Deck 14: Financial Statements

Question 1

A horizontal analysis compares items on a balance sheet using the concept of percent of increase or decrease.

Answer 1

True

Question 2

Mr. Bobson owns a hardware store. The gross sales for the first quarter of the year were $92,000. There was $1,930 in returned merchandise and $2,300 in sales discounts. His beginning merchandise inventory was $54,000 and his ending inventory was $40,000. He purchased $17,000 of additional merchandise for sale during the quarter, returned $1,750 worth of merchandise damaged during shipment, and received $3,800 in purchase discounts. Mr. Bobson's operating expenses include the following: delivery expense, $263; depreciation expense for equipment, $750; payroll taxes expense, $585; salary expense, $11,700; supplies, $395; and utilities expense, $420.
What is the cost of goods sold for Bobson's Hardware?

A) $11,450
B) $14,000
C) $25,450
D) $31,000

Answer 2

C

Question 3

Mr. Bobson owns a hardware store. The gross sales for the first quarter of the year were $92,000. There was $1,930 in returned merchandise and $2,300 in sales discounts. His beginning merchandise inventory was $54,000 and his ending inventory was $40,000. He purchased $17,000 of additional merchandise for sale during the quarter, returned $1,750 worth of merchandise damaged during shipment, and received $3,800 in purchase discounts. Mr. Bobson's operating expenses include the following: delivery expense, $263; depreciation expense for equipment, $750; payroll taxes expense, $585; salary expense, $11,700; supplies, $395; and utilities expense, $420.
What are the total operating expenses for Bobson's Hardware?

A) $8,563
B) $14,113
C) $18,343
D) $19,663

Answer 3

B

Question 4

The Barrett Corporations current assets were $1.7 million and current liabilities were $425,000. What is the current ratio?

A) 1:4
B) 2:1
C) 4:1
D) 8:1

Question 5

Mr. Bobson owns a hardware store. The gross sales for the first quarter of the year were $92,000. There was $1,930 in returned merchandise and $2,300 in sales discounts. His beginning merchandise inventory was $54,000 and his ending inventory was $40,000. He purchased $17,000 of additional merchandise for sale during the quarter, returned $1,750 worth of merchandise damaged during shipment, and received $3,800 in purchase discounts. Mr. Bobson's operating expenses include the following: delivery expense, $263; depreciation expense for equipment, $750; payroll taxes expense, $585; salary expense, $11,700; supplies, $395; and utilities expense, $420.
What is the gross profit for Bobson's Hardware?

A) $52,000
B) $62,320
C) $66,550
D) $87,770

Question 6

The vertical analysis of the income statement for a company that has cost of goods sold of $39,000 and net sales of $106,000 will be 27.2%.

Question 7

The Bright Cleaning Company has annual revenue of $117,000. Their operating expenses include salary expense of $41,600, depreciation expense for equipment of $500, supplies expense of $936, automobile expense of $2,048, and miscellaneous expenses of $550. What is the net profit before federal income tax for the Bright Cleaning Company?

A) $45,634
B) $71,366
C) $75,400
D) $112,966

Question 8

Champion Camera Company has cash assets of $235,000 and accounts receivable of $115,000. Their accounts payable total is $100,000. What is the acid test ratio?

A) 1.15:1
B) 2.35:1
C) 3.5:1
D) 4.5:1

Question 9

Below is a partially completed vertical analysis of a balance sheet.
What are the total liabilities and owner’s equity for Rachel’s Candle Company?

Question 10

Net profit for a service organization is determined by subtracting operating expenses from revenue received.

Question 11

A comparison of items on the income statement to gross sales is called a vertical analysis.

Question 12

Mr. Bobson owns a hardware store. The gross sales for the first quarter of the year were $92,000. There was $1,930 in returned merchandise and $2,300 in sales discounts. His beginning merchandise inventory was $54,000 and his ending inventory was $40,000. He purchased $17,000 of additional merchandise for sale during the quarter, returned $1,750 worth of merchandise damaged during shipment, and received $3,800 in purchase discounts. Mr. Bobson's operating expenses include the following: delivery expense, $263; depreciation expense for equipment, $750; payroll taxes expense, $585; salary expense, $11,700; supplies, $395; and utilities expense, $420.
What is the net sales for Bobson's hardware?

A) $87,770
B) $89,700
C) $90,070
D) $92,000

Question 13

Below is a partially completed vertical analysis of a balance sheet.
What are the total assets for Rachel’s Candle Company?

