105. The balance sheets at the end of each of the first two years of operations indicate the following:
2012
2011
Total current assets
$600,000
$560,000
Total investments
60,000
40,000
Total property, plant, and equipment
900,000
700,000
Total current liabilities
125,000
65,000
Total long-term liabilities
350,000
250,000
Preferred 9% stock, $100 par
100,000
100,000
Common stock, $10 par
600,000
600,000
Paid-in capital in excess of par-common stock
75,000
75,000
Retained earnings
310,000
210,000
If net income is $115,000 and interest expense is $30,000 for 2012, and the market price is $30, What is the price-earnings ratio on common stock
for 2012 (Round intermediate calculation to two decimal place and final answers to one decimal place)?
106. The numerator of the rate earned on common stockholders’ equity ratio is equal to
107. The numerator of the rate earned on total assets ratio is equal to
108. The following information is available for Taylor Company:
2012
Market price per share of common stock
$25.00
Earnings per share on common stock
$ 1.25
Which of the following statements is correct?
109. The following information is available for Dorman Company:
2014
Dividends per share of common stock
$ 1.44
Market price per share of common stock
$ 24.00
Which of the following statements is correct?
110. The particular analytical measures chosen to analyze a company may be influenced by all of the following
except:
111. Which one of the following is not a characteristic generally evaluated in ratio analysis?
112. Short-term creditors are typically most interested in assessing
113. A common measure of liquidity is
114. In 2012 Robert Corporation had net income of $250,000 and paid dividends to common stockholders of
$50,000. They had 50,000 shares of common stock outstanding during the entire year. Robert Corporation’s
common stock is selling for $50 per share on the New York Stock Exchange.
Robert Corporation’s price-earnings ratio is
115. Leveraging implies that a company
116. The following information pertains to Carlton Company. Assume that all balance sheet amounts represent
both average and ending balance figures. Assume that all sales were on credit.
Assets
Cash and short-term investments
$ 40,000
Accounts receivable (net)
25,000
Inventory
20,000
Property, plant and equipment
210,000
Total assets
$295,000
Liabilities and Stockholders’ Equity
Current liabilities
60,000
Long-term liabilities
85,000
Stockholders’ equity-common
150,000
Total liabilities and stockholders’ equity
$295,000
Income Statement
Net 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
6,000000
Market price of common stock
$20
Total dividends paid
$5,400
Cash provided by operations
$30,000
What is the ratio of net sales to total assets for this company? Round your answer to two decimal points.
117. The following information pertains to Carlton Company. Assume that all balance sheet amounts represent
both average and ending balance figures. Assume that all sales were on credit.
Assets
Cash and short-term
investments
$ 40,000
Accounts receivable (net)
25,000
Inventory
20,000
Property, plant and equipment
210,000
Total assets
$295,000
Liabilities and Stockholders’ Equity
Current liabilities
60,000
Long-term liabilities
85,000
Stockholders’ equity-common
150,000
Total liabilities and stockholders’ equity
$295,000
Income Statement
Net 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
6,000000
Market price of common stock
$20
Total dividends paid
$5,400
Cash provided by operations
$30,000
What is the rate earned on total assets for this company? Round your answer to one decimal point.
118. The following information pertains to Carlton Company. Assume that all balance sheet amounts represent
both average and ending balance figures. Assume that all sales were on credit.
Assets
Cash and short-term investments
$ 40,000
Accounts receivable (net)
25,000
Inventory
20,000
Property, plant and equipment
210,000
Total assets
$295,000
Liabilities and Stockholders’ Equity
Current liabilities
60,000
Long-term liabilities
85,000
Stockholders’ equity-common
150,000
Total liabilities and stockholders’ equity
$295,000
Income Statement
Net 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
6,000000
Market price of common stock
$20
Total dividends paid
$5,400
Cash provided by operations
$30,000
What are the dividends per common share for this company?
