Costs and expenses
Costs of goods sold
$ 29,000
Selling expenses
10,000
General and administrative expenses
13,750
Interest expense
6,250
Total costs and expenses
59,0000
Income before income taxes
$ 49,750
Income taxes
19,500
Net income
$ 30,250
If the income statement were prepared in a multistep form, gross margin from sales would be
a.
$79,750.
b.
$76,000.
c.
$71,000.
d.
$86,000.
54. Use this information to answer the following question.
Net sales
$103,250
Dividend income
8,750
Total revenues
$112,000
Costs of goods sold
$ 30,000
Selling expenses
10,000
General and administrative expenses
13,750
Interest expense
6,250
Total costs and expenses
60,000
Income before income taxes
$52,000
Income taxes
19,500
Net income
$ 32,500
If the income statement were prepared in a multistep form, income from operations would be
a.
$49,500.
b.
$42,000.
c.
$52,000.
d.
$43,250.
55. Use this information to answer the following question.
Net sales
$100,000
Dividend income
7,000
Total revenues
$107,000
Costs of goods sold
$ 30,000
Selling expenses
10,000
General and administrative expenses
13,750
Interest expense
6,250
Total costs and expenses
60,000
Income before income taxes
$ 47,000
Income taxes
19,500
Net income
$ 27,500
If the income statement were prepared in a multistep form, excess of other expenses over other
revenues would be
a.
$7,000.
b.
$750.
c.
$13,250.
d.
$6,250.
56. Use this information to answer the following question.
Net sales
$100,000
Dividend income
8,750
Total revenues
$108,750
Costs of goods sold
$ 30,000
Selling expenses
10,000
General and administrative expenses
13,750
Interest expense
6,250
Total costs and expenses
60,000
Income before income taxes
$ 48,750
Income taxes
19,500
Net income
$ 29,250
If the income statement were prepared in a multistep form, income before income taxes would be
a.
$33,750.
b.
$52,500.
c.
$40,000.
d.
$48,750.
57. Use this information to answer the following question.
Net sales
$100,000
Dividend income
8,750
Total revenues
$108,750
Costs of goods sold
$ 37,750
Selling expenses
10,000
General and administrative expenses
6,000
Interest expense
6,250
Total costs and expenses
60,000
Income before income taxes
$ 48,750
Income taxes
19,500
Net income
$ 29,250
If the income statement were prepared in a multistep form, operating expenses would be
a.
$46,000.
b.
$16,000.
c.
$22,250.
d.
$40,000.
58. The other revenues and expenses section of a multistep income statement could include all the
following except
a.
interest expense.
b.
interest income.
c.
dividend income.
d.
insurance expense.
59. Which of the following items is not shown on a single-step income statement?
a.
Cost of goods sold
b.
Interest expense
c.
Selling expenses
d.
Gross margin
60. The debt to equity ratio equals
a.
stockholders’ equity divided by total liabilities.
b.
stockholders’ equity divided by long-term liabilities.
c.
total liabilities divided by stockholders’ equity.
d.
current liabilities divided by average stockholders’ equity.
61. The profit margin equals
a.
net sales divided by net income.
b.
gross margin divided by net income.
c.
net income divided by gross margin.
d.
net income divided by net sales.
62. Asset turnover equals
a.
net sales divided by average total assets.
b.
average total assets divided by net income.
c.
average total assets divided by total liabilities.
d.
net income divided by average total assets.
63. Use this balance sheet and income statement to answer the following question. Use ending balances
whenever average balances are required for computing ratios.
Abner Systems, Inc.
Balance Sheet
December 31, 2010
Assets
Liabilities
Current assets
$ 6,000
Current liabilities
$ 4,000
Investments
1,000
Long-term liabilities
1,000
Property, plant, and equipment
8,000
Total liabilities
$ 5,000
Intangible assets
5,000
Stockholders’ Equity
Common stock
$10,000
Retained earnings
5,000
Total stockholders’ equity
$15,000
Total liabilities and
Total assets
$20,000
stockholders’ equity
$20,000
Abner Systems, Inc.
Income Statement
For the Year Ended December 31, 2010
Net sales
$ 24,000
Costs of goods sold
8,000
Gross margin
$ 16,000
Operating expenses
8,000
Income before income taxes
$ 8,000
Income taxes
3,200
Net income
$ 4,800
The total amount of working capital of Abner Systems is
a.
