Question 1

Gnas Corporation's total current assets are $210,000, its noncurrent assets are $590,000, its total current liabilities are $160,000, its long-term liabilities are $490,000, and its stockholders' equity is $150,000. The current ratio is closest to:
A)1.31
B)0.76
C)0.33
D)0.36

Accepted Answer

Current ratio = current assets / current liabilities

Current assets = $210,000
Current liabilities = $160,000

Current ratio = 210,000 / 160,000 = 1.31

Therefore, the closest answer is A) 1.31.

Question 2

Laverde Corporation has provided the following data: $\begin{array}{cc}
&\text { Year 2 } & \text { Year 1 } \
\text {Inventory. }&\$ 185,000 & \$ 200,000 \
\text {Total assets. }&\$ 1,489,000 & \$ 1,470,000 \
\text {Sales }&\$ 1,220,000 &
\end{array}$ The company's total asset turnover for Year 2 is closest to:
A)1.22
B)7.60
C)0.13
D)0.82

Accepted Answer

The answer of Laverde Corporation has provided the following data:...

Question 3

Orem Corporation's current liabilities are $75,000, its long-term liabilities are $225,000, and its working capital is $100,000. If the corporation's debt-to-equity ratio is 0.30, total long-term assets must equal:
A)$1,000,000
B)$1,300,000
C)$1,125,000
D)$1,225,000

Accepted Answer

First, we can find the total liabilities of the corporation by adding the current and long-term liabilities:

Total liabilities = $75,000 + $225,000 = $300,000

Next, we can use the debt-to-equity ratio to find the amount of equity:

Debt-to-equity ratio = total liabilities / equity 
0.30 = $300,000 / equity 
Equity = $1,000,000

Finally, we can use the working capital to find the total current assets:

Working capital = total current assets - current liabilities 
$100,000 = total current assets - $75,000 
Total current assets = $175,000

To find total long-term assets, we can use the equation:

Total assets = total liabilities + equity 
Total assets = $300,000 + $1,000,000 
Total assets = $1,300,000

Therefore, the best choice is (C) $1,125,000.

Question 4

Stimac Corporation has total cash of $210,000, no marketable securities, total current receivables of $281,000, total inventory of $151,000, total prepaid expenses of $53,000, total current assets of $695,000, total current liabilities of $261,000, total stockholders' equity of $1,014,000, total assets of $1,415,000, and total liabilities of $401,000. The company's acid-test (quick) ratio is closest to:
A)2.08
B)1.73
C)2.66
D)1.88

Accepted Answer

The answer of Stimac Corporation has total cash of $210,000,...

Question 5

Data from Keniston Corporation's most recent balance sheet and income statement appear below: $\begin{array}{ll}
&\text { This Year } & \text { Last Year } \
\text {Accounts receivable. }&\$ 128,000 & \$ 114,000 \
\text {Inventory. }&\$228,000 & \$ 193,000 \
\text {Sales on account. }&\$813,000 & \
\text {Cost of goods sold }&\$ 597,000 &
\end{array}$ The average collection period for this year is closest to:
A)39.1 days
B)45.1 days
C)54.3 days
D)57.5 days

Accepted Answer

The average collection period is calculated as (Average Accounts Receivable / Sales on Account) * 365. The average accounts receivable is ($128,000 + $114,000) / 2 = $121,000. Thus, the average collection period is ($121,000 / $813,000) * 365 ≈ 54.3 days.

Question 6

Feiler Corporation has total current assets of $483,000, total current liabilities of $347,000, total stockholders' equity of $1,057,000, total net plant and equipment of $1,031,000, total assets of $1,514,000, and total liabilities of $457,000. The company's current ratio is closest to:
A)0.32
B)0.30
C)1.39
D)0.95

Accepted Answer

The current ratio is calculated by dividing total current assets by total current liabilities:

Current ratio = Total current assets / Total current liabilities

Substituting the values given in the question, we get:

Current ratio = $483,000 / $347,000

Current ratio = 1.39

Therefore, the closest answer choice is C) 1.39.

