 103,600 123,300
Intangible assets, net 64,000 47,000
Total assets $192,500 $186,200
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 11,000 $ 12,000
Other current liabilities 11,800 3,200
Total current liabilities 22,800 15,200
Long-term debt 120,000 128,000
Total liabilities 142,800 143,200
Stockholders’ equity:
Common stock 15,000 15,000
Additional paid-in capital 20,000 20,000
Retained earnings 14,700 8,000
Total stockholders’ equity 49,700 43,000
Total liabilities and stockholders’ equity $192,500 $186,200
Year Ended December 31
2018 2017
Sales $250,000 $ 230,000
Cost of goods sold 164,000 142,300
Gross margin 86,000 87,700
Operating expenses 64,000 54,000
Operating income 22,000 33,700
Interest expense 7,500 5,900
Earnings before income taxes 14,500 27,800
Income taxes 7,800 7,140
Net earnings $ 6,700 $ 20,660
How much is Bent Stew’s times interest earned for 2018?
A. 2.93 times
B. 37.31 times
C. 0.34 times
D. 0.89 times
Chapter 14 Analyzing Financial Statements: A Managerial Perspective
14–33
120. Comparative financial statements for Cross, Inc. are shown below:
December 31
Assets 2018 2017
Current assets:
Cash $ 89,103 $ 68,203
Accounts receivable 142,000 135,000
Inventory 96,708 85,694
Prepaid expenses 21,203 5,118
Total current assets 349,014 294,015
Property, plant and equipment, net 822,576 718,144
Total assets $1,171,590 $1,012,159
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 85,443 $ 62,394
Other current liabilities 38,112 33,507
Total current liabilities 123,555 95,901
Long-term debt 302,430 290,324
Total liabilities 425,985 386,225
Stockholders’ equity:
Common stock 600,000 600,000
Retained earnings 145,605 25,934
Total stockholders’ equity 745,605 625,934
Total liabilities and stockholders’ equity $1,171,590 $1,012,159
Year Ended December 31
2018 2017
Net sales $17,005,852 $13,809,585
Cost of goods sold 12,250,257 9,825,614
Gross margin 4,755,595 3,983,971
Operating expense 3,585,657 3,400,258
Operating income 1,169,938 583,713
Interest expense 28,500 27,300
Earnings before tax 1,141,438 556,413
Income taxes 342,431 166,924
Net income $ 799,007 $ 389,489
Using horizontal analysis, how much is Cross, Inc.’s percentage change in accounts
receivable from 2017 to 2018?
A. 4.9% increase
B. 5.2% increase
C. 1.1% increase
D. 1.2% decrease
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
14–34
121. Comparative financial statements for Cross, Inc. are shown below:
December 31
Assets 2018 2017
Current assets:
Cash $ 89,103 $ 68,203
Accounts receivable 142,000 135,000
Inventory 96,708 85,694
Prepaid expenses 21,203 5,118
Total current assets 349,014 294,015
Property, plant and equipment, net 822,576 718,144
Total assets $1,171,590 $1,012,159
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 85,443 $ 62,394
Other current liabilities 38,112 33,507
Total current liabilities 123,555 95,901
Long-term debt 302,430 290,324
Total liabilities 425,985 386,225
Stockholders’ equity:
Common stock 600,000 600,000
Retained earnings 145,605 25,934
Total stockholders’ equity 745,605 625,934
Total liabilities and stockholders’ equity $1,171,590 $1,012,159
Year Ended December 31
2018 2017
Net sales $17,005,852 $13,809,585
Cost of goods sold 12,250,257 9,825,614
Gross margin 4,755,595 3,983,971
Operating expense 3,585,657 3,400,258
Operating income 1,169,938 583,713
Interest expense 28,500 27,300
Earnings before tax 1,141,438 556,413
Income taxes 342,431 166,924
Net income $ 799,007 $ 389,489
How much is Cross, Inc.’s gross margin percentage for 2018?
