Ch16 Exam Prep How to Read, Analyze, and Interpret Financial - Business Math Procedures 13e Test Bank with Answers by Jeffrey Slater. DOCX document preview.
Practical Business Math Procedures, 13e (Slater)
Chapter 16 How to Read, Analyze, and Interpret Financial Reports
1) The computer is the only tool needed in monitoring a business's financial condition.
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
2) A balance sheet shows the financial condition of a business at a particular date.
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
3) The income statement shows the financial condition of a business over a period of time.
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
4) Assets, liabilities, capital, and revenues are listed on the balance sheet.
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
5) Assets represent things of value owed by the business.
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
6) Assets that last longer than one year are called plant and equipment.
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
7) Retained earnings are the same as cash.
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
8) Land does not depreciate.
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
9) A comparative statement contains data for less than two successive accounting periods.
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (2) Explain and complete vertical and horizontal analysis.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
10) Vertical analysis cannot be done on a comparative statement.
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (2) Explain and complete vertical and horizontal analysis.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
11) Vertical analysis need not be done only on comparative reports since calculations were within each period of time.
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (2) Explain and complete vertical and horizontal analysis.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
12) Horizontal analysis can analyze balance sheets for two or more periods.
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (2) Explain and complete vertical and horizontal analysis.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
13) Horizontal analysis need not be done using comparative reports.
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (2) Explain and complete vertical and horizontal analysis.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
14) Cash is recorded on the income statement.
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (2) Explain and complete vertical and horizontal analysis.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
15) Income statements are prepared only once a year.
Difficulty: 1 Easy
Topic: LU 16-02 Income Statement-Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
16) Reductions in the selling price for early payment are called sales returns and allowances.
Difficulty: 1 Easy
Topic: LU 16-02 Income Statement-Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
17) Net purchases are the cost of purchases minus purchase discounts minus purchase returns and allowances.
Difficulty: 1 Easy
Topic: LU 16-02 Income Statement-Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
18) Cost of merchandise sold is equal to beginning inventory minus net purchases minus ending inventory.
Difficulty: 1 Easy
Topic: LU 16-02 Income Statement-Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
19) Net income is equal to gross profit minus operating expenses.
Difficulty: 1 Easy
Topic: LU 16-02 Income Statement-Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
20) Cash is a liability.
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
21) In horizontal analysis the oldest year is the base.
Difficulty: 1 Easy
Topic: LU 16-02 Income Statement-Report for a Specific Period of Time
Learning Objective: 16-02 (2) Explain and complete vertical and horizontal analysis.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
22) Trend analysis expresses each number as a percent of the base year.
Difficulty: 1 Easy
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (1) Explain and complete a trend analysis.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
23) A relationship of one number to another is a ratio.
Difficulty: 1 Easy
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (1) Explain and complete a trend analysis.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
24) Debt management ratios show a company how well its assets are managed.
Difficulty: 1 Easy
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
25) A ratio of 4:5:2 mean that out of 11 parts it is divided up as 4/11, 5/11, 2/11.
Difficulty: 2 Medium
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (1) Explain and complete a trend analysis.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
26) A current ratio is calculated by current assets times current liabilities.
Difficulty: 1 Easy
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
27) In the acid test ratio, inventory and prepaid expenses are excluded.
Difficulty: 1 Easy
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
28) "Could we speed up our collections?" could be one question raised about the average day's collection ratio.
Difficulty: 1 Easy
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
29) The return on equity ratio looks at how effectively assets are being utilized.
Difficulty: 1 Easy
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (1) Explain and complete a trend analysis.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
30) The asset turnover is gross sales divided by total assets.
Difficulty: 1 Easy
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (1) Explain and complete a trend analysis.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
31) The balance sheet lists:
A) Assets, liabilities, expenses
B) Assets, liabilities, equity
C) Assets, revenues, expenses
D) Assets, revenues, equity
E) None of these
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
32) Which of the following is not a current asset?
A) Cash
B) Building
C) Prepaid expense
D) Accounts receivable
E) None of these
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
33) When each asset is analyzed as a percent of total assets for a single period, this is known as:
A) Horizontal analysis
B) Comparative analysis
C) Ratio analysis
D) Vertical analysis
E) None of these
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (2) Explain and complete vertical and horizontal analysis.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
34) In using horizontal analysis, comparative reports are:
A) Always used
B) Never used
C) Infrequently used
D) Often used
E) None of these
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (2) Explain and complete vertical and horizontal analysis.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
35) From 2016 to 2017, accounts receivable increased from $4,000 to $4,800. The percent increase is:
A) 120%
B) 162/3%
C) 20%
D) 55%
E) None of these
Difficulty: 2 Medium
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (2) Explain and complete vertical and horizontal analysis.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
36) Which one is not used to calculate net sales?