Question 7

Dratif Corporation's working capital is $33,000 and its current liabilities are $80,000. The corporation's current ratio is closest to:
A)1.41
B)0.59
C)3.42
D)0.41

Accepted Answer

The answer of Dratif Corporation's working capital is $33,000 and...

Question 8

During the year just ended, the retailer James Corporation purchased $425,000 of inventory. The inventory balance at the beginning of the year was $175,000. If the cost of goods sold for the year was $450,000, then the inventory turnover for the year was:
A)2.77
B)2.57
C)3.00
D)2.62

Accepted Answer

The answer of During the year just ended, the retailer...

Question 9

Harris Corporation, a retailer, had cost of goods sold of $290,000 last year. The beginning inventory balance was $26,000 and the ending inventory balance was $24,000. The corporation's inventory turnover was closest to:
A)12.08
B)11.60
C)5.80
D)11.15

Accepted Answer

Inventory turnover = Cost of goods sold / Average inventory
Average inventory = (Beginning inventory + Ending inventory) / 2

Average inventory = ($26,000 + $24,000) / 2 = $25,000

Inventory turnover = $290,000 / $25,000 = 11.6 (rounded to the nearest hundredth)

Therefore, the closest answer is B) 11.60

Question 10

Granger Corporation had $180,000 in sales on account last year. The beginning accounts receivable balance was $10,000 and the ending accounts receivable balance was $18,000. The corporation's average collection period was closest to:
A)20.3 days
B)28.4 days
C)36.5 days
D)56.8 days

Accepted Answer

Average accounts receivable balance = ($10,000 + $18,000) ÷ 2 = $14,000
Accounts receivable turnover = Sales on account ÷ Average accounts receivable balance
= $180,000 ÷ $14,000 = 12.86
Average collection period = 365 days ÷ Accounts receivable turnover
= 365 days ÷ 12.86 = 28.4 days

Question 11

Mcrae Corporation's total current assets are $380,000, its noncurrent assets are $500,000, its total current liabilities are $340,000, its long-term liabilities are $250,000, and its stockholders' equity is $290,000. Working capital is:
A)$380,000
B)$40,000
C)$250,000
D)$290,000

Accepted Answer

Working capital is calculated by subtracting current liabilities from current assets. Therefore, working capital = $380,000 - $340,000 = $40,000.

Question 12

Frantic Corporation had $130,000 in sales on account last year. The beginning accounts receivable balance was $10,000 and the ending accounts receivable balance was $16,000. The corporation's accounts receivable turnover was closest to:
A)5.00
B)13.00
C)10.00
D)8.13

Accepted Answer

Accounts receivable turnover = Net Credit Sales / Average Accounts Receivable

Net Credit Sales = Total Sales - Cash Sales
Net Credit Sales = $130,000 - $0 = $130,000

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2
Average Accounts Receivable = ($10,000 + $16,000) / 2 = $13,000

Accounts receivable turnover = $130,000 / $13,000 = 10.00

Therefore, the closest answer is C) 10.00.

Question 13

Erastic Corporation has $14,000 in cash, $8,000 in marketable securities, $34,000 in account receivable, $40,000 in inventories, and $42,000 in current liabilities. The corporation's current assets consist of cash, marketable securities, accounts receivable, and inventory. The corporation's acid-test ratio is closest to:
A)1.33
B)0.81
C)2.29
D)1.14

Accepted Answer

The answer of Erastic Corporation has $14,000 in cash, $8,000...

Question 14

Windham Corporation has current assets of $400,000 and current liabilities of $500,000. Windham Corporation's current ratio would be increased by:
A)the purchase of $100,000 of inventory on account.
B)the payment of $100,000 of accounts payable.
C)the collection of $100,000 of accounts receivable.
D)refinancing a $100,000 long-term loan with short-term debt.

Accepted Answer

The answer of Windham Corporation has current assets of $400,000...

