Calculate the current ratio and the acid–test ratio. Is the company healthy based on the guidelines given in the text?
32)
Current assets: $442,000
Current liabilities: $189,000
Liquid assets: $50,000
32)
A)
Current ratio =8.84 which is fine
Acid–test ratio =0.26 which is very low
B)
Current ratio =2.34 which is fine
Acid–test ratio =0.26 which is very low
C)
Current ratio =2.34 which is fine
Acid–test ratio =8.84 which is fine
D)
Current ratio =0.26 which is very low
Acid–test ratio =2.34 which is fine
Find (a) the gross profit, (b) the net income before taxes, and (c) the net income after taxes.
33)
MidState Machinery has a cost of goods sold of $105,000, operating expenses of $47,000, taxes of
$10,500, and net sales of $237,000.
33)
A)
(a) $190,000 (b) $85,000 (c)$74,500
B)
(a) $58,000 (b) $132,000 (c)$121,500
C)
(a) $58,000 (b) $85,000 (c)$74,500
D)
(a) $132,000 (b) $85,000 (c)$74,500
Complete the horizontal analysis for the balance sheet. Round to the nearest tenth of a percent.
34)
Bud’s Show Repair
This
Year
Last
Year Inc or –Dec %
Current Assets
Cash $64,000 $48,000 %
Notes Receivable $10,000 $6,000 %
Accounts Receivable $119,000 $90,000 %
Inventory $153,000 $129,000 %
Total Current $346,000 $273,000 %
Fixed Assets $55,000 $41,000 %
Total Assets $401,000 $314,000 %
34)
A)
25.0%, 40.0%, 24.4%, 15.7%, 21.1%, 25.5%, 21.7%
B)
75.0%, 60.0%, 75.6%, 84.3%, 78.9%, 74.5%, 78.3%
C)
33.3%, 66.7%, 32.2%, 18.6%, 26.7%, 34.1%, 27.7%
D)
33.4%, 66.5%, 32.2%, 18.6%, 26.7%, 34.1%, 27.6%
Complete the horizontal analysis for the comparative income statement. Round to the nearest tenth of a percent.
35)
This Year Last Year
Increase or
–Decrease Percent
Gross Sales $1,611,000 $1,504,000
Returns $5000 $15,000
Net Sales $1,606,000 $1,489,000
Cost of Goods Sold $1,127,000 $1,051,000
Gross Profit $479,000 $438,000
Total Expenses $73,000 $58,000
Net Income before taxes $406,000 $380,000
35)
A)
0.5%, -133.3%, 1.1%, -2.3%, -13.5%, -146.6%, -19.5%
B)
-7.1%, 66.7%, -7.9%, -7.2%, -9.4%, -25.9%, -6.8%
C)
7.1%, -66.7%, 7.9%, 7.2%, 9.4%, 25.9%, 6.8%
D)
6.6%, -200.0%, 7.3%, 6.7%, 8.6%, 20.5%, 6.4%
36)
This Year Last Year
Increase or
–Decrease Percent
Gross Sales $1,009,000 $836,000
Returns $5000 $13,000
Net Sales $1,004,000 $823,000
Cost of Goods Sold $228,000 $241,000
Gross Profit $776,000 $582,000
Total Expenses $49,000 $33,000
Net Income before taxes $727,000 $549,000
36)
A)
20.7%, -61.5%, 22.0%, –5.4%, 33.3%, 48.5%, 32.4%
B)
-20.7%, 61.5%, -22.0%, 5.4%, -33.3%, -48.5%, -32.4%
C)
8.7%, -138.5%, 9.8%, -46.9%, 16.2%, -254.5%, 14.2%
D)
17.1%, -160.0%, 18.0%, –5.7%, 25.0%, 32.7%, 24.5%
Find the ratio of net income after taxes to average owner’s equity. Round to the nearest tenth of a percent.
37)
Owner’s equity at beginning of year: $582,000. Owner’s equity at end of year: $725,000. Net income
after taxes: $56,500.
37)
A)
7.8%
B)
9.8%
C)
8.6%
D)
9.7%
Complete the horizontal analysis for the balance sheet. Round to the nearest tenth of a percent.