$0.
b.
$6,000.
c.
$2,000.
d.
$10,000.
64. Use this balance sheet and income statement to answer the following question. Use ending balances
whenever average balances are required for computing ratios.
Abner Systems, Inc.
Balance Sheet
December 31, 2010
Assets
Liabilities
Current assets
$ 5,464
Current liabilities
$ 4,000
Investments
1,000
Long-term liabilities
1,000
Property, plant, and equipment
8,536
Total liabilities
$ 5,000
Intangible assets
5,000
Stockholders’ Equity
Common stock
$10,000
Retained earnings
5,000
Total stockholders’ equity
$15,000
Total liabilities and
Total assets
$20,000
stockholders’ equity
$20,000
Abner Systems, Inc.
Income Statement
For the Year Ended December 31, 2010
Net sales
$ 24,000
Costs of goods sold
8,000
Gross margin
$ 16,000
Operating expenses
8,000
Income before income taxes
$ 8,000
Income taxes
3,200
Net income
$ 4,800
The current ratio for Abner Systems is (after rounding to two decimal places)
a.
.75.
b.
1.25.
c.
1.13.
d.
1.37.
65. Use this balance sheet and income statement to answer the following question. Use ending balances
whenever average balances are required for computing ratios.
Abner Systems, Inc.
Balance Sheet
December 31, 2010
Assets
Liabilities
Current assets
$ 6,000
Current liabilities
$ 4,000
Investments
1,000
Long-term liabilities
1,000
Property, plant, and equipment
8,000
Total liabilities
$ 5,000
Intangible assets
5,000
Stockholders’ Equity
Common stock
$10,000
Retained earnings
5,000
Total stockholders’ equity
$15,000
Total liabilities and
Total assets
$20,000
stockholders’ equity
$20,000
Abner Systems, Inc.
Income Statement
For the Year Ended December 31, 2010
Net sales
$ 24,000
Costs of goods sold
8,000
Gross margin
$ 16,000
Operating expenses
8,000
Income before income taxes
$ 8,000
Income taxes
3,200
Net income
$ 4,800
The profit margin of Abner Systems is
a.
60 percent.
b.
25 percent.
c.
20 percent.
d.
12 percent.
66. Use this balance sheet and income statement to answer the following question. Use ending balances
whenever average balances are required for computing ratios.
Abner Systems, Inc.
Balance Sheet
December 31, 2010
Assets
Liabilities
Current assets
$ 6,000
Current liabilities
$ 4,000
Investments
1,000
Long-term liabilities
1,000
Property, plant, and equipment
8,000
Total liabilities
$ 5,000
Intangible assets
5,000
Stockholders’ Equity
Common stock
$10,000
Retained earnings
5,000
Total stockholders’ equity
$15,000
Total liabilities and
Total assets
$20,000
stockholders’ equity
$20,000
Abner Systems, Inc.
Income Statement
For the Year Ended December 31, 2010
Net sales
$ 24,000
Costs of goods sold
8,000
Gross margin
$ 16,000
Operating expenses
8,000
Income before income taxes
$ 8,000
Income taxes
3,200
Net income
$ 4,800
The return on assets for Abner Systems is
a.
30 percent.
b.
150 percent.
c.
33-1/3 percent.
d.
24 percent.
67. Use this balance sheet and income statement to answer the following question. Use ending balances
whenever average balances are required for computing ratios.
Abner Systems, Inc.
Balance Sheet
December 31, 2010
Assets
Liabilities
Current assets
$ 6,000
Current liabilities
$ 4,000
Investments
1,000
Long-term liabilities
1,000
Property, plant, and equipment
8,000
Total liabilities
$ 5,000
Intangible assets
5,000
Stockholders’ Equity
Common stock
$10,000
Retained earnings
5,000
Total stockholders’ equity
$15,000
Total liabilities and
Total assets
$20,000
stockholders’ equity
$20,000
Abner Systems, Inc.
Income Statement
For the Year Ended December 31, 2010
Net sales
$ 24,000
Costs of goods sold
8,000
Gross margin
$ 16,000
Operating expenses
8,000
Income before income taxes
$ 8,000
Income taxes
3,200
Net income
$ 4,800
The return on equity for Abner Systems is
a.