A) Purchases
B) Sales discount
C) Sales returns and allowance
D) Gross sales
E) None of these
Difficulty: 1 Easy
Topic: LU 16-02 Income Statement-Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
37) Cost of merchandise sold equals beginning inventory:
A) Plus net purchases plus ending inventory
B) Plus net purchases minus ending inventory
C) Minus net purchases minus ending inventory
D) Minus net purchases plus ending inventory
E) None of these
Difficulty: 1 Easy
Topic: LU 16-02 Income Statement-Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
38) Selecting a base year and expressing each amount as a percent of the base year amount is called:
A) Trend analysis
B) Horizontal analysis
C) Vertical analysis
D) Ratio analysis
E) None of these
Difficulty: 1 Easy
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (1) Explain and complete a trend analysis.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
39) The acid test ratio includes:
A) Current Assets
B) Prepaid Expenses
C) Current Liabilities
D) Inventory
E) All of these
Difficulty: 1 Easy
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
40) A return on equity of 17% implies which of the following?
A) For every 17 cents invested, a return of $1.00 results
B) For every $1.00 invested, a return of 17 cents results
C) For every $1.17 invested, a return of 17 cents results
D) For every $10.00 invested, a return of $1.17 results
E) None of the above
Difficulty: 2 Medium
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
41) The total debt to total assets of Logan Company was 0.71. The total of Logan's assets was $270,000. The amount of total debt is:
A) $146,700
B) $191,700
C) $119,700
D) $461,700
E) None of these
Difficulty: 2 Medium
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
42) Lee Company has a current ratio of 2.65. The acid test ratio is 2.01. The current liabilities of Lee are $45,000. The dollar amount of merchandise inventory is (assume no prepaid expenses):
A) $28,008
B) $28,800
C) $90,450
D) $90,540
E) None of these
Difficulty: 3 Hard
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
43) The asset turnover of Ryan Company is 7.2. The total assets of Ryan are $88,000. Ryan's net sales were:
A) $6,336
B) $63,360
C) $633,000
D) $633,600
E) None of these
Difficulty: 2 Medium
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
44) Jay Corporation has earned $175,900 after tax. The accountant calculated the return on equity as 12.5%. Jay Corporation's stockholders' equity to the nearest dollar is:
A) $140,720
B) $14,720
C) $1,407,200
D) $140,720,000
E) None of these
Difficulty: 2 Medium
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
45) In analyzing the income statement of Bob Company, cost of goods sold decreased by 8.2% from 2016 to 2017. If the cost of goods sold was $19,000 in 2016, what was it in 2017? (Rounded to the nearest cent.)
A) $17,442
B) $1,558
C) $20,697.17
D) $20,796.71
E) None of these
Difficulty: 3 Hard
Topic: LU 16-02 Income Statement-Report for a Specific Period of Time
Learning Objective: 16-02 (2) Explain and complete vertical and horizontal analysis.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
46) Given the following:
2015 | 2016 | 2017 | |
Sales | $400,000 | $350,000 | $470,000 |
Gross Profit | -100,000 | -130,000 | -140,000 |
Net Income | $300,000 | $220,000 | $230,000 |
By trend analysis (base year is 2015), sales in 2017 to the nearest percent of the base year is:
A) 117%
B) 116%
C) 118%
D) 119%
E) None of these
Difficulty: 2 Medium
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (1) Explain and complete a trend analysis.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
47) The asset turnover from the following is (round to nearest tenth):
Gross sales | $70,000 |
Sales discount | $2,500 |
Sales returns and allowances | $8,000 |
Total assets | $39,000 |
A) 1.7
B) 1.5
C) 1.9
D) 1.6
E) None of these
Difficulty: 3 Hard
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
48) Given the following for a company: sales $80,000, beginning inventory $5,000, purchases $21,800, purchase discounts $790, ending inventory $5,100, find the company's cost of merchandise sold.
A) $21,560
B) $20,190
C) $20,910
D) $21,650
E) None of these
Difficulty: 3 Hard
Topic: LU 16-02 Income Statement-Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
49) Given the following for a company: sales $48,000, sales returns and allowances $6,000, operating expenses $6,200, beginning inventory $900, net purchases $9,100, ending inventory $2,300, find the company's gross profit.
