Question 1

Stockholders are most interested in evaluating

Accepted Answer

A)  liquidity. 
B)  solvency. 
C)  profitability. 
D)  marketability. 
A)  liquidity. 
B)  solvency. 
C)  profitability. 
D)  marketability.

Question 2

In performing a vertical analysis, the base for sales returns and allowances is

Accepted Answer

A)  sales revenue. 
B)  sales discounts. 
C)  net sales. 
D)  total revenues. 
A)  sales revenue. 
B)  sales discounts. 
C)  net sales. 
D)  total revenues.

Question 3

The inventory turnover is calculated by dividing

Accepted Answer

A)  cost of goods sold by the ending inventory. 
B)  cost of goods sold by the beginning inventory. 
C)  cost of goods sold by the average inventory. 
D)  average inventory by cost of goods sold. 
A)  cost of goods sold by the ending inventory. 
B)  cost of goods sold by the beginning inventory. 
C)  cost of goods sold by the average inventory. 
D)  average inventory by cost of goods sold.

Question 4

The following items were taken from the financial statements of Kramer Manufacturing, Inc., over a three-year period:   
Instructions
Using horizontal analysis and 2016 as the base year, compute the trend percentages for net sales, cost of goods sold, and gross profit. Explain whether the trends are favorable or unfavorable for each item.

Accepted Answer

@#IMG-DLM& ¹(2018 Net sal./2016 Net sal.) ²(2018 Gr.

Question 5

Using these data from the comparative balance sheet of K. Leen Company, perform vertical analysis.

Accepted Answer

The answer of Using these data from the comparative balance...

Question 6

A primary purpose of vertical analysis is to observe trends over a three-year period.

Accepted Answer

A) True 
 B)False

Question 7

In a common size balance sheet, the 100 percent figure is

Accepted Answer

A)  total current assets. 
B)  total property, plant and equipment. 
C)  total liabilities. 
D)  total assets. 
A)  total current assets. 
B)  total property, plant and equipment. 
C)  total liabilities. 
D)  total assets.

Question 8

Assume the following sales data for a company:   If 2016 is the base year, what is the percentage increase in sales from 2016 to 2017?

Accepted Answer

A)  60% 
B)  25% 
C)  125% 
D)  160% 
A)  60% 
B)  25% 
C)  125% 
D)  160%

Question 9

Junebag Corporation reported net income $24,000; net sales $400,000; and average assets $600,000 for 2017. What is the 2017 profit margin?

Accepted Answer

A)  6% 
B)  4% 
C)  40% 
D)  67% 
A)  6% 
B)  4% 
C)  40% 
D)  67%

Question 10

Dandy Candy Company sold its licorice division resulting in a loss of $80,000. Assuming a tax rate of 25%, the loss on this disposal will be reported on the income statement at what amount?

Accepted Answer

A)  $100,000 
B)  $20,000 
C)  $80,000 
D)  $60,000 
A)  $100,000 
B)  $20,000 
C)  $80,000 
D)  $60,000

Question 11

Dos Amugus Company has income from continuing operations of $621,000 (after tax) for the year ended December 31, 2017. It also has the following items (before considering income taxes):
(1) An unrealized loss of $120,000 available-for-sale-securities.
(2) A gain of $60,000 on the discontinuance of a major component.
(3) A cumulative effect of a change in accounting principle that resulted in an increase in prior years' depreciation of $50,000.
Assume all items are subject to income taxes at a 30% tax rate.
Instructions
Prepare a statement of comprehensive income, beginning with income from continuing operations.

Accepted Answer

@#IMG-DLM& *(Inc. fr. con. ope

Question 12

In a common size income statement, net sales are represented by 100%.

Accepted Answer

A) True 
 B)False

Question 13

If Year 1 equals $700, Year 2 equals $840, and Year 3 equals $630, the percentage to be assigned for Year 1 in a trend analysis, assuming that Year 1 is the base year, is

Accepted Answer

A)  100%. 
B)  90%. 
C)  111%. 
D)  120%. 
A)  100%. 
B)  90%. 
C)  111%. 
D)  120%.