40 percent.
b.
67 percent.
c.
47 percent.
d.
32 percent.
68. Use this balance sheet and income statement to answer the following question. Use ending balances
whenever average balances are required for computing ratios.
Abner Systems, Inc.
Balance Sheet
December 31, 2010
Assets
Liabilities
Current assets
$ 6,000
Current liabilities
$ 4,000
Investments
1,000
Long-term liabilities
1,000
Property, plant, and equipment
8,000
Total liabilities
$ 5,000
Intangible assets
5,000
Stockholders’ Equity
Common stock
$10,000
Retained earnings
5,000
Total stockholders’ equity
$15,000
Total liabilities and
Total assets
$20,000
stockholders’ equity
$20,000
Abner Systems, Inc.
Income Statement
For the Year Ended December 31, 2010
Net sales
$ 24,000
Costs of goods sold
8,000
Gross margin
$ 16,000
Operating expenses
8,000
Income before income taxes
$ 8,000
Income taxes
3,200
Net income
$ 4,800
The debt to equity ratio for Abner Systems is
a.
67 percent.
b.
75 percent.
c.
25 percent.
d.
33-1/3 percent.
69. Use this balance sheet and income statement to answer the following question. Use ending balances
whenever average balances are required for computing ratios.
Abner Systems, Inc.
Balance Sheet
December 31, 2010
Assets
Liabilities
Current assets
$ 6,000
Current liabilities
$ 4,000
Investments
1,000
Long-term liabilities
1,000
Property, plant, and equipment
8,000
Total liabilities
$ 5,000
Intangible assets
5,000
Stockholders’ Equity
Common stock
$10,000
Retained earnings
5,000
Total stockholders’ equity
$15,000
Total liabilities and
Total assets
$20,000
stockholders’ equity
$20,000
Abner Systems, Inc.
Income Statement
For the Year Ended December 31, 2010
Net sales
$ 24,000
Costs of goods sold
8,000
Gross margin
$ 16,000
Operating expenses
8,000
Income before income taxes
$ 8,000
Income taxes
3,200
Net income
$ 4,800
The asset turnover for Abner Systems is
a.
1.00 times.
b.
1.33 times.
c.
.83 times.
d.
1.20 times.
70. Which of the following is not a measure of profitability?
a.
Current ratio
b.
Return on assets
c.
Return on equity
d.
Debt to equity ratio
71. Which of the following is a measure of liquidity?
a.
Return on equity
b.
Return on assets
c.
Working capital
d.
Profit margin
72. Current assets divided by current liabilities is known as the
a.
profit margin.
b.
current ratio.
c.
working capital.
d.
capital structure.
73. Which of the following is not expressed in terms of a percentage?
a.
Return on equity
b.
Debt to equity ratio
c.
Current ratio
d.
Profit margin
74. Which of the following is expressed in terms of a percentage?
a.
Return on equity
b.
Current ratio
c.
Asset turnover
d.
Working capital
75. Which of the following does not include net income in its computation?
a.
Debt to equity ratio
b.
Return on assets
c.
Return on equity
d.
Profit margin
76. Use this balance sheet and income statement for the first year of operations for Layton Novelties, Inc.
to answer the following question. Use ending balances whenever average balances are required for
computing ratios.
Layton Novelties, Inc.
Balance Sheet
December 31, 2010
Assets
Liabilities
Current assets
$ 28,000
Current liabilities
$ 16,000
Investments
12,000
Long-term liabilities
4,000
Property, plant, and equipment
48,000
Total liabilities
$ 20,000
Intangible assets
32,000
Stockholders’ Equity
Common stock
$ 80,000
Retained earnings
20,000
Total stockholders’ equity
$100,000
Total liabilities and
Total assets
$120,000
stockholders’ equity
$120,000
Layton Novelties, Inc.
Income Statement
For the Year Ended December 31, 2010
Net sales
$ 80,000
Costs of goods sold
32,000
Gross margin
$ 48,000
Operating expenses
12,000
Income before income taxes
$ 36,000
Income taxes
14,400
Net income
$ 21,600
The total amount of working capital of Layton Novelties is
a.
$8,000.
b.
