The current year-end balance sheet data for a company are shown below: $\begin{array}{|l|r|} \hline \text { Assets: } & \\ \hline \text { Cash } & \$ 18,000 \\ \hline \text { Marketable securities } & 45,000 \\ \hline \text { Accounts receivable (net) } & 157,500 \\ \hline \text { Merchandise inventory } & 139,500 \\ \hline \text { Long-term investments } & 135,000 \\ \hline \text { Plant assets (net) } & 517,500 \\ \hline \text { Total assets } & \$ 1,012,500\\ \hline \\ \hline \text { Liabilities and equity: } & \\ \hline \text { Accounts payable } & \$ 168,700 \\ \hline \text { Acctued liabilities } & 90,000 \\ \hline \text { Notes payable (secured by plant assets) } & 234,800 \\ \hline \text { Common stock ( } \$ 12 \text { par) } & 180,000 \\ \hline \text { Contributed capital in excess of par } & 135,000 \\ \hline \text { Retained earnings } & 204,000 \\ \hline \text { Total liabilities and equity } & \$ 1,012,500 \\ \hline \end{array}$ Calculate this company's: (1)Working capital. (2)Acid-test ratio.

1) Working capital = $360,000 - $258,700

Corona Company's balance sheet accounts follow: $\begin{array}{lrrr} \text { At December 31}&2011&2010&2009\\ \text { Assets}\\ \text { Cash } & \$ 25,868 & \$ 31,163 & \$ 31,182 \\ \text { Accounts receivable, net } & 78,034 & 53,995 & 41,152 \\ \text { Merchandise inventory } & 95,120 & 73,491 & 46,095 \\ \text { Prepaid expenses } & 8,330 & 8,099 & 3,429 \\ \text { Plant assets,net } & 241,854 & 218,932 & 199,542 \\ \text { Total assets } & \$ 449,206 & \$ 385,680 & \$ 321,400 \\ \text { Liabilities and Equity } & & & \\ \text { Accounts payable } & \$ 108,058 & \$ 67,135 & \$ 42,849 \\ \text { Long-term notes payable secured by mortgages on } & & & \\ \text { plant assets } & 85,791 & 87,819 & 71,029 \\ \text { Common stock, } \$ 10 \text { par value } & 162,500 & 162,500 & 162,500 \\ \text { Retained earnings } &92,857 & 68,226 & 45,022 \\ \text { Total liabilities and equity } &\$449,206 & \$ 385,680 & \$ 321,400 \\ \end{array}$ What is Corona Company's days' sales uncollected ratio for 2011 assuming net sales and gross profit for the period were $1,236,783,$927,587 respectively?

A) 25.20 B) 23.03 C) 20.99 D) 24.58 E) 22.17 A) 25.20 B) 23.03 C) 20.99 D) 24.58 E) 22.17

Comparative calendar year financial data for a company are shown below: $\begin{array}{|l|r|r|} \hline \text { Sales } & \$ 720,000 & \$ 607,500 \\ \hline \text { Gross profit } & 270,000 & 224,800 \\ \hline \text { Income before taxes } & 79,200 & 78,700 \\ \hline \text { Net income } & 51,200 & 51,700 \\ \hline\\ \hline &\text { December 31, } & \text { December 31, } \\ &2011 & 2010 \\ \hline \text { Liabilities } & \$ 493,500 & \$ 452,500 \\ \hline \text { Common stock }(\$ 12 \text { par }) & 180,000 & 180,000 \\ \hline \text { Contributed capital in excess of par } & 135,000 & 135,000 \\ \hline \text { Retained earnings } & \underline{204,000} & \underline{177,300} \\ \hline \text { Total liabilities and equity } & \$ 1.012,500 & \$ 944,800\\ \hline \end{array}$ Calculate: (1)Return on total assets for 2011. (2)Return on common stockholders' equity for 2011.

(1)Return on total assets: = (Net income

A company is preparing a common size balance sheet and wishes the base amount to be the total amount of assets.What are the 2010 and 2011 common-size percents for cash? \[\begin{array} { | l | r | r | } \hline & \mathbf { 2 0 1 0 } & { \mathbf { 2 0 1 1 } } \\ \hline \text { Cash } & \mathbf { 2 1 , 9 0 4 } & \mathbf { \$ 3 2 , 2 0 3 } \\ \hline \text { Total curtert assets } & 101,769 & 141,128 \\ \hline \text { Propety and equipment } & 112,577 & 202,558 \\ \hline \text { Long-tern irvestrments } & 12,700 & 4,344 \\ \hline \text { Intarigible assets } & 16,621 & 48,703 \\ \hline \text { Other lonp-term assets } & 11,709 & 13,754 \\ \hline \text { Total assets } & \$ 255,376 & \$ 410,487 \\ \hline \end{array}\]