A. 19.4%
B. 72.0%
C. 28.8%
D. 28.0%
Chapter 14 Analyzing Financial Statements: A Managerial Perspective
14–35
122. Comparative financial statements for Cross, Inc. are shown below:
December 31
Assets 2018 2017
Current assets:
Cash $ 89,103 $ 68,203
Accounts receivable 142,000 135,000
Inventory 96,708 85,694
Prepaid expenses 21,203 5,118
Total current assets 349,014 294,015
Property, plant and equipment, net 822,576 718,144
Total assets $1,171,590 $1,012,159
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 85,443 $ 62,394
Other current liabilities 38,112 33,507
Total current liabilities 123,555 95,901
Long-term debt 302,430 290,324
Total liabilities 425,985 386,225
Stockholders’ equity:
Common stock 600,000 600,000
Retained earnings 145,605 25,934
Total stockholders’ equity 745,605 625,934
Total liabilities and stockholders’ equity $1,171,590 $1,012,159
Year Ended December 31
2018 2017
Net sales $17,005,852 $13,809,585
Cost of goods sold 12,250,257 9,825,614
Gross margin 4,755,595 3,983,971
Operating expense 3,585,657 3,400,258
Operating income 1,169,938 583,713
Interest expense 28,500 27,300
Earnings before tax 1,141,438 556,413
Income taxes 342,431 166,924
Net income $ 799,007 $ 389,489
There were 200,000 shares of common stock outstanding during both years. How much
is earnings per share for Cross, Inc. in 2018?
A. $4.00
B. $0.05
C. $85.03
D. $5.71
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
14–36
123. Comparative financial statements for Cross, Inc. are shown below:
December 31
Assets 2018 2017
Current assets:
Cash $ 89,103 $ 68,203
Accounts receivable 142,000 135,000
Inventory 96,708 85,694
Prepaid expenses 21,203 5,118
Total current assets 349,014 294,015
Property, plant and equipment, net 822,576 718,144
Total assets $1,171,590 $1,012,159
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 85,443 $ 62,394
Other current liabilities 38,112 33,507
Total current liabilities 123,555 95,901
Long-term debt 302,430 290,324
Total liabilities 425,985 386,225
Stockholders’ equity:
Common stock 600,000 600,000
Retained earnings 145,605 25,934
Total stockholders’ equity 745,605 625,934
Total liabilities and stockholders’ equity $1,171,590 $1,012,159
Year Ended December 31
2018 2017
Net sales $17,005,852 $13,809,585
Cost of goods sold 12,250,257 9,825,614
Gross margin 4,755,595 3,983,971
Operating expense 3,585,657 3,400,258
Operating income 1,169,938 583,713
Interest expense 28,500 27,300
Earnings before tax 1,141,438 556,413
Income taxes 342,431 166,924
Net income $ 799,007 $ 389,489
Which one of the following is revealed by horizontal analysis of Cross, Inc. during the
2018 and 2017 years?
A. Current assets are increasing at a faster rate than total assets.
B. Sales are increasing faster than cost of goods sold.
C. Sales are increasing faster than net income.
D. Cash is increasing faster than accounts payable.
Chapter 14 Analyzing Financial Statements: A Managerial Perspective
14–37
124. Comparative financial statements for Cross, Inc. are shown below:
December 31
Assets 2018 2017
Current assets:
Cash $ 89,103 $ 68,203
Accounts receivable 142,000 135,000
Inventory 96,708 85,694
Prepaid expenses 21,203 5,118
Total current assets 349,014 294,015
Property, plant and equipment, net 822,576 718,144
Total assets $1,171,590 $1,012,159
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 85,443 $ 62,394
Other current liabilities 38,112 33,507
Total current liabilities 123,555 95,901
Long-term debt 302,430 290,324
Total liabilities 425,985 386,225
Stockholders’ equity:
Common stock 600,000 600,000
Retained earnings 145,605 25,934
Total stockholders’ equity 745,605 625,934
Total liabilities and stockholders’ equity $1,171,590 $1,012,159
Year Ended December 31
2018 2017
Net sales $17,005,852 $13,809,585
Cost of goods sold 12,250,257 9,825,614
Gross margin 4,755,595 3,983,971
Operating expense 3,585,657 3,400,258
Operating income 1,169,938 583,713
Interest expense 28,500 27,300
Earnings before tax 1,141,438 556,413
Income taxes 342,431 166,924
Net income $ 799,007 $ 389,489
The market price per share of Cross, Inc.’s common stock is $103.00 at the end of 2018.
Throughout both 2017 and 2018, there are 500,000 shares of common stock
outstanding. How much is Cross, Inc.’s price-earnings ratio at the end of 2018?