$28,000.
c.
$12,000.
d.
$4,000.
77. Use this balance sheet and income statement for the first year of operations for Layton Novelties, Inc.
to answer the following question. Use ending balances whenever average balances are required for
computing ratios.
Layton Novelties, Inc.
Balance Sheet
December 31, 2010
Assets
Liabilities
Current assets
$ 28,000
Current liabilities
$ 16,000
Investments
12,000
Long-term liabilities
4,000
Property, plant, and equipment
48,000
Total liabilities
$ 20,000
Intangible assets
32,000
Stockholders’ Equity
Common stock
$ 80,000
Retained earnings
20,000
Total stockholders’ equity
$100,000
Total liabilities and
Total assets
$120,000
stockholders’ equity
$120,000
Layton Novelties, Inc.
Income Statement
For the Year Ended December 31, 2010
Net sales
$ 80,000
Costs of goods sold
32,000
Gross margin
$ 48,000
Operating expenses
12,000
Income before income taxes
$ 36,000
Income taxes
14,400
Net income
$ 21,600
The current ratio for Layton Novelties is
a.
1.75.
b.
.57.
c.
1.4.
d.
2.0.
78. Use this balance sheet and income statement for the first year of operations for Layton Novelties, Inc.
to answer the following question. Use ending balances whenever average balances are required for
computing ratios.
Layton Novelties, Inc.
Balance Sheet
December 31, 2010
Assets
Liabilities
Current assets
$ 28,000
Current liabilities
$ 16,000
Investments
12,000
Long-term liabilities
4,000
Property, plant, and equipment
48,000
Total liabilities
$ 20,000
Intangible assets
32,000
Stockholders’ Equity
Common stock
$ 80,000
Retained earnings
20,000
Total stockholders’ equity
$100,000
Total liabilities and
Total assets
$120,000
stockholders’ equity
$120,000
Layton Novelties, Inc.
Income Statement
For the Year Ended December 31, 2010
Net sales
$ 80,000
Costs of goods sold
32,000
Gross margin
$ 48,000
Operating expenses
12,000
Income before income taxes
$ 36,000
Income taxes
14,400
Net income
$ 21,600
The profit margin of Layton Novelties is
a.
30 percent.
b.
75 percent.
c.
60 percent.
d.
27 percent.
79. Use this balance sheet and income statement for the first year of operations for Layton Novelties, Inc.
to answer the following question. Use ending balances whenever average balances are required for
computing ratios.
Layton Novelties, Inc.
Balance Sheet
December 31, 2010
Assets
Liabilities
Current assets
$ 28,000
Current liabilities
$ 16,000
Investments
12,000
Long-term liabilities
4,000
Property, plant, and equipment
48,000
Total liabilities
$ 20,000
Intangible assets
32,000
Stockholders’ Equity
Common stock
$ 80,000
Retained earnings
20,000
Total stockholders’ equity
$100,000
Total liabilities and
Total assets
$120,000
stockholders’ equity
$120,000
Layton Novelties, Inc.
Income Statement
For the Year Ended December 31, 2010
Net sales
$ 80,000
Costs of goods sold
32,000
Gross margin
$ 48,000
Operating expenses
12,000
Income before income taxes
$ 36,000
Income taxes
14,400
Net income
$ 21,600
The return on assets for Layton Novelties is
a.
40 percent.
b.
70 percent.
c.
18 percent.
d.
66-2/3 percent.
80. Use this balance sheet and income statement for the first year of operations for Layton Novelties, Inc.
to answer the following question. Use ending balances whenever average balances are required for
computing ratios.
Layton Novelties, Inc.
Balance Sheet
December 31, 2010
Assets
Liabilities
Current assets
$ 28,000
Current liabilities
$ 16,000
Investments
12,000
Long-term liabilities
4,000
Property, plant, and equipment
48,000
Total liabilities
$ 20,000
Intangible assets
32,000
Stockholders’ Equity
Common stock
$ 80,000
Retained earnings
20,000
Total stockholders’ equity
$100,000
Total liabilities and
Total assets
$120,000
stockholders’ equity
$120,000
Layton Novelties, Inc.