119. The following information pertains to Carlton Company. Assume that all balance sheet amounts represent
both average and ending balance figures. Assume that all sales were on credit.
Assets
Cash and short-term investments
$ 40,000
Accounts receivable (net)
25,000
Inventory
20,000
Property, plant and equipment
210,000
Total assets
$295,000
Liabilities and Stockholders’ Equity
Current liabilities
60,000
Long-term liabilities
85,000
Stockholders’ equity-common
150,000
Total liabilities and stockholders’ equity
$295,000
Income Statement
Net 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
6,000000
Market price of common stock
$20
Total dividends paid
$5,400
Cash provided by operations
$30,000
What is the dividend yield for this company? Round your answer to one decimal point.
120. The following information pertains to Carlton Company. Assume that all balance sheet amounts represent
both average and ending balance figures. Assume that all sales were on credit.
Assets
Cash and short-term
investments
$ 40,000
Accounts receivable (net)
25,000
Inventory
20,000
Property, plant and equipment
210,000
Total assets
$295,000
Liabilities and Stockholders’ Equity
Current liabilities
60,000
Long-term liabilities
85,000
Stockholders’ equity-common
150,000
Total liabilities and stockholders’ equity
$295,000
Income Statement
Net 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
6,000000
Market price of common stock
$20
Total dividends paid
$5,400
Cash provided by operations
$30,000
What is the rate earned on common stockholders’ equity for this company? Round your answer to one decimal point.
121. The following information pertains to Carlton Company. Assume that all balance sheet amounts represent
both average and ending balance figures. Assume that all sales were on credit.
Assets
Cash and short-term investments
$ 40,000
Accounts receivable (net)
25,000
Inventory
20,000
Property, plant and equipment
210,000
Total assets
$295,000
Liabilities and Stockholders’ Equity
Current liabilities
60,000
Long-term liabilities
85,000
Stockholders’ equity-common
150,000
Total liabilities and stockholders’ equity
$295,000
Income Statement
Net 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
6,000000
Market price of common stock
$20
Total dividends paid
$5,400
Cash provided by operations
$30,000
What is the price earnings ratio for this company? Round your answer to one decimal point.
122. The following information pertains to Newman Company. Assume that all balance sheet amounts represent
both average and ending balance figures. Assume that all sales were on credit.
Assets
Cash and short-term
investments
$ 40,000
Accounts receivable (net)
30,000
Inventory
25,000
Property, plant and equipment
215,000
Total Assets
$310,000
Liabilities and Stockholders’ Equity
Current liabilities
60,000
Long-term liabilities
95,000
Stockholders’ equity-common
155,000
Total Liabilities and stockholders’
equity
$310,000
Income Statement
Sales
$ 90,000
Cost of goods sold
45,000
Gross margin
45,000
Operating expenses
20,000
Net income
$ 25,000
Number of shares of common stock
6,000000
Market price of common stock
$40
Dividends per share
1.00
Cash provided by operations
$40,000
What is the rate earned on total assets for this company?
123. The following information pertains to Newman Company. Assume that all balance sheet amounts represent
both average and ending balance figures. Assume that all sales were on credit.
Assets
Cash and short-term investments
$ 40,000
Accounts receivable (net)
30,000
Inventory
25,000
Property, plant and equipment
215,000
Total Assets
$310,000
Liabilities and Stockholders’ Equity
Current liabilities
60,000
Long-term liabilities
95,000
Stockholders’ equity-common
155,000
Total Liabilities and stockholders’ equity
$310,000
Income Statement
Sales
$ 90,000
Cost of goods sold
45,000
Gross margin
45,000
Operating expenses
20,000
Net income
$ 25,000
Number of shares of common stock
6,000000
Market price of common stock
$40
Dividends per share
1.00
Cash provided by operations
$40,000
What is the price earnings ratio for this company?
124. Percentage analyses, ratios, turnovers, and other measures of financial position and operating results are
125. The following information pertains to Auburn Company. Assume that all balance sheet amounts represent
both average and ending balance figures. Assume that all sales were on credit.