38)
Larry’s Bike Shop
This
Year
Last
Year Inc or –Dec %
Current Assets
Cash $22,000 $39,000 %
Notes Receivable $8,000 $9,000 %
Accounts Receivable $126,000 $111,000 %
Inventory $148,000 $119,000 %
Total Current $304,000 $278,000 %
Plant Assets $51,000 $35,000 %
Total Assets $355,000 $313,000 %
38)
A)
177.3%, 112.5%, 88.1%, 80.4%, 91.4%, 68.6%, 88.2%
B)
–43.7%, -11.3%, 13.5%, 24.4%, 9.4%, 45.7%, 13.3%
C)
–43.6%, -11.1%, 13.5%, 24.4%, 9.4%, 45.7%, 13.4%
D)
-77.3%, -12.5%, 11.9%, 19.6%, 8.6%, 31.4%, 11.8%
The following chart shows some figures from an income statement. Prepare a vertical analysis by expressing each item as
a percent of net sales. Round percents to the nearest tenth of a percent.
39)
More–to–See Video
Amt %
Net Sales
Cost of Goods Sold
Wages
Advertising
Net Income before Taxes
$756,000
$252,000
$61,000
$34,000
$75,000
100%
39)
A)
33.3%, 8.2%, 13.5%, 29.8%
B)
33.3%, 8.1%, 55.7%, 9.9%
C)
33.3%, 24.2%, 13.5%, 29.8%
D)
33.3%, 8.1%, 4.5%, 9.9%
Complete the income statement.
40)
Camelot Sales Inc. had gross sales of $4,172,000 with returns of $59,900. The inventory on January 1
was $582,000. During the year $1,303,000 worth of goods was purchased with freight of $5600. The
inventory on December 31 was $507,000. Wages and salaries were $88,000, rent was $14,600,
advertising was $17,400, utilities were $5800, business taxes totaled $8200, and miscellaneous
expenses were $7200.
Camelot Sales Inc. Income Statement Year Ending December 31
Gross Sales 1)
Returns 2)
Net Sales 3)
Cost of Goods Sold 4)
Gross Profit 5)
Total Expenses 6)
Net Income before Taxes 7)
40)
A)
1) $4,172,000, 2) $59,900, 3) $4,112,100, 4) $1,372,400, 5) $2,739,700, 6) $141,200,7) $2,587,300
B)
1) $4,172,000, 2) $59,900, 3) $4,231,900, 4) $1,383,600, 5) $2,848,300, 6) $141,200,7) $2,707,100
C)
1) $4,172,000, 2) $59,900, 3) $4,112,100, 4) $1,383,600, 5) $2,728,500, 6) $141,200,7) $2,707,100
D)
1) $4,172,000, 2) $59,900, 3) $4,112,100, 4) $1,383,600, 5) $2,728,500, 6) $141,200,7) $2,587,300
Find the ratio of net income after taxes to average owner’s equity. Round to the nearest tenth of a percent.
41)
Owner’s equity at beginning of year: $640,000. Owner’s equity at end of year: $2,298,000. Net
income after taxes: $309,500.
41)
A)
13.5%
B)
21.1%
C)
48.4%
D)
48.5%
Find (a) the gross profit, (b) the net income before taxes, and (c) the net income after taxes.
42)
Eddie’s TV and Appliance had gross sales of $489,000, returns of $18,000, operating expenses of
$178,000, taxes of $24,450, and a cost of goods sold of $213,000.
42)
A)
(a) $293,000 (b) $80,000 (c)$55,550
B)
(a) $258,000 (b) $80,000 (c)$55,550
C)
(a) $276,000 (b) $80,000 (c)$55,550
D)
(a) $311,000 (b) $80,000 (c)$55,550
Complete the horizontal analysis for the comparative income statement. Round to the nearest tenth of a percent.
43)
This Year Last Year
Increase or
–Decrease Percent
Gross Sales $2,757,000 $2,610,000
Returns $5000 $14,000
Net Sales $2,752,000 $2,596,000
Cost of Goods Sold $1,582,000 $1,821,000
Gross Profit $1,170,000 $775,000
Total Expenses $77,000 $55,000
Net Income before taxes $1,093,000 $720,000
43)
A)
5.6%, -64.3%, 6.0%, -13.1%, 51.0%, 40.0%, 51.8%
B)
5.3%, -180.0%, 5.7%, -15.1%, 33.8%, 28.6%, 34.1%
C)
1.8%, -135.7%, 2.2%, -18.6%, 38.1%, -141.8%, 37.9%
D)
-5.6%, 64.3%, -6.0%, 13.1%, -51.0%, -40.0%, -51.8%
Complete the income statement.
44)
Central Data Inc. had gross sales of $410,000 with returns of $5700. The inventory on January 1 was
$56,000. During the year $105,000 worth of goods was purchased with freight of $2100. The
inventory on December 31 was $51,000. Wages and salaries were $59,200, rent was $13,400,
advertising was $2400, utilities were $2400, business taxes totaled $5800, and miscellaneous
expenses were $4000.