Question 14

Below is a partially completed vertical analysis of a balance sheet.
What are the total liabilities for Rachel’s Candle Company?

Question 15

Below is a partially completed vertical analysis of a balance sheet.
Rachel completes a vertical analysis of her company’s balance sheet. What percent of total assets is cash? Round to the nearest tenth.

Question 16

Excel can simplify completing a vertical analysis of an income statement because the formula to calculate percent of net sales can be entered once and then copied to all other applicable cells.

Question 17

A company has net sales of $97,500, cost of goods sold of $37,000, gross profit of $60,500, total operating expenses of $12,675, and net income of $47,825. Rounded to the nearest tenth of a percent, what would the vertical analysis of the income statement have for total operating expenses?

A) 34.3%
B) 26.5%
C) 21.0%
D) 13.0%

Question 18

Below is a partially completed vertical analysis of a balance sheet.
Rachel completes a vertical analysis of her company’s balance sheet. What percent of total assets is supplies? Round to the nearest tenth.

Question 19

Jenkin's Card Shop had net income of $77,000 this year with owner's equity of $108,000. What is the return on investment for the year?

A) 140.3%
B) 71.3%
C) 40.3%
D) 28.7%

Question 20

What is the net profit for Bobson's Hardware?

A) $24,540
B) $48,207
C) $62,320
D) $73,657

Question 21

Below is a partially completed horizontal analysis of a balance sheet.
Rachel is completing a comparative analysis of her business balance sheet. What is the amount and percent of change in accounts payable from Year 1 to Year 2 for Rachels Candle Company?

Question 22

Below is a partially completed horizontal analysis of a balance sheet.
Rachel is completing a comparative analysis of her business’ balance sheet. What is the amount and percent of change in office equipment from Year 1 to Year 2 for Rachel’s Candle Company?

Question 23

Below is a partially completed vertical analysis of a balance sheet.
Rachel completes a vertical analysis of her company’s balance sheet. What percent of total liabilities and owner’s equity is notes payable? Round to the nearest tenth.

Question 24

Below is a partially completed horizontal analysis of a balance sheet.
Rachel is completing a comparative analysis of her business'; balance sheet. What is the amount and percent of change in notes payable from Year 1 to Year 2 for Rachels Candle Company?

Question 25

In a vertical analysis of a balance sheet, what will be total assets as a percent and total liabilities and owner's equity as a percent?

Question 26

Below is a partially completed vertical analysis of a balance sheet.
Rachel completes a vertical analysis of her company’s balance sheet. What percent of total liabilities and owner’s equity is mortgage payable? Round to the nearest tenth.

Question 27

Below is a partially completed vertical analysis of a balance sheet.
Rachel completes a vertical analysis of her company’s balance sheet. What percent of total liabilities and owner’s equity is total liabilities? Round to the nearest tenth.

Question 28

Below is a partially completed horizontal analysis of a balance sheet.
Rachel is completing a comparative analysis of her business'; balance sheet. What is the amount and percent of change in total liabilities from Year 1 to Year 2 for Rachels Candle Company?

Question 29

Below is a partially completed vertical analysis of a balance sheet.
Rachel completes a vertical analysis of her company’s balance sheet. What percent of total liabilities and owner’s equity is accounts payable? Round to the nearest tenth.

Question 30

Below is a partially completed horizontal analysis of a balance sheet.
Rachel is completing a comparative analysis of her business'; balance sheet. What is the amount and percent of change in total liabilities and owners equity from Year 1 to Year 2 for Rachels Candle Company?

Question 31

Below is a partially completed vertical analysis of a balance sheet.
Rachel completes a vertical analysis of her company’s balance sheet. What percent of total assets is office equipment? Round to the nearest tenth.

Question 32

Below is a partially completed horizontal analysis of a balance sheet.
Rachel is completing a comparative analysis of her business' balance sheet. What is the amount and percent of change in building/land from Year 1 to Year 2 for Rachels Candle Company?

Question 33

Below is a partially completed vertical analysis of a balance sheet.
Rachel completes a vertical analysis of her company’s balance sheet. What percent of total assets is building/land? Round to the nearest tenth.

Question 34

Below is a partially completed horizontal analysis of a balance sheet.
Rachel is completing a comparative analysis of her business'; balance sheet. What is the amount and percent of change in total assets from Year 1 to Year 2 for Rachels Candle Company?