Assets
Cash and short-term investments
$ 40,000
Accounts receivable (net)
30,000
Inventory
25,000
Property, plant and equipment
280,000
Total Assets
$375,000
Liabilities and Stockholders’ Equity
Current liabilities
60,000
Long-term liabilities
95,000
Stockholders’ equity-common
220,000
Total Liabilities and stockholders’ equity
$375,000
Income Statement
Sales
$ 90,000
Cost of goods sold
45,000
Gross margin
45,000
Operating expenses
10,000
Net income
$ 35,000
Number of shares of common stock
6,000000
Market price of common stock
$20
Dividends per share
1.00
Cash provided by operations
$40,000
What is the rate earned on stockholders’ equity? Round answer to a single decimal point.
126. Corporate annual reports typically do not contain which of the following?
127. The independent auditor’s report does which of the following?
128. The purpose of an audit is to
129. Which of the following is required by the Sarbanes-Oxley Act of 2002?
130. All of the following are typically included in the Management’s Discussion and Analysis in annual reports
except:
131. Which of the following should be reported net of the related income tax effect on the income statement?
132. Which of the following would appear as an extraordinary item on the income statement?
133. A loss on disposal of a segment would be reported in the income statement as a(n)
134. An extraordinary item results from
135. Which of the following is considered an unusual item affecting the prior period’s income statement?
136. Which of the following should be classified as an extraordinary item on the income statement?
137. A loss due to a discontinued operation should be reported in the income statement
138. When a company changes from one acceptable accounting method to another, the change is reported
139. Which of the following items should be classified as an extraordinary item on a corporate income
statement?
140. Which of the following items appear on the corporate income statement before income from continuing
operations?
141. A company reports the following:
Net income
$150,000
Preferred dividends
$ 10,000
Shares of common stock outstanding
20,000
Market price per share of common stock
$35.00
Determine the company’s earnings per share on common stock.
142. Income statement information for Lucy Company is provided below:
Sales
$175,000
Cost of goods sold
105,000
Gross profit
$ 70,000
Using vertical analysis of the income statement for Lucy Company, determine the gross profit margin.
143. The Cash and Accounts Receivable for a company are provided below:
2015
2014
Cash
$70,000
$50,000
Accounts receivable (net)
$70,400
$80,000
Based on this information, what is the amount and percentage of increase or decrease that would be shown in a balance sheet with horizontal
analysis?
144. The Cash and Accounts Receivable for a company are provided below:
2012
2011
Cash
$62,400
$60,000
Accounts receivable (net)
$44,000
$50,000
Based on this information, what is the amount and percentage of increase or decrease that would be shown in a balance sheet with horizontal
analysis?
Cash
$2,400 increase ($62,400 – $60,000) or 4%
Accounts Receivable
$6,000 decrease ($44,000 – $50,000) or – 12%
145. Income statement information for Lucy Company is provided below:
Sales
$175,000
Cost of goods sold
105,000
Gross profit
$ 70,000
Prepare a vertical analysis of the income statement for Lucy Company.
Amount
Percentage
Sales
$ 175,000
100%
($175,000 / $175,000)
Cost of goods sold
$ 105,000
60%
(105,000 / $175,000)
Cash
$20,000 increase ($70,000 – $50,000) or 40%
Accounts Receivable
$ 9,600 decrease ($80,000 – $70,400), or -12%
146. Income statement information for Sharif Corporation is provided below:
Sales
$500,000
Gross profit
140,000
Net income
40,000
Required: Prepare a vertical analysis of the given income statement information for Sharif Corporation.
147. Why would you or why wouldn’t you compare an organization like Ford Motor Company to the local car
dealer “Johnson City Ford/Lincoln/Mercury” in vertical and horizontal analysis?
148. What is a major advantage of using percentages rather than dollar changes in doing horizontal and vertical
analysis?