A) $34,000
B) $43,000
C) $34,003
D) $34,300
E) None of these
Difficulty: 3 Hard
Topic: LU 16-02 Income Statement-Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
50) Bill's Pizza has an asset turnover of 3.5. The total assets of Bill's were $95,000. The net sales of Bill's Pizza is:
A) $27,142.85
B) $332,500.00
C) $271,428.50
D) $33,250.00
E) None of these
Difficulty: 2 Medium
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
51) Complete the horizontal analysis below: (round to the nearest tenth percent if applicable)
Year 2 | Year 1 | Amount + | Percent Change |
$88,338 | $92,147 | ? | ? |
A) ($3,809), ‒4.1%
B) $3,809, 4.1%
C) $180,485, 51.1%
D) $8,300, 15%
E) None of these
Difficulty: 2 Medium
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (2) Explain and complete vertical and horizontal analysis.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
52) Complete the following vertical analysis of a balance sheet:
Amount | Percent | |
Current assets | $15,751 | A |
Accounts Receivable | $10,888 | B |
Inventory | $97,125 | C |
PPD expenses | $11,448 | D |
Total assets | $135,212 | 100% |
(Round to nearest tenth percent.)
A) 11.6%, 8.1%, 71.8%, 8.5%
B) 11.5%, 8.0%, 72%, 11.7%
C) 13%, 8.6%, 80%, 12.7%
D) 15%, 10.2%, 66.1%, 12.5%
E) None of these
Difficulty: 2 Medium
Topic: LU 16-01 Balance Sheet-Report as of a Particular Date
Learning Objective: 16-01 (2) Explain and complete vertical and horizontal analysis.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
53) Complete the trend analysis for sales for year 3 (Round to nearest tenth percent):
Year 4 | Year 3 | Year 2 | Year 1 (Base yr) |
$782,143 | $655,211 | $605,000 | $646,133 |
A) 103.9%
B) 101.4%
C) 109.3%
D) 110.2%
E) None of these
Difficulty: 2 Medium
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (1) Explain and complete a trend analysis.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
54) Given gross sales of $40,000 and sales returns and allowances of $6,000, what are the net sales?
A) $50,000
B) $46,000
C) $34,500
D) $34,000
E) None of these
Difficulty: 2 Medium
Topic: LU 16-02 Income Statement-Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
55) Complete the current ratio for the following: Total current assets = $12,000; current liabilities = $10,000
A) 1.5
B) 1.7
C) 0.7
D) 1.2
E) None of these
Difficulty: 2 Medium
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
Match the following terms with their definitions.
A) Uses a base year
B) Inventory and prepaid expenses are subtracted
C) A liability
D) Net sales ÷ total assets
E) Actual sale after returns on discounts
F) Current assets ÷ current liabilities
G) What we owe creditors
H) Data placed side by side
I) Cash, supplies
J) Obligations due within one year
K) Cost of goods for resale
L) Obligations that are not due for at least one year
M) Total this period is compared by amount of percent to same total last period
N) Part of stockholders' equity
O) What customers owe
P) Dollars not shown
Q) Paid in advance
R) Profit
S) Revenues and expense for a specific period of time
T) Prepared as of a particular date
U) Beginning inventory plus new purchases - ending inventory
V) True cost of purchases
W) Includes no plant and equipment assets
X) Sales - cost of goods sold
Y) Each liability and equity is analyzed as a percent of the total
56) Long-term liabilities
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
57) Prepaid expense
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
58) Cost of merchandise sold
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
59) Income statement
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
60) Current ratio
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
61) Common size statement
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
62) Trend analysis
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
63) Vertical analysis
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
64) Assets
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
65) Horizontal analysis
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
66) Gross profit
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
67) Liabilities
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
68) Net purchases
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
69) Retained earnings
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
70) Balance sheet
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
71) Current assets
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
72) Current liabilities
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
73) Asset turnover
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
74) Accounts payable
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
75) Merchandise inventory
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
76) Net income
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
77) Net sales
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
78) Acid test
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
79) Comparative statements
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
80) Accounts receivable
Difficulty: 1 Easy
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date; LU 16-02 Income Statement—Report for a Specific Period of Time; lU 16-03 Trend and Ratio Analysis
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.; 16-02 (1) Explain the purpose and the key items on the income statement.; 16-02 (2) Explain and complete vertical and horizontal analysis.; 16-03 (1) Explain and complete a trend analysis.; 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
Answers: 56) L 57) Q 58) U 59) S 60) F 61) P 62) A 63) Y 64) I 65) M 66) X 67) G 68) V 69) N 70) T 71) W 72) J 73) D 74) C 75) K 76) R 77) E 78) B 79) H 80) O
81) From the following, calculate (A) net sales, (B) gross profit, (C) total operating expenses, and (D) net income: sales returns $700, rent expense $1,288, sales discounts $950, depreciation expense $600, cost of merchandise sold $7,600, gross sales $20,900, advertising expense $1,650, salary expense $2,900, heat expense $900.