A) 21.52% in 2010 and 22.82% in 2011 B) 7.90% in 2010 and 7.27% in 2011 C) 8.58% in 2010 and 7.85% in 2011 D) 19.30% in 2010 and 20.79 in 2011 E) The percent cannot be computed for 2010 and 47.01% in 2011 A) 21.52% in 2010 and 22.82% in 2011 B) 7.90% in 2010 and 7.27% in 2011 C) 8.58% in 2010 and 7.85% in 2011 D) 19.30% in 2010 and 20.79 in 2011 E) The percent cannot be computed for 2010 and 47.01% in 2011

Oakley Corporation has the following comparative income statements.Which of the following statements is false with regard to this comparative data? Oakley Corporation Comparative Income Statements For years ended December 31,2011 and 2010 $\begin{array}{|l|r|r|} \hline \text { Sales } & 2011 & {2010} \\ \hline \text { Cost of goods sold } & \$ 360,000 & \$ 267,500 \\ \hline \text { Gross profit } & 237,600 & 140,170 \\ \hline \text { Operating expenses } & 122,400 & 127,330 \\ \hline \text { Net income } & \underline{75,600} & \underline{51,895} \\ \hline \end{array}$

A) The common-size sales percent for 2011 equals 100% B) The common-size net income percent for 2010 equals 28.2% C) The common-size gross profit percent for 2011 equals (3.87)% D) The common-size cost of goods sold for 2010 equals 52.4% E) Statements B and D are false A) The common-size sales percent for 2011 equals 100% B) The common-size net income percent for 2010 equals 28.2% C) The common-size gross profit percent for 2011 equals (3.87)% D) The common-size cost of goods sold for 2010 equals 52.4% E) Statements B and D are false

Exam 13: Analyzing and Interpreting Financial Statements

The current year-end balance sheet data for a company are shown below: Assets: Cash \ 18,000 Marketable securities 45,000 Accounts receivable (net) 157,500 Merchandise inventory 139,500 Long-term investments 135,000 Plant assets (net) 517,500 Total assets \ 1,012,500 Liabilities and equity: Accounts payable \ 168,700 Acctued liabilities 90,000 Notes payable (secured by plant assets) 234,800 Common stock ( \ 12 par) 180,000 Contributed capital in excess of par 135,000 Retained earnings 204,000 Total liabilities and equity \ 1,012,500 Calculate this company's: (1)Working capital. (2)Acid-test ratio.

(Essay)

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Question 21

A company has a current ratio of 1.92,total liabilities of $193,849,long-term notes payable of $85,791,a quick ratio of .96.What is the total of the current assets for the company?

(Short Answer)

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Question 22

One purpose of financial statement analysis for internal users is to provide information helpful in improving the company's efficiency and effectiveness in providing products and services.

(True/False)

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Question 23

Profitability is the company's ability to generate future revenues and meet long-term financial obligations.

(True/False)

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Question 24

A company has an inventory turnover ratio of 2.81,merchandise inventory for 2011 is $93,303,and average inventory of $83,397.What is the cost of goods sold?

(Short Answer)

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Question 25

The return on total equity measures a company's success in reaching the goal of earning net income for its owners.

(True/False)

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Question 26

Corona Company's balance sheet accounts follow: At December 31 2011 2010 2009 Assets Cash \ 25,868 \ 31,163 \ 31,182 Accounts receivable, net 78,034 53,995 41,152 Merchandise inventory 95,120 73,491 46,095 Prepaid expenses 8,330 8,099 3,429 Plant assets,net 241,854 218,932 199,542 Total assets \ 449,206 \ 385,680 \ 321,400 Liabilities and Equity Accounts payable \ 108,058 \ 67,135 \ 42,849 Long-term notes payable secured by mortgages on plant assets 85,791 87,819 71,029 Common stock, \ 10 par value 162,500 162,500 162,500 Retained earnings 92,857 68,226 45,022 Total liabilities and equity \4 49,206 \ 385,680 \ 321,400 What is Corona Company's days' sales uncollected ratio for 2011 assuming net sales and gross profit for the period were $1,236,783,$927,587 respectively?

(Multiple Choice)

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Question 27

Comparative calendar year financial data for a company are shown below: Sales \ 720,000 \ 607,500 Gross profit 270,000 224,800 Income before taxes 79,200 78,700 Net income 51,200 51,700 December 31, December 31, 2011 2010 Liabilities \ 493,500 \ 452,500 Common stock (\ 12 par ) 180,000 180,000 Contributed capital in excess of par 135,000 135,000 Retained earnings Total liabilities and equity \ 1.012,500 \ 944,800 Calculate: (1)Return on total assets for 2011. (2)Return on common stockholders' equity for 2011.

