1) How does reliable financial disclosure benefit a company that is seeking to borrow money from a bank? [Choose only ONE.]

• By transferring operating control
• By guaranteeing compliance with SEC regulations
• By reducing uncertainty
• By increasing synergy

2) The data below are for Julian Company and Standard Company. Standard Company is the best company in Julian's industry; all companies in the industry strive to do things the way that Standard does them.

JulianStandard

Cash5003,250

Accounts Receivable5,00015,000

Inventory3,00019,500

Property, Plant, and Equipment12,00040,000

Total Assets20,50077,750

Total Liabilities13,00037,000

Total Equity7,50040,750

Sales30,000150,000

Cost of Goods Sold(18,000)(90,000)

Wage Expense(7,500)(30,000)

Research Expense(2,000)(10,000)

Advertising Expense(1,600)(8,000)

Net Income90012,000

Which ONE of the following statements is TRUE regarding Julian's income statement? Remember, Standard Company represents the standard of performance in Julian's industry.

• Julian Company has a problem with its research expense.
• Julian Company has a problem with its wage expense.
• Julian Company's profitability is better than Standard Company's profitability
• Julian Company has a problem with its cost of goods sold.
• Julian Company has a problem with its advertising expense.

3) Using the following information, compute total CURRENT LIABILITIES:

Accrued Income Taxes Payable

9,000

Notes Payable (due in 14 months)

1,100

Paid-in Capital

1,750

Treasury Stock

400

Current Portion of Long-Term Debt

10,000

Unearned Revenue

250

Accounts Payable

700

Retained Earnings

1,000

Additional Paid-in Capital

4,000

Hint: "Unearned revenue" is an obligation to deliver a service that has not yet been delivered but for which the customer has already paid.

• $19,950
• $20,350
• $21,700
• $19,700
• $10,700

4) Use the following information to compute NET INCOME. The income tax rate on all items is 40%.

Cost of Goods Sold

$ 11,000

Interest Expense

2,100

Loss from sale of land

1,000

Cash

900

Selling and Administrative Expense

1,750

Accounts payable

400

Sales

20,000

Gain from sale of equipment

1,250

Dividends

700

• $3,780
• $3,240
• $2,540
• $2,820
• $3,360

5) "It is assumed that the company will continue to exist into the foreseeable future." - Which ONE of the terms below matches the definition/description just given?

• Arm's-length
• Accrual basis
• Entity concept
• Stable monetary measure
• Going concern assumption

6) Using the data below, compute Return on Sales.

Accounts Payable800

Accounts Receivable1,100

Capital Stock2,000

Cash50

Cost of Goods Sold6,000

Inventory1,500

Long-term Debt1,820

Net Income950

Property, Plant, and Equipment (net)3,000

Retained Earnings1,030

Sales10,000

Market value of shares12,000

• 9.5%
• 19.0%
• 40.0%
• 31.4%
• 17.5%

7) "Amount of money made on activitiesoutsidenormal business operations" - Which ONE of the terms below matches the definition/description just given?

• Owners' equity
• Gains
• Accounts receivable
• Cash
• Revenues

8) The data below are for Julian Company and Standard Company. Standard Company is the best company in Julian's industry; all companies in the industry strive to do things the way that Standard does them.

JulianStandard

Cash5003,250

Accounts Receivable5,00015,000

Inventory3,00019,500

Property, Plant, and Equipment12,00040,000

Total Assets20,50077,750

Total Liabilities13,00037,000

Total Equity7,50040,750

Sales20,000130,000

Cost of Goods Sold(6,000)(39,000)

Wage Expense(10,000)(65,000)

Research Expense(2,000)(13,000)

Advertising Expense(1,600)(6,000)

Net Income4007,000

Which ONE of the following statements is TRUE regarding Julian's income statement? Remember, Standard Company represents the standard of performance in Julian's industry.

• Julian Company's profitability is better than Standard Company's profitability.
• Julian Company has a problem with its wage expense.
• Julian Company has a problem with its research expense.
• Julian Company has a problem with its advertising expense.
• Julian Company has a problem with its cost of goods sold.

9) Chen Corporation had the following cash flows during 20X3.

Cash receipt from the issuance of stock......................................................... $40,000

Cash received from customers............................................................................ 20,000

Interest received on long-term investments...................................................... 10,000

Cash paid for wages.............................................................................................. 12,000

Cash paid for insurance.......................................................................................... 1,000

Cash paid for dividends.......................................................................................... 6,000

Cash paid to purchase building........................................................................... 60,000

Cash paid to purchase land................................................................................. 20,000

Given this information, net cash inflow (outflow) from investing activities is:

• negative $20,000
• negative $86,000
• negative $80,000
• negative $60,000

10) The following list of items is for Company N.

Cash

5,600

Inventory

14,000

Unearned Revenue

2,400

Paid-in Capital

4,000

Retained Earnings (ending)

13,200

Compute TOTAL STOCKHOLDERS' EQUITY.

• $23,600
• $29,600
• $42,800
• $17,200
• $19,600

11) Using the following information, compute cash flow from investing activities.

Cash Inflow (Outflow)

Cash received from sale of a building$5,600

Cash paid for interest(450)

Cash paid to repurchase shares of stock (treasury stock)(1,000)

Cash collected from customers10,000

Cash paid for dividends(780)

Cash paid for income taxes(1,320)

• $4,150
• $4,600
• $4,820
• $5,150
• $5,600

12) Using the following information, compute theENDINGcash balance for the year.

Cash balance, beginning$1,500

Cash paid to purchase inventory7,800

Cash received from sale of a building5,600

Cash paid for interest450

Cash paid to repay a loan1,000

Cash collected from customers10,000

Cash received from issuance of new shares of common stock1,200

Cash paid for dividends780

Cash paid for income taxes1,320

Cash paid to purchase machinery1,950

• $6,000
• $4,570
• $3,800
• $4,420
• $5,000

13) The following information describes the company's sales for the year:

a.A sale for $100,000 was made on March 23. As of the end of the year, all of the work associated with the sale has been completed. Unfortunately, the customer is a significant credit risk and the collection of the cash for the sale is very uncertain. No cash has been collected as of the end of the year.

b.A sale for $130,000 was made on July 12.The $130,000 cash for the sale was collected in full on July 12. The work associated with the sale has not yet begun, but is expected to be completed early next year.

c.A sale for $170,000 was made on November 17. No cash has been collected as of the end of the year, but all of the cash is expected to be collected early next year. As of the end of the year, all of the work associated with the sale has been completed.

How much revenue should be recognized for the year?

• $130,000
• $100,000
• $400,000
• $300,000
• $230,000
• $0
• $270,000
• $170,000

14) Use the following information to compute NET INCOME. The income tax rate on all items is 40%.

Cost of Goods Sold$ 9,000

Interest Expense2,100

Loss from sale of land1,000

Cash900

Selling and Administrative Expense1,750

Accounts payable400

Sales20,000

Gain from sale of equipment1,250

Dividends700

• $4,980
• $3,740
• $4,020
• $4,560
• $4,440