Question 35

A financial statement showing total revenue, total expenses, and net income of a business is called a(n) _______________.

Question 36

Below is a partially completed horizontal analysis of a balance sheet.
Rachel is completing a comparative analysis of her business’ balance sheet. What is the amount and percent of change in supplies from Year 1 to Year 2 for Rachel’s Candle Company?

Question 37

Below is a partially completed horizontal analysis of a balance sheet.
Rachel is completing a comparative analysis of her business'; balance sheet. What is the amount and percent of change in capital from Year 1 to Year 2 for Rachels Candle Company?

Question 38

Below is a partially completed vertical analysis of a balance sheet.
Rachel completes a vertical analysis of her company’s balance sheet. What percent of total liabilities and owner’s equity is capital? Round to the nearest tenth.

Question 39

Below is a partially completed horizontal analysis of a balance sheet.
Rachel is completing a comparative analysis of her business’ balance sheet. What is the amount and percent of change in cash from Year 1 to Year 2 for Rachel’s Candle Company?

Question 40

Below is a partially completed horizontal analysis of a balance sheet.
Rachel is completing a comparative analysis of her business'; balance sheet. What is the amount and percent of change in mortgage payable from Year 1 to Year 2 for Rachels Candle Company?

Question 41

Burke's Office Supply has cash assets of $82,000 and accounts receivable of $94,000. Their accounts payable total $55,000. What is the acid test ratio?

Question 42

The Smoothie Shoppe's income statement is done in Excel. Cell E8 contains net sales, Cell E17 contains cost of goods sold, and Cell E27 contains total operating expenses. What is the formula to calculate net income before federal income tax?

Question 43

Mantilli Manufacturing has current assets worth $12.5 million and current liabilities worth $5 million. What is the current ratio?

Question 44

The vertical analysis of a balance sheet for a coffee shop is created in Excel. Cash assets are in Cell C9 and total assets are in Cell C16. Write two ways for keying cash as a percent of total assets into Cell D9.

Question 45

Explain how to complete a vertical analysis of an income statement.

Question 46

The accounting equation shows the relationship among what the owner owns, owes, and is worth at all times. The equation is __________ = ____________ + ____________.

Question 47

A construction company creates its financial statements in Excel. The net income of the company is stored in Cell B35 and the Owners Equity in C35. What formula will calculate return on investment?

Question 48

Dr. Diana Brentwood, an optometrist, received revenue (professional fees) totaling $238,000 for the year ending December 31, 20- -. Her operating expenses were as follows: $74,800 for salaries; $1,230 for payroll taxes; $21,000 for office rent; $3,500 for depreciation of equipment; $15,000 for supplies; $4,840 for utilities; $1,750 for miscellaneous expenses; $2,100 for automobile expense; and $1,200 for equipment repair expense. Compute the total operating expenses and net profit before taxes for Dr. Brentwood's office for the year.

Question 49

A local tire store has beginning merchandise inventory of $37,400 and ending inventory of $26,300. The store purchased $8,500 of additional merchandise for sale during the quarter, returned $720 worth of merchandise damaged during shipment, and received $600 in purchase discounts. What is the cost of goods sold for the tire store?

Question 50

Donald Brennan has a financial planning business that received revenue totaling $212,000 for the year. His operating expenses were as follows: $99,600 for salaries; $4,980 for payroll taxes; $10,200 for office rent; $1,500 for depreciation of equipment; $12,500 for supplies; $5,040 for utilities; $2,544 for miscellaneous expenses; $6,850 for automobile expense; and $575 for equipment repair expense. Compute the total operating expenses and net profit before taxes for Donald Brennan's office for the year.

Question 51

Henderson's Appliance Store had net income of $202,000 this year with owner's equity of $325,000. What is the return on investment for the year?

Question 52

Mrs. Hersh owns a bakery. The gross sales for the year were $162,000. There was $670 in returned merchandise and $4,860 in sales discounts. What are the net sales for the bakery?

Question 53

The _______________ measures how quickly a company can liquidate assets to pay off current debt.

Question 54

Name two formatting options available in Excel that are important to include when dealing with financial statements.

Question 55

The A-1 Sign Company has net sales of $247,000, cost of goods sold of $109,000, gross profit of $138,000, total operating expenses of $62,500, and net income of $75,500. Rounded to the nearest tenth of a percent, what would the vertical analysis of the income statement have for gross profit?