A. 20,900 - 700 - 950 = 19,250; B. 19,250 - 7,600 = 11,650; C. 1,288 + 600 + 1,650 + 2,900 + 900 = 7,338; D. 11,650 - 7,338 = 4,312.
Difficulty: 3 Hard
Topic: LU 16-02 Income Statement—Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
82) Calculate total of (A) current assets, (B) plant assets, and (C) stockholders' equity from these selected titles: Cash $7,500, Common Stock $30,000, Retained Earnings $51,000, Prepaid Rent $12,000, Accounts Payable $1,900, Accounts Receivable $6,000, Merchandise Inventory $19,000, Land $16,000, Building $11,000.
A. 7,500 + 12,000 + 6,000 + 19,000 = 44,500; B. 16,000 + 11,000 = 27,000; C. 30,000 + 51,000 = 81,000.
Difficulty: 3 Hard
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
83) Complete:
Current Assets | Amount | Round to Nearest Hundredth Percent |
Cash | $12,000 | B |
Accounts Receivable | $9,000 | C |
Prepaid Rent | $5,000 | D |
Merchandise Inventory | $28,000 | E |
Total Current Assets | A | 100% |
A. 12,000 + 9,000 + 5,000 + 28,000 = 54,000; B. 12,000/54,000 = 22.22%; C. 9,000/54,000 = 16.67%; D. 5,000/54,000 = 9.26%.
Difficulty: 2 Medium
Topic: LU 16-02 Income Statement—Report for a Specific Period of Time
Learning Objective: 16-02 (2) Explain and complete vertical and horizontal analysis.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
84) Complete:
2017 | 2016 | Decrease Amount | % Decrease (to nearest hundredth) |
$12,000 | $16,000 | A | B |
A. $16,000 - $12,000 = $4,000; B. $4,000 / $16,000 = .25 × 100% = 25%.
Difficulty: 2 Medium
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (1) Explain and complete a trend analysis.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
85) Solve for (A) current ratio, (B) acid test, (C) average day's collection (360), (D) asset turnover, and (E) profit margin on sales. (Round to nearest hundredth or hundredth percent as needed.)
Current Assets | $26,000 |
Accounts Receivable | $4,100 |
Current Liabilities | $16,500 |
Inventory | $4,100 |
Net Sales | $52,000 |
Total Assets | $38,000 |
Net Income | $8,000 |
A. $26,000/$16,500 = 1.58; B. ($26,000 - $4,100)/$16,500 = 1.33; C. $4,100 / ($52,000/360) = 28 days; D. $52,000/$38,000 = 1.37; E. $8,000/$52,000 = .15384615 × 100% = 15.38%.
Difficulty: 3 Hard
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
86) Complete using trend analysis for sales. (Round to nearest percent and use 2017 as the base year.)
2014 | 2015 | 2016 | 2017 | |
SALES | $179,000 | $585,000 | $340,000 | $600,000 |
(A) | (B) | (C) | (D) |
A. $179,000/$600,000 = 30%; B. $585,000/$600,000 = 98%; C. $340,000/$600,000 = 57%; D. $600,000/$600,000 = 100%.
Difficulty: 3 Hard
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (1) Explain and complete a trend analysis.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
87) The asset turnover of Jerry's Sleepshop is 3.2. The total assets of Jerry's are $32,000. What were Jerry's net sales?
$32,000 × 3.2 = 102,400.
Difficulty: 3 Hard
Topic: LU 16-02 Income Statement—Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
88) Moore Corporation has earned $205,500 after tax. The return on equity for Moore Corporation is 18%. What is Moore's stockholders' equity?
$205,500/.18 = $1,141,666.67.
Difficulty: 3 Hard
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
89) The total debt to total assets of Mose Corporation was .22. Mose's total assets were $220,000. What was the amount of total debt to Mose Corporation?