Central Data Inc. Income Statement Year Ending December 31
Gross Sales 1)
Returns 2)
Net Sales 3)
Cost of Goods Sold 4)
Gross Profit 5)
Total Expenses 6)
Net Income before Taxes 7)
44)
A)
1) $410,000, 2) $5700, 3) $415,700, 4) $112,100, 5) $303,600, 6) $87,200,7) $216,400
B)
1) $410,000, 2) $5700, 3) $404,300, 4) $112,100, 5) $292,200, 6) $87,200,7) $205,000
C)
1) $410,000, 2) $5700, 3) $404,300, 4) $107,900, 5) $296,400, 6) $87,200,7) $205,000
D)
1) $410,000, 2) $5700, 3) $404,300, 4) $112,100, 5) $292,200, 6) $87,200,7) $216,400
Complete the horizontal analysis for the balance sheet. Round to the nearest tenth of a percent.
45)
Hamilton Supplies
This
Year
Last
Year Inc or –Dec %
Current Assets
Cash $52,000 $35,000 %
Notes Receivable $10,000 $6,000 %
Accounts Receivable $146,000 $129,000 %
Inventory $150,000 $94,000 %
Total Current Assets $358,000 $264,000 %
Plant Assets $58,000 $47,000 %
Total Assets $416,000 $311,000 %
45)
A)
48.7%, 66.5%, 13.2%, 59.6%, 35.6%, 23.4%, 33.7%
B)
67.3%, 60.0%, 88.4%, 62.7%, 73.7%, 81.0%, 74.8%
C)
48.6%, 66.7%, 13.2%, 59.6%, 35.6%, 23.4%, 33.8%
D)
32.7%, 40.0%, 11.6%, 37.3%, 26.3%, 19.0%, 25.2%
Find (a) the gross profit, (b) the net income before taxes, and (c) the net income after taxes.
46)
Jill’s Cleaning Service had net sales of $435,000, operating expenses of $124,000, taxes of
$21,750,and a cost of goods sold of $63,000.
46)
A)
(a) $61,000 (b) $248,000 (c)$226,250
B)
(a) $372,000 (b) $248,000 (c)$226,250
C)
(a) $61,000 (b) $372,000 (c)$350,250
D)
(a) $311,000 (b) $248,000 (c)$226,250
The following chart shows some figures from an income statement. Prepare a vertical analysis by expressing each item as
a percent of net sales. Round percents to the nearest tenth of a percent.
47)
West End Clinic
Amt %
Net Sales
Cost of Goods Sold
Wages
Advertising
Net Income before Taxes
$806,000
$339,000
$68,000
$35,000
$78,000
100%
47)
A)
42.1%, 8.4%, 51.5%, 9.7%
B)
42.1%, 20.1%, 10.3%, 23.0%
C)
42.1%, 8.5%, 10.3%, 23.0%
D)
42.1%, 8.4%, 4.3%, 9.7%
Complete the income statement.
48)
Frank’s Nursery had gross sales of $3,166,000 with returns of $62,100. The inventory on January 1
was $570,000. During the year $1,402,000 worth of goods was purchased with freight of $5500. The
inventory on December 31 was $500,000. Wages and salaries were $89,500, rent was $10,400,
advertising was $13,400, utilities were $6600, business taxes totaled $8900, and miscellaneous
expenses were $9000.
Frank’s Nursery Income Statement Year Ending December 31
Gross Sales 1)
Returns 2)
Net Sales 3)
Cost of Goods Sold 4)
Gross Profit 5)
Total Expenses 6)
Net Income before Taxes 7)
48)
A)
1) $3,166,000, 2) $62,100, 3) $3,103,900, 4) $1,477,500, 5) $1,626,400, 6) $137,800,7) $1,488,600
B)
1) $3,166,000, 2) $62,100, 3) $3,103,900, 4) $1,477,500, 5) $1,626,400, 6) $137,800,7) $1,612,800
C)
1) $3,166,000, 2) $62,100, 3) $3,103,900, 4) $1,466,500, 5) $1,637,400, 6) $137,800,7) $1,488,600
D)
1) $3,166,000, 2) $62,100, 3) $3,228,100, 4) $1,477,500, 5) $1,750,600, 6) $137,800,7) $1,612,800
Calculate the current ratio and the acid–test ratio. Is the company healthy based on the guidelines given in the text?
