1. Net income on the income statement?

a. The financing section

b. The operating section

c. The investing section

d. The noncash investing and financing section

2. Cash received from selling merchandise would be considered a:

a. Cash inflow from investing activities.

b. Cash inflow from operating activities.

c. Cash inflow from financing activities.

d. Cash outflow from operating activities.

3. Arturo Sales purchased some equipment for $12,000 by issuing a 6-month note payable. How would this transaction be shown on the statement of cash flows?

a. In the noncash financing and investing activities section

b. In the investing activities section

c. In the operating activities section

d. In the financing activities section

4. Which of the following sections from the statement of cash flows would include the payment of a note payable by issuing common stock?

a. The payment of a note payable by issuing common stock would be included in the investing section.

b. The payment of a note payable by issuing common stock would be included in the financing section.

c. The payment of a note payable by issuing common stock would be included in the operating section.

d. The payment of a note payable by issuing common stock would not be included in the noncash investing and financing section.

5. The only part that differs in a statement of cash flows using the direct method from one using the indirect method is the:

a. Financing activities section.

b. Investing activities section.

c. Operating activities section.

d. Noncash investing and financing activities section.

6. Oglethorpe Company reports the following information from the vertical analysis of their income statement:

Net income:

4.2 % in 2014

3.9% in 2013

Which of the following statements could be logically concluded from the above data?

a. The company made a higher gross profit in 2014 than in 2013.

b. The company made higher net income in 2014 than in 2013.

c. The company has improved the profit they make per dollar of sales in 2014.

d. The company's total net income increased by 0.3% in 2014.

7. Which of the following balance sheet displays shows only percentages?

a. Horizontal analysis balance sheet

b. A common-size balance sheet

c. A vertical analysis balance sheet

d. A balance sheet as shown in the annual report of a company

8. Which of the following ratios is used to determine how quickly and easily a company is able to sell its inventory?

a. Current ratio

b. Inventory turnover

c. Price/earnings ratio

d. Return on net sales

9. Which of the following items is a measure of a company's ability to collect receivables?

a. The inventory turnover ratio

b. The current ratio

c. The day's sales in receivables

d. The acid-test ratio

10. Which of the following accurately describes working capital?

a. Current assets minus inventory

b. Current assets minus current liabilities

c. Total debt minus stockholders' equity

d. Cost of goods sold divided by average inventory

1. The records of McKnight Color Engraving reveal the following:

Requirements

a. Compute cash flows from operating activities by the indirect method.

b . Evaluate the operating cash flow of McKnight Color Engraving. Give the reason for your evaluation.

2. Comparative financial statement data of Danfield, Inc., follow:

a. Market price of Danfield?s common stock: $86.58 at December 31, 2012, and $46.54 at December 31, 2011.

b. Common shares outstanding: 12,000 during 2012 and 10,000 during 2011 and 2010.

c. All sales on credit.

Requirements

1. Compute the following ratios for 2012 and 2011:

a. Current ratio

b. Times-interest-earned ratio

c. Inventory turnover

d. Gross profit percentage

e. Debt to equity ratio

f. Rate of return on common stockholders? equity

g. Earnings per share of common stock

h. Price/earnings ratio

2. Decide (a) whether Danfield?s ability to pay debts and to sell inventory improved or deteriorated during 2012 and (b) whether the investment attractiveness of its common stock appears to have increased or decreased.

Transcribed Image Text:

Net income Sales revenue Loss on sale of land Acquisition of land $ 38,000 51,000 5,000 39,000 Depreciation Decrease in current liabilities Increase in current assets other than cash $ 4,000 28,000 14,000 DANFIELD, INC. Comparative Income Statement Years Ended December 31, 2012 and 2011 2012 2011 $ 467,000 $ 428,000 237,000 218,000 $ 230,000 $ 210,000 136,000 134,000 $ 94,000 $ 76,000 9,000 10,000 85,000 $ 66,000 24,000 27,000 $ 61,000 $ 39,000 Net sales Cost of goods sold Gross profit Operating expenses Income from operations Interest expense Income before income tax Income tax expense Net income DANFIELD, INC. Comparative Balance Sheet December 31, 2012 and 2011 2012 Current assets: Cash Current receivables, net Inventories Prepaid expenses Selected 2010 amounts 2011 Total current assets $366,000 $381,000 Property, plant, and equipment, net 211,000 179,000 Total assets $ 577,000 $ 560,000 Total current liabilities $225,000 $246,000 Long-term liabilities 114,000 97,000 Total liabilities $ 339,000 $343,000 Preferred stock, 3% 108,000 108,000 Common stockholders' equity, no par 130,000 109,000 Total liabilities and stockholders' equity $ 577,000 $ 560,000 2010* $ 97,000 $ 95,000 112,000 118,000 $102,000 145,000 163,000 203,000 12,000 5,000 598,000 85,000 Net income Sales revenue Loss on sale of land Acquisition of land $ 38,000 51,000 5,000 39,000 Depreciation Decrease in current liabilities Increase in current assets other than cash $ 4,000 28,000 14,000 DANFIELD, INC. Comparative Income Statement Years Ended December 31, 2012 and 2011 2012 2011 $ 467,000 $ 428,000 237,000 218,000 $ 230,000 $ 210,000 136,000 134,000 $ 94,000 $ 76,000 9,000 10,000 85,000 $ 66,000 24,000 27,000 $ 61,000 $ 39,000 Net sales Cost of goods sold Gross profit Operating expenses Income from operations Interest expense Income before income tax Income tax expense Net income DANFIELD, INC. Comparative Balance Sheet December 31, 2012 and 2011 2012 Current assets: Cash Current receivables, net Inventories Prepaid expenses Selected 2010 amounts 2011 Total current assets $366,000 $381,000 Property, plant, and equipment, net 211,000 179,000 Total assets $ 577,000 $ 560,000 Total current liabilities $225,000 $246,000 Long-term liabilities 114,000 97,000 Total liabilities $ 339,000 $343,000 Preferred stock, 3% 108,000 108,000 Common stockholders' equity, no par 130,000 109,000 Total liabilities and stockholders' equity $ 577,000 $ 560,000 2010* $ 97,000 $ 95,000 112,000 118,000 $102,000 145,000 163,000 203,000 12,000 5,000 598,000 85,000

Answer rating: 100% (QA)

1 b The operating section 2 b cash inflow from operating activities 3 d In the financing activities ... View the full answer