$220,000 × .22 = $48,400.
Difficulty: 3 Hard
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
90) The cost of merchandise (goods) sold by Ryan Corporation decreased by 9.3% from 2015 to 2017. The cost of merchandise (goods) was $22,000 in 2017. What was the cost of merchandise (goods) sold in 2015?
$22,000/(100% - 9.3%) = $24,255.78.
Difficulty: 3 Hard
Topic: LU 16-02 Income Statement—Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
91) Given gross sales $75,000, sales returns and allowances $4,000, beginning inventory $5,000, net purchases $9,000, ending inventory $3,000, and operating expenses $13,900, calculate:
A. Net sales
B. Cost of merchandise (goods sold)
C. Gross profit from sales
D. Net income.
Difficulty: 3 Hard
Topic: LU 16-02 Income Statement—Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
92) Complete the partial comparative balance sheet. Round to nearest hundredth percent.
Assets | Amount | Percent | Amount | Percent |
Current Assets: | ||||
Cash | $6,000 | C | $7,000 | G |
Accounts Receivable | $3,000 | D | $3,500 | H |
Merch. Inventory | $1,000 | E | $2,000 | I |
Prepaid Expense | $500 | F | $1,000 | J |
Total Current Assets | A | B |
A. 6,000 + 3,000 + 1,000 + 500 = 10,500; B. 7,000 + 3,500 + 2,000 + 1,000 = 13,500; C. 6,000 / 10,500 = 57.14%; D. 3,000 / 10,500 = 28.57%; E. 1,000 / 10,500 = 9.52%; F. 500 / 10,500 = 4.76%; G. 7,000 / 13,500 = 51.85%; H. 3,500 / 13,500 = 25.93%; I. 2,000 / 13,500 = 14.81%; J. 1,000 / 13,500 = 7.41%.
Difficulty: 3 Hard
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date
Learning Objective: 16-01 (2) Explain and complete vertical and horizontal analysis.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
93) Calculate the amount of increase or decrease and the percent change of each title (round to nearest hundredth percent):
2017 | 2016 | Amount | Percent | |
Cash | $15,000 | $6,000 | A | B |
Land | $39,000 | $18,500 | C | D |
Accounts Payable | $12,000 | $4,000 | E | F |
A. 15,000 - 6,000 = 9,000; B. 9,000 / 6,000 = 150%; C. 39,000 - 18.500 = 20,500; D. 20,500 / 18,500 = 110.81%; E. 12,000 - 4,000 = 8,000; F. 8,000 / 4,000 = 200%.
Difficulty: 3 Hard
Topic: LU 16-02 Income Statement—Report for a Specific Period of Time
Learning Objective: 16-02 (2) Explain and complete vertical and horizontal analysis.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
94) Complete a trend analysis for sales (round to nearest whole percent and use 2014 as the base year).
2017 | 2016 | 2015 | 2014 | |
Sales | $620,000 | $580,000 | $450,000 | $600,000 |
(D) | (C) | (B) | (A) |
A: $600,000 / $600,000 = 100%; B. $450,000 / $600,000 = 75%; C. $580,000 / $600,000 = 97%; D. $620,000 / $600,000 = 103%.
Difficulty: 3 Hard
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (1) Explain and complete a trend analysis.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
95) From the following, prepare a balance sheet for Roe Co. as of December 31, 2017.
Salaries Payable | 6,000 |
Accounts Receivable | 9,000 |
Retained Earnings | 21,000 |
Common Stock | 27,000 |
Mortgage Note Payable | 45,000 |
Prepaid Rent | 12,000 |
Accounts Payable | 19,000 |
Land | 18,000 |
Cash | 3,000 |
Merchandise Inventory | 16,000 |
Building | 60,000 |
Roe Company
Balance Sheet
December 31, 2017
Assets Liabilities
Current Assets: Current Liabilities:
Cash $3,000 Accounts Payable $19,000
Accts. Receivable 9,000 Salaries Payable 6,000
Merch. Inventory 16,000 Total Current Liabilities 25,000
Prepaid Rent 12,000
Total Current Assets 40,000 Long-term Liabilities:
Mortgage Note Payment $45,000
Total Liabilities $70,000
Plant and Equipment:
Land $18,000 Stockholders' Equity:
Building 60,000 Common Stock $27,000
Total Plant and Equip. $78,000 Retained Earnings 21,000
Total Stockholders' Equity $48,000
Total Liability and
Total Assets: $118,000 Stockholders' Equity $118,000
See book section 16.1 for filling in a balance sheet
Difficulty: 3 Hard
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
96) Given the following:
Current Assets | $18,000 |
Accounts Receivable | $3,000 |
Current Liabilities | $16,000 |
Inventory | $2,000 |
Net Sales | $41,000 |
Total Assets | $29,000 |
Net Income | $6,000 |
Find the following (round to the nearest hundredth if needed): A. Current ratio; B. Acid test; C. Average day's collection; D. Asset turnover; E. Profit margin on sales.