Income Statement
For the Year Ended December 31, 2010
Net sales
$ 80,000
Costs of goods sold
32,000
Gross margin
$ 48,000
Operating expenses
12,000
Income before income taxes
$ 36,000
Income taxes
14,400
Net income
$ 21,600
The return on equity for Layton Novelties is
a.
48 percent.
b.
21.6 percent.
c.
42 percent.
d.
30 percent.
81. Use this balance sheet and income statement for the first year of operations for Layton Novelties, Inc.
to answer the following question. Use ending balances whenever average balances are required for
computing ratios.
Layton Novelties, Inc.
Balance Sheet
December 31, 2010
Assets
Liabilities
Current assets
$ 28,000
Current liabilities
$ 16,000
Investments
12,000
Long-term liabilities
4,000
Property, plant, and equipment
48,000
Total liabilities
$ 20,000
Intangible assets
32,000
Stockholders’ Equity
Common stock
$ 80,000
Retained earnings
20,000
Total stockholders’ equity
$100,000
Total liabilities and
Total assets
$120,000
stockholders’ equity
$120,000
Layton Novelties, Inc.
Income Statement
For the Year Ended December 31, 2010
Net sales
$ 80,000
Costs of goods sold
32,000
Gross margin
$ 48,000
Operating expenses
12,000
Income before income taxes
$ 36,000
Income taxes
14,400
Net income
$ 21,600
The debt to equity ratio for Layton Novelties is
a.
16-2/3 percent.
b.
20 percent.
c.
80 percent.
d.
83-1/3 percent.
82. Use this information to answer the following question.
J. & B. Auto Parts, Inc.
Balance Sheet
December 31, 2010
Assets
Cash
$ 60,000
Short-term investments
40,000
Notes receivable (due in ten months)
30,000
Accounts receivable
20,000
Merchandise inventory
70,000
Land held for future use
80,000
Land
90,000
Building
$100,000
Less accumulated depreciation
20,000
80,000
Trademark
70,000
Total assets
$540,000
Liabilities
Notes payable (due in six months)
$ 50,000
Accounts payable
20,000
Salaries payable
10,000
Mortgage payable (due in seven years)
90,000
Total liabilities
$170,000
Stockholders’ Equity
Common stock
$310,000
Retained earnings
60,000
Total stockholders’ equity
370,000
Total liabilities and stockholders’ equity
$540,000
The debt to equity ratio is
a.
.46.
b.
.67.
c.
2.20.
d.
.33.
83. Use this information to answer the following question.
J. & B. Auto Parts, Inc.
Balance Sheet
December 31, 2010
Assets
Cash
$ 60,000
Short-term investments
40,000
Notes receivable (due in ten months)
30,000
Accounts receivable
20,000
Merchandise inventory
70,000
Land held for future use
80,000
Land
90,000
Building
$100,000
Less accumulated depreciation
20,000
80,000
Trademark
70,000
Total assets
$540,000
Liabilities
Notes payable (due in six months)
$ 50,000
Accounts payable
20,000
Salaries payable
10,000
Mortgage payable (due in seven years)
90,000
Total liabilities
$170,000
Stockholders’ Equity
Common stock
$310,000
Retained earnings
60,000
Total stockholders’ equity
370,000
Total liabilities and stockholders’ equity
$540,000
The total amount of working capital is
a.
$370,000.
b.
$40,000.
c.
$140,000.
d.
$60,000.
84. Use this information to answer the following question.
Coyne Corporation
Balance Sheet
December 31, 2010
Assets
Cash
$ 70,000
Short-term investments
56,000
Accounts receivable
28,000
Notes receivable (due in one year)
42,000
Merchandise inventory
98,000
Land held for future use
112,000
Land
140,000
Building
$150,000
Less accumulated depreciation
28,000
122,000
Trademark
92,000
Total assets
$760,000
Liabilities
Notes payable (due in one year)
$ 70,000
Accounts payable
30,000
Salaries payable
14,000
Mortgage payable (due in seven years)
146,000
Total liabilities
$260,000
Stockholders’ Equity
Common stock
$300,000
Retained earnings
200,000
500,000
Total liabilities and stockholders’ equity
$760,000
The debt to equity ratio is
a.
.48.
b.
.34.
c.
.52.
d.
.66.
85. Use this information to answer the following question.
Coyne Corporation
Balance Sheet
December 31, 2010