Question 14

Match the ratios with their formulas by entering the appropriate letter in the space provided.
A. Current ratio 
B. Price-earnings ratio 
C. Profit margin 
D. Asset turnover 
E. Earnings per share 
F. Times interest earned
G. Inventory turnover
H. Average collection period
I. Days in inventory
J. Payout ratio

Accepted Answer

1. G 6. H
2. C 7. E

Question 15

Boone Trading Company reported net sales of $400,000, $440,000, and $560,000 in the years 2016, 2017, and 2018, respectively. If 2016 is the base year, what is the trend percentage for 2018?

Accepted Answer

A)  71% 
B)  127% 
C)  140% 
D)  110% 
A)  71% 
B)  127% 
C)  140% 
D)  110%

Question 16

Improper recognition of income is not one of the factors affecting the quality of earnings.

Accepted Answer

A) True 
 B)False

Question 17

In vertical analysis, the base amount for salaries and wages expense is generally

Accepted Answer

A)  net sales. 
B)  salary & wages expense in a previous year. 
C)  gross profit. 
D)  net income. 
A)  net sales. 
B)  salary & wages expense in a previous year. 
C)  gross profit. 
D)  net income.

Question 18

LKN Company had net credit sales of $5,005,000 and cost of goods sold of $3,500,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The accounts receivable turnover was

Accepted Answer

A)  8.4 times. 
B)  7.7 times. 
C)  3.9 times. 
D)  7.1 times. 
A)  8.4 times. 
B)  7.7 times. 
C)  3.9 times. 
D)  7.1 times.

Question 19

Vertical analysis is also known as

Accepted Answer

A)  perpendicular analysis. 
B)  common size analysis. 
C)  trend analysis. 
D)  straight-line analysis. 
A)  perpendicular analysis. 
B)  common size analysis. 
C)  trend analysis. 
D)  straight-line analysis.

Question 20

Corsig Corporation had the following comparative current assets and current liabilities:   
During 2017, net credit sales and cost of goods sold were $570,000 and $350,000, respectively. Net cash provided by operating activities for 2017 was $140,000.
Instructions
Compute the following liquidity measures for 2017:
1. Current ratio
2. Accounts receivable turnover
3. Inventory turnover

Accepted Answer

The answer of Corsig Corporation had the following comparative current...

Exam 13: Financial Statement Analysis

Stockholders are most interested in evaluating

In performing a vertical analysis, the base for sales returns and allowances is

The inventory turnover is calculated by dividing

Using these data from the comparative balance sheet of K. Leen Company, perform vertical analysis.

A primary purpose of vertical analysis is to observe trends over a three-year period.

In a common size balance sheet, the 100 percent figure is

Assume the following sales data for a company: If 2016 is the base year, what is the percentage increase in sales from 2016 to 2017?

Junebag Corporation reported net income $24,000; net sales $400,000; and average assets $600,000 for 2017. What is the 2017 profit margin?

Dandy Candy Company sold its licorice division resulting in a loss of $80,000. Assuming a tax rate of 25%, the loss on this disposal will be reported on the income statement at what amount?

In a common size income statement, net sales are represented by 100%.

If Year 1 equals $700, Year 2 equals $840, and Year 3 equals $630, the percentage to be assigned for Year 1 in a trend analysis, assuming that Year 1 is the base year, is

Boone Trading Company reported net sales of $400,000, $440,000, and $560,000 in the years 2016, 2017, and 2018, respectively. If 2016 is the base year, what is the trend percentage for 2018?

Improper recognition of income is not one of the factors affecting the quality of earnings.

In vertical analysis, the base amount for salaries and wages expense is generally

LKN Company had net credit sales of $5,005,000 and cost of goods sold of $3,500,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The accounts receivable turnover was

Vertical analysis is also known as

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations Perpetual Approach

Inventories Periodic Approach

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Stock Transactions, and Stockholders Equity

Statement of Cash Flows

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Time Value of Money

Investments

Payroll Accounting

Subsidiary Ledgers and Special Journals

Other Significant Liabilities

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