A. $18,000/$16,000 = 1.13; B. ($18,000 - $2,000)/$16,000 = 1; C. $3,000/($41,000/360) = 26.34 days; D. $41,000/$29,000 = 1.41; E. $6,000/$41,000 = .15.
Difficulty: 3 Hard
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
97) Calculate (A) net sales, (B) gross profit, (C) total operating expenses, and (D) net income.
Sales returns $850, rent expense $1,355, sales discounts $1,200, depreciation expense $510, cost of merchandise sold $6,500, gross sales $19,500, advertising expense $400, salary expense $2,100, heat expense $750.
A. 19,500 - 850 - 1,200 = 17,450; B. 17,450 - 6,500 = 10,950; C. 1,355 + 510 + 400 + 2,100 + 750 = 5,115; D. 10,950 - 5,115 = 5,835.
Difficulty: 3 Hard
Topic: LU 16-02 Income Statement—Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
98) Calculate (A) net sales, (B) gross profit (C) total operating expenses, and (D) net income.
Sales returns $600, rent expense $1,700, sales discounts $1,800, depreciation expense $490, cost of merchandise sold $7,200, gross sales $19,900, advertising expense $650, salary expense $2,500, heat expense $850.
A. 19,900 - 600 - 1,800 = 17,500; B. 17,500 - 7,200 = 10,300; C. 1,700 + 490 + 650 + 2,500 + 850 = 6,190; D. 10,300 - 6,190 = 4,110.
Difficulty: 3 Hard
Topic: LU 16-02 Income Statement—Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
99) Calculate the total of (A) current assets, (B) plant assets, and (C) stockholders' equity.
Cash $7,000, common stock $21,000, retained earnings $41,000, prepaid rent $21,000, accounts payable $2,300, accounts receivable $4,000, merchandise inventory $18,000, total liabilities $10,800, land $25,000, building $1,900.
A. $7,000 + $21,000 + $4,000 + $18,000 = $50,000; B. $25,000 + $1,900 = $26,900; C. $21,000 + $41,000 = $62,000.
Difficulty: 3 Hard
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
100) Complete:
Current Assets | Amount | Percent (round to hundredths %) |
Cash | $10,000 | B |
Accts Receivable | $7,000 | C |
Prepaid Rent | $4,000 | D |
Merchandise Inventory | $21,000 | E |
Total Current Assets | A | 100% |
A. $10,000 + $7,000 + $4,000 + $21,000 = $42,000; B. $10,000 / $42,000 = 23.81%; C. $7,000 / $42,000 = 16.67; D. $4,000 / $42,000 = 9.52; E. $21,000 / $42,000 = 50.00%.
Difficulty: 3 Hard
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date
Learning Objective: 16-01 (2) Explain and complete vertical and horizontal analysis
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
101) Complete:
Current Assets | Amount | Percent (round to hundredths %) |
Cash | $27,000 | B |
Accts Receivable | $12,000 | C |
Prepaid Rent | $4,000 | D |
Merchandise Inventory | $8,000 | E |
Total Current Assets | A | 100% |
A. $27,000 + $12,000 + $4,000 + $8,000 = $51,000; B. $27,000 / $51,000 = 52.94%; C. $12,000 / $51,000 = 23.53%; D. $4,000 / $51,000 = 7.84%; E. $8,000 / $51,000 = 15.69%.
Difficulty: 3 Hard
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date
Learning Objective: 16-01 (2) Explain and complete vertical and horizontal analysis
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
102) Complete:
2017 | 2016 | Increase Amount | Increase % | |
Cash | $10,000 | $8,000 | A | B |
A. $10,000 - $8,000 = $2,000; $2,000 / $8,000 = 25%.
Difficulty: 2 Medium
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date
Learning Objective: 16-01 (2) Explain and complete vertical and horizontal analysis
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
103) Complete
2017 | 2016 | Decrease Amount | Decrease % | |
Cash | $10,000 | $18,000 | A | B |
A. $18,000 - $10,000 = $8,000; B. $8,000 / $18,000 = 44.44%.
Difficulty: 2 Medium
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date
Learning Objective: 16-01 (2) Explain and complete vertical and horizontal analysis
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
104) Solve for (A) current ratio, (B) acid test (quick), (C) average day's collection, (D) asset turnover, and (E) profit margin on sales. Round to nearest hundredth or hundredth percent as needed.