($500,000 $500,000)
($140,000 $500,000)
($40,000 $500,000)
149. The following items are reported on a company’s balance sheet:
Cash
$230,000
Marketable securities
50,000
Accounts receivable
200,000
Inventory
240,000
Accounts payable
300,000
Determine the (a) current ratio, and (b) quick ratio. Round your answer to one decimal place.
150. The following items are reported on a company’s balance sheet:
Cash
$400,000
Marketable securities
50,000
Accounts receivable
150,000
Inventory
200,000
Accounts payable
250,000
Determine the (a) current ratio, and (b) quick ratio. Round your answer to one decimal place.
(a)
Current ratio = Current assets (cash, marketable securities, accounts receivable, and inventory) / current liabilities (accounts payable)
Current ratio = ($400,000 + $50,000 + $150,000 + $200,000) / $250,000
Current ratio = 3.2
(b)
Quick ratio = Quick assets (cash, marketable securities and accounts receivable) / current liabilities (accounts payable)
Quick ratio = ($400,000 + $50,000 + $150,000) /$250,000
Quick ratio = 2.4
Current ratio = ($230,000 + $50,000 + $200,000 + $240,000) / $300,000
Current ratio = 2.4
(b)
Quick ratio = Quick assets (cash, marketable securities and accounts receivable) / current liabilities (accounts payable)
Quick ratio = ($230,000 + $50,000 + $200,000) / $300,000
Quick ratio = 1.6
151. The following items are reported on a company’s balance sheet:
Cash
$190,000
Marketable securities
150,000
Accounts receivable (net)
260,000
Inventory
300,000
Accounts Payable
600,000
Required:
Determine (1) the current ratio and (2) the quick ratio. Round to one decimal place.
152. For Garrison Corporation, the working capital at the end of the current year is $10,000 more than the
working capital at the end of the preceding year, reported as follows:
Current year
Preceding year
Current assets:
Cash, marketable securities, and receivables
$80,000
$84,000
Inventories
120,000
66,000
Total current assets
$200,000
$150,000
Current liabilities
100,000
60,000
Working capital
$100,000
$90,000
Required:
Has the current position improved? Explain.
The amount of working capital and the change in working capital are just two indicators of the strength of the
current position. A comparison of the current ratio and the quick ratio, along with the amount of working
capital, gives a better analysis of the current
position. Such a comparison shows:
Current
Preceding
Year
Year
Working capital
$100,000
$90,000
Current ratio
2.0
2.5
Quick ratio
0.8
1.4
Current Ratio = Current Assets Current Liabilities
Current Ratio = ($190,000 + $150,000 + $260,000 + $300,000) $600,000
Current Ratio = 1.5
Quick Ratio = Quick Assets Current Liabilities
Quick Ratio = ($190,000 + $150,000 + $260,000) $600,000
Quick Ratio = 1.0
153. A company reports the following:
Net sales
$720,000
Average accounts receivable (net)
$ 45,000
Determine the (a) accounts receivable turnover, and (b) number of days’ sales in receivables. Round your answer to one decimal place.
154. A company reports the following:
Net sales
$1,200,000
Average accounts receivable (net)
$ 50,000
Determine the (a) accounts receivable turnover, and (b) number of days’ sales in receivables. Round your answer to one decimal place.
Accounts receivable turnover = Sales / Average accounts receivable
Accounts receivable turnover = $1,200,000 / $50,000
Accounts receivable turnover = 24.0
Number of days’ sales in receivable = Average accounts receivable / Average daily sales
Number of days’ sales in receivable = $50,000 / ($1,200,000 / 365)
Number of days’ sales in receivables = 15.2
Accounts receivable turnover = Net sales / Average accounts receivable
Accounts receivable turnover = $720,000 / $45,000
Accounts receivable turnover = 16.0
Number of days’ sales in receivable = Average accounts receivable / Average daily sales
Number of days’ sales in receivable = $45,000 / ($720,000 / 365)
Number of days’ sales in receivables = 22.8