49)
Current assets: $1,529,000
Current liabilities: $539,000
Liquid assets: $820,000
49)
A)
Current ratio =2.84 which is fine
Acid–test ratio =1.86 which is fine
B)
Current ratio =1.86 which is low
Acid–test ratio =1.52 which is fine
C)
Current ratio =2.84 which is fine
Acid–test ratio =1.52 which is fine
D)
Current ratio =1.52 which is too low
Acid–test ratio =2.84 which is fine
50)
Current assets: $218,000
Current liabilities: $181,000
Liquid assets: $146,000
50)
A)
Current ratio =1.20 which is too low
Acid–test ratio =1.49 which is fine
B)
Current ratio =0.81 which is too low
Acid–test ratio =1.20 which is too low
C)
Current ratio =1.20 which is too low
Acid–test ratio =0.81 which is too low
D)
Current ratio =1.49 which is too low
Acid–test ratio =0.81 which is too low
Complete the horizontal analysis for the balance sheet. Round to the nearest tenth of a percent.
51)
Armaud’s Deli
This
Year
Last
Year Inc or –Dec %
Current Assets
Cash $12,000 $46,000 %
Notes Receivable $12,000 $10,000 %
Accounts Receivable $152,000 $93,000 %
Inventory $132,000 $127,000 %
Total Current $308,000 $276,000 %
Plant Assets $25,000 $45,000 %
Total Assets $333,000 $321,000 %
51)
A)
383.3%, 83.3%, 61.2%, 96.2%, 89.6%, 180.0%, 96.4%
B)
-73.8%, 19.8%, 63.4%, 3.9%, 11.6%, –44.4%, 3.6%
C)
-283.3%, 16.7%, 38.8%, 3.8%, 10.4%, -80.0%, 3.6%
D)
-73.9%, 20.0%, 63.4%, 3.9%, 11.6%, –44.4%, 3.7%
Complete the balance sheet.
22
52)
Mullen’s Hardware: mortgage $30,000; notes payable $18,000; accounts payable $13,000; long–term
notes $44,000; fixed assets $60,000; inventory $76,000; accounts receivable $30,000; notes receivable
$18,000; cash $13,000; owner’s equity $92,000
Balance Sheet Dec 31
Assets
Current Assets
Cash $
Notes Receivable $
Accts Receivable $
Inventory $
Total Current Assets $
Plant Assets $
Total Assets $
Liabilities
Current Liabilities
Notes Payable $
Accts Payable $
Total Current Liabilities $
Long–Term Liabilities
Mortgages Payable $
Long Term Notes Payable $
Total Long–Term Liabilities $
Total Liabilities $
Owner’s Equity
Owner‘s Equity $
Total Liabilities and Owner’s Equity $
52)
A)
Assets: 13,000; 18,000; 30,000; 76,000; 137,000; 60,000; 197,000
Liabilities: 44,000; 13,000; 57,000; 30,000; 18,000; 48,000; 92,000
Owner’s Equity: 105,000; 197,000
B)
Assets: 13,000; 18,000; 30,000; 76,000; 137,000; 60,000; 197,000
Liabilities: 44,000; 13,000; 57,000; 30,000; 18,000; 48,000; 105,000
Owner’s Equity: 92,000; 197,000
C)
Assets: 13,000; 18,000; 30,000; 76,000; 137,000; 60,000; 197,000
Liabilities: 18,000; 13,000; 31,000; 30,000; 44,000; 74,000; 105,000
Owner’s Equity: 92,000; 197,000
D)
Assets: 13,000; 18,000; 30,000; 137,000; 76,000; 60,000; 197,000
Liabilities: 44,000; 13,000; 57,000; 30,000; 18,000; 48,000; 105,000
Owner’s Equity: 92,000; 197,000
Prepare a vertical analysis. Round percents to the nearest tenth of a percent.
53)
Wandell’s Garden Shop had a cost of goods sold of $108,000, operating expenses of $43,000, and net
sales of $184,000.
53)
A)
Percent cost of goods sold =35.3%
Percent operating expenses =58.7%
B)
Percent cost of goods sold =58.7%
Percent operating expenses =23.4%
C)
Percent cost of goods sold =23.4%
Percent operating expenses =58.7%
D)
Percent cost of goods sold =58.7%
Percent operating expenses =35.3%
Calculate the current ratio and the acid–test ratio. Is the company healthy based on the guidelines given in the text?
54)
Current assets: $498,000
Current liabilities: $188,000
Liquid assets: $146,000
54)
A)
Current ratio =0.78 which is too low
Acid–test ratio =2.65 which is fine
B)
Current ratio =2.65 which is fine
Acid–test ratio =3.41 which is fine
C)
Current ratio =3.41 which is fine
Acid–test ratio =0.78 which is too low
D)
Current ratio =2.65 which is fine
Acid–test ratio =0.78 which is too low
Answer Key
Testname: C15
25
Answer Key
Testname: C15
Answer Key
Testname: C15