Current Assets | $24,000 |
Accounts Receivable | $4,300 |
Current Liabilities | $17,000 |
Inventory | $3,900 |
Net Sales | $44,000 |
Total Assets | $33,000 |
Net Income | $7,000 |
A. $24,000 / $17,000 = 1.41; B. ($24,000 - $3,900) / $17,000 = 1.18; C. $4,300 / ($44,000 / 360) = 35.18 days; D. $44,000 / $33,000 = 1.33; E. $7,000 / $44,000 = 15.91%.
Difficulty: 3 Hard
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
105) Solve for (A) current ratio, (B) acid test (quick), (C) average day's collection (360), (D) asset turnover, and (E) profit margin on sales. Round to nearest hundredth or hundredth percent as needed.
Current Assets | $21,000 |
Accounts Receivable | $4,200 |
Current Liabilities | $16,000 |
Inventory | $3,500 |
Net Sales | $41,000 |
Total Assets | $32,000 |
Net Income | $6,000 |
A. $21,000 / $16,000 = 1.31; B. ($21,000 - $3,500) / $16,000 = 1.09; C. $4,200 / ($41,000 / 360) = 36.88 days; D. $41,000 / $32,000 = 1.28; E. $6,000 / $41,000 = 14.63%.
Difficulty: 3 Hard
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
106) Complete using trend analyses for sales. (Round to nearest percent and use 2014 as the base year.)
2017 | 2016 | 2015 | 2014 | |
Sales | $158,000 | $615,000 | $280,000 | $500,000 |
A | B | C | D |
A. $158,000 / $500,000 = 32%; B. $615,000 / $500,000 = 123%; C. $280,000 / $500,000 = 56%; D. $500,000 /$500,000 = 100%.
Difficulty: 3 Hard
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (1) Explain and complete a trend analysis.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
107) For Monday, John recorded gross sales of $4,000. He also noticed sales returns and sales discounts totaling $800. What are net sales for John?
$4,000 - $800 = $3,200.
Difficulty: 2 Medium
Topic: LU 16-02 Income Statement—Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
108) From the following information, could you help Bill calculate his cost of merchandise sold?
Beginning Inventory | $2,500 |
Purchases | $3,000 |
Purchase Returns | $400 |
Purchase Discounts | $100 |
Ending Inventory | $2,100 |
$2,500 + $3,000 - $400 - $100 - $2,100 = $2,900.
Difficulty: 2 Medium
Topic: LU 16-02 Income Statement—Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
109) Al Flynn has gathered the following information. Could you help Al calculate his gross profit?
Gross Sales | $25,000 |
Sales Discounts | $3,000 |
Beg Inventory | $2,000 |
Net Purchases | $4,000 |
Ending Inventory | $2,800 |
Operating Expense | $1,800 |
$25,000 = $3,000 = $22,000; $2,000 + $4,000 - $2,800 = $3,200; $22,000 - $3,200 = $18,800.
Difficulty: 3 Hard
Topic: LU 16-02 Income Statement—Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
110) Mel King has asked you to prepare a classified balance sheet for Pad Co. as of December 31, 2017. Ending merchandise inventory was $1,800:
Cash | $1,500 | Accounts Payable | $1,800 |
Prepaid Rent | $4,500 | Salaries Payable | $2,250 |
Prepaid Insurance | $3,000 | Notes Payable (long-term) | $1,500 |
Office Equipment | $4,500 | ||
Accum. Depreciation | $3,000 | J. Pad, Capital | $9,750 |
PAD COMPANY
Balance Sheet
December 31, 2017
Assets Liabilities
Current Assets: Current Liabilities:
Cash $1,500 Accounts Payable $1,800
Prepaid Rent 4,500 Salaries Payable 2,250
Prepaid Insurance 3,000 Total Current Liabilities $4,050
Merchandise Inv. 1,800
Total Current Assets $10,800 Long-term Liabilities:
Notes Payable $1,500
Total Liabilities $5,500
Plant and Equipment:
Office Equipment (net) $4,500 Owner's Equity:
J. Pad. Capital $9,750
Total Liability and
Total Assets: $15,300 Owner's Equity $15,300
See book section 16.1 for filling in a balance sheet
Difficulty: 3 Hard
Topic: LU 16-01 Balance Sheet—Report as of a Particular Date
Learning Objective: 16-01 (1) Explain the purpose and the key items on the balance sheet.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
111) Alice Co. has a current ratio of 2.7. The acid test ratio is 2.2. The current liabilities of Alice Co. are $46,000. Could you calculate the dollar amount of merchandise inventory?