(Essay)

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Question 28

A company that has days' sales uncollected of 30 days and days' sales in inventory of 18 days implies that inventory will be converted to cash in about 12 days.

(True/False)

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Question 29

A company is preparing a common size balance sheet and wishes the base amount to be the total amount of assets.What are the 2010 and 2011 common-size percents for cash? Cash Total curtert assets 101,769 141,128 Propety and equipment 112,577 202,558 Long-tern irvestrments 12,700 4,344 Intarigible assets 16,621 48,703 Other lonp-term assets 11,709 13,754 Total assets \ 255,376 \ 410,487

(Multiple Choice)

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Question 30

Use the financial data shown below to calculate the following ratios for the current year: (a)Current ratio. (b)Acid-test ratio. (c)Accounts receivable turnover. (d)Days' sales uncollected. (e)Inventory turnover. (f)Days' sales in inventory. Income statement data Sales \ 650,000 Cost of goods sold 425,000 Income before taxes 78,000 Net income 54,600 Ending Beginning Balances Cash \ 19,500 \ 15,000 Accounts receivable (net) 65,000 60,000 Inventory 71,500 64,500 Plant and equipment (net) Total assets \ 351,000 \ 323,400 Current liabilities \ 62,400 \ 52,700 Long-term notes payable 97,500 100,000

(Essay)

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Question 31

An advantage of common-size statements is that they reflect the relative sizes of different companies under analysis.

(True/False)

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Question 32

Oakley Corporation has the following comparative income statements.Which of the following statements is false with regard to this comparative data? Oakley Corporation Comparative Income Statements For years ended December 31,2011 and 2010 Sales 2011 2010 Cost of goods sold \ 360,000 \ 267,500 Gross profit 237,600 140,170 Operating expenses 122,400 127,330 Net income

(Multiple Choice)

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Question 33

The three most common tools of financial analysis are:

(Multiple Choice)

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Question 34

A company had a return on common stockholders' equity of 25%.Net income equaled $200,000 and average common stockholders' equity equaled $700,000.Compute the amount of the preferred dividends declared.

(Multiple Choice)

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Question 35

Standards for comparison are necessary when making judgments about a company's financial performance.

(True/False)

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Question 36

A company had a return on common stockholders' equity of 22%.Net income equaled $600,000 and average common stockholders' equity equaled $2,500,000.Compute the amount of the preferred dividends declared.

(Multiple Choice)

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Question 37

The comparison of a company's financial condition and performance to a base amount is known as:

(Multiple Choice)

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Question 38

Liquidity and efficiency are considered the building blocks of financial statement analysis.

(True/False)

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Question 39

A company had a profit margin of 8%.If net income equaled $40,000 and average total assets equaled $332,500,how much were net sales?

(Multiple Choice)

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Question 40

A company has a current ratio of 1.92,total liabilities of $193,849,long-term notes payable of $85,791,a quick ratio of .96.What is the total of the current assets for the company?

One purpose of financial statement analysis for internal users is to provide information helpful in improving the company's efficiency and effectiveness in providing products and services.

Profitability is the company's ability to generate future revenues and meet long-term financial obligations.

A company has an inventory turnover ratio of 2.81,merchandise inventory for 2011 is $93,303,and average inventory of $83,397.What is the cost of goods sold?

The return on total equity measures a company's success in reaching the goal of earning net income for its owners.

A company that has days' sales uncollected of 30 days and days' sales in inventory of 18 days implies that inventory will be converted to cash in about 12 days.

An advantage of common-size statements is that they reflect the relative sizes of different companies under analysis.

The three most common tools of financial analysis are:

A company had a return on common stockholders' equity of 25%.Net income equaled $200,000 and average common stockholders' equity equaled $700,000.Compute the amount of the preferred dividends declared.

Standards for comparison are necessary when making judgments about a company's financial performance.

A company had a return on common stockholders' equity of 22%.Net income equaled $600,000 and average common stockholders' equity equaled $2,500,000.Compute the amount of the preferred dividends declared.

The comparison of a company's financial condition and performance to a base amount is known as:

Liquidity and efficiency are considered the building blocks of financial statement analysis.

A company had a profit margin of 8%.If net income equaled $40,000 and average total assets equaled $332,500,how much were net sales?

Introducing Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Investments and International Operations

Reporting and Analyzing Partnerships

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