A. $1.60
B. $64.46
C. $0.21
D. $1.66
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
14–38
125. Comparative financial statements for Cross, Inc. are shown below:
December 31
Assets 2018 2017
Current assets:
Cash $ 89,103 $ 68,203
Accounts receivable 142,000 135,000
Inventory 96,708 85,694
Prepaid expenses 21,203 5,118
Total current assets 349,014 294,015
Property, plant and equipment, net 822,576 718,144
Total assets $1,171,590 $1,012,159
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 85,443 $ 62,394
Other current liabilities 38,112 33,507
Total current liabilities 123,555 95,901
Long-term debt 302,430 290,324
Total liabilities 425,985 386,225
Stockholders’ equity:
Common stock 600,000 600,000
Retained earnings 145,605 25,934
Total stockholders’ equity 745,605 625,934
Total liabilities and stockholders’ equity $1,171,590 $1,012,159
Year Ended December 31
2018 2017
Net sales $17,005,852 $13,809,585
Cost of goods sold 12,250,257 9,825,614
Gross margin 4,755,595 3,983,971
Operating expense 3,585,657 3,400,258
Operating income 1,169,938 583,713
Interest expense 28,500 27,300
Earnings before tax 1,141,438 556,413
Income taxes 342,431 166,924
Net income $ 799,007 $ 389,489
How much is return on total assets for Cross, Inc. for 2017?
A. 68.2%
B. 69.9%
C. 68.9%
D. 14.5%
Chapter 14 Analyzing Financial Statements: A Managerial Perspective
14–39
126. Comparative financial statements for Cross, Inc. are shown below:
December 31
Assets 2018 2017
Current assets:
Cash $ 89,103 $ 68,203
Accounts receivable 142,000 135,000
Inventory 96,708 85,694
Prepaid expenses 21,203 5,118
Total current assets 349,014 294,015
Property, plant and equipment, net 822,576 718,144
Total assets $1,171,590 $1,012,159
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 85,443 $ 62,394
Other current liabilities 38,112 33,507
Total current liabilities 123,555 95,901
Long-term debt 302,430 290,324
Total liabilities 425,985 386,225
Stockholders’ equity:
Common stock 600,000 600,000
Retained earnings 145,605 25,934
Total stockholders’ equity 745,605 625,934
Total liabilities and stockholders’ equity $1,171,590 $1,012,159
Year Ended December 31
2018 2017
Net sales $17,005,852 $13,809,585
Cost of goods sold 12,250,257 9,825,614
Gross margin 4,755,595 3,983,971
Operating expense 3,585,657 3,400,258
Operating income 1,169,938 583,713
Interest expense 28,500 27,300
Earnings before tax 1,141,438 556,413
Income taxes 342,431 166,924
Net income $ 799,007 $ 389,489
How much is return on common stockholders’ equity for Cross, Inc. for 2018?
A. 107.2%
B. 93.3%
C. 68.2%
D. 2.0%
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
14–40
127. Comparative financial statements for Cross, Inc. are shown below:
December 31
Assets 2018 2017
Current assets:
Cash $ 89,103 $ 68,203
Accounts receivable 142,000 135,000
Inventory 96,708 85,694
Prepaid expenses 21,203 5,118
Total current assets 349,014 294,015
Property, plant and equipment, net 822,576 718,144
Total assets $1,171,590 $1,012,159
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 85,443 $ 62,394
Other current liabilities 38,112 33,507
Total current liabilities 123,555 95,901
Long-term debt 302,430 290,324
Total liabilities 425,985 386,225
Stockholders’ equity:
Common stock 600,000 600,000
Retained earnings 145,605 25,934
Total stockholders’ equity 745,605 625,934
Total liabilities and stockholders’ equity $1,171,590 $1,012,159
Year Ended December 31
2018 2017
Net sales $17,005,852 $13,809,585
Cost of goods sold 12,250,257 9,825,614
Gross margin 4,755,595 3,983,971
Operating expense 3,585,657 3,400,258
Operating income 1,169,938 583,713
Interest expense 28,500 27,300
Earnings before tax 1,141,438 556,413
Income taxes 342,431 166,924
Net income $ 799,007 $ 389,489
How much is inventory turnover for Cross, Inc. for 2018?
A. 8.26 times
B. 126.7 times
C. 0.79 times
D. 2.9 times