$46,000 × 2.7 + $46,000 × 2.2 = $124,200 - $101,200 = $23,000.
Difficulty: 3 Hard
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
112) The asset turnover of Ready Corp. is 6.7; the total assets of Ready are $45,000. What were Ready's net sales?
$45,000 × 6.7 = $301,500.
Difficulty: 3 Hard
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
113) Sullivan Corp. earned $75,500 after taxes. The accountant calculated the return on equity as 12%. What was Sullivan's stockholders' equity? (round to the nearest cent)
$75,500 /.12 = $629,166.66.
Difficulty: 3 Hard
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
114) Al Ring received a memo requesting that he complete a trend analysis of the following, using 2014 as the base year. (Round each percent to nearest whole percent.) Can you help Al with this request?
2017 | 2016 | 2015 | 2014 | |
Sales | $42,000 (A) | $60,000 (D) | $80,000 (G) | $95,000 (J) |
Gross Profit | $21,000 (B) | $28,000 (E) | $42,000 (H) | $60,000 (K) |
Net Income | $21,000 (C) | $32,000 (F) | $38,000 (I) | $35,000 (L) |
*For simplicity, operating expenses have been omitted.
A. $42,000 / $95,000 = 44%; B. $21,000 / $60,000 = 35%; C. $21,000 / $35,000 = 60%; D. $60,000 / $95,000 = 63%; E. $28,000 / $60,000 = 47%; F. $32,000 / $35,000 = 91%; G. $80,000 / $95,000 = 84%; H. $42,000 / $60,000 = 70%; I. $38,000 / $35,000 = 109%; J. $95,000 / $95,000 = 100%; K. $60,000 / $60,000 = 100%; L. $35,000 / $35,000 = 100%.
Difficulty: 3 Hard
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (1) Explain and complete a trend analysis.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
115) Given gross sales of $50,000, sales returns and allowances of $6,000, beginning inventory of $4,000, net purchases of $8,000, ending inventory of $2,000, and operating expenses of $4,500, calculate net income.
$50,000 - $6,000 = $44,000; $4,000 + $8,000 - $2,000 = $10,000; $44,000 - $10,000 = $34,000; $34,000 - $4,500 = $29,500.
Difficulty: 3 Hard
Topic: LU 16-02 Income Statement—Report for a Specific Period of Time
Learning Objective: 16-02 (1) Explain the purpose and the key items on the income statement.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
116) Complete the following vertical analysis. With cash of $15,750, accounts receivables of $10,800, inventory of $97,000, and PPD expenses of $11,000, what percent of total assets are accounts receivables?
$15,750 + $10,800 + $97,000 + $11,000 = $134,550; $10,800 /$ 34,550 = 8%
Difficulty: 3 Hard
Topic: LU 16-02 Income Statement—Report for a Specific Period of Time
Learning Objective: 16-02 (2) Explain and complete vertical and horizontal analysis.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
117) Complete the following ratios:
Current assets = $13,000 Inventory = $4,400 Current liabilities = $10,000 Net income = $7,700 Net sales = $24,400
A. Profit margin on sales (round to nearest tenth percent)
B. Acid test (Round to nearest tenth percent.)
A. $7,700 / $24,400 = 31.6%; B. ($13,000 - $4,400) / $10,000 = 86%.
Difficulty: 3 Hard
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (2) List, explain, and calculate key financial ratios.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
118) Complete the following trend analysis for year 4:
Year 4 | Year 3 | Year 2 | Year 1 (base year) |
$48,200 | $50,000 | $44,000 | $17,560 |
$48,200 / $17,560 = 274.5%.
Difficulty: 2 Medium
Topic: LU 16-03 Trend and Ratio Analysis
Learning Objective: 16-03 (1) Explain and complete a trend analysis.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
Document Information
Connected Book
Business Math Procedures 13e Test Bank with Answers
By Jeffrey Slater