Question 15

Kopas Corporation has provided the following data: $\begin{array}{ll}
&\text { This Year } & \text { Last Year } \
\text {Accounts receivable. }&\$ 89,000&\$107,000 \
\text {Inventory. }&\$ 160,000&\$156,000 \
\text {Sales on account. }&\$ 627,000 & \
\text {Cost of goods sold }&\$ 488,000 &
\end{array}$ The inventory turnover for this year is closest to:
A)3.09
B)0.98
C)1.03
D)3.05

Accepted Answer

Inventory turnover = Cost of goods sold / Average inventoryAverage inventory = (Beginning inventory + Ending inventory) / 2= (156,000 + 160,000) / 2= 158,000Inventory turnover = 488,000 / 158,000= 3.09

Question 16

Calin Corporation has total current assets of $615,000, total current liabilities of $230,000, total stockholders' equity of $1,183,000, total net plant and equipment of $958,000, total assets of $1,573,000, and total liabilities of $390,000. The company's working capital is:
A)$615,000
B)$1,183,000
C)$385,000
D)$958,000

Accepted Answer

Working capital is calculated by subtracting current liabilities from current assets. So, Working Capital = total current assets - total current liabilities = $615,000 - $230,000 = $385,000.

Question 17

Spomer Corporation's inventory at the end of Year 2 was $114,000 and its inventory at the end of Year 1 was $120,000. Cost of goods sold amounted to $710,000 in Year 2. The company's inventory turnover for Year 2 is closest to:
A)5.92
B)1.05
C)6.07
D)6.23

Accepted Answer

Inventory turnover = Cost of goods sold / Average inventory
Average inventory = (Ending inventory + Beginning inventory) / 2

Average inventory for Year 2 = ($114,000 + $120,000) / 2 = $117,000
Inventory turnover for Year 2 = $710,000 / $117,000 = 6.07 (rounded to two decimal places)

Therefore, the closest answer is choice letter C.

Question 18

Dennisport Corporation has an acid-test ratio of 2.5. It has current liabilities of $40,000 and noncurrent assets of $70,000. The corporation's current assets consist of cash, marketable securities, accounts receivable, prepaid expenses, and inventory; it has no short-term notes receivable. If Dennisport's current ratio is 3.1, its inventory and prepaid expenses must be:
A)$12,400
B)$24,000
C)$30,000
D)$40,000

Accepted Answer

Current ratio = Current assets ÷ Current liabilities
3.1 = Current assets ÷ $40,000
Current assets = $124,000
Acid-test ratio = (Cash + Marketable securities + Accounts receivable + Short-term notes receivable) ÷ Current liabilities
2.5 = (Cash + Marketable securities + Accounts receivable + 0) ÷ $40,000
Cash + Marketable securities + Accounts receivable = $100,000
Current assets = Cash + Marketable securities + Accounts receivable + Prepaid expenses + Inventory
$124,000 = $100,000 + Prepaid expenses + Inventory
Prepaid expenses + Inventory = $24,000

Question 19

Natcher Corporation's accounts receivable at the end of Year 2 was $126,000 and its accounts receivable at the end of Year 1 was $130,000. The company's inventory at the end of Year 2 was $127,000 and its inventory at the end of Year 1 was $120,000. Sales, all on account, amounted to $1,380,000 in Year 2. Cost of goods sold amounted to $800,000 in Year 2. The company's operating cycle for Year 2 is closest to:
A)44.7 days
B)17.3 days
C)62.8 days
D)90.2 days

Accepted Answer

Inventory turnover = Cost of goods sold ÷ Average inventory*
= $800,000 ÷ $123,500 = 6.48 (rounded)
*Average inventory =
($127,000 + $120,000) ÷ 2 = $123,500
Average sale period = 365 days ÷ Inventory turnover
= 365 days ÷ 6.48 = 56.3 days (rounded)
Accounts receivable turnover = Sales on account ÷ Average accounts receivable*
= $1,380,000 ÷ $128,000 = 10.78 (rounded)
*Average accounts receivable =
($126,000 + $130,000) ÷ 2 = $128,000
Average collection period = 365 days ÷ Accounts receivable turnover
= 365 days ÷ 10.78 = 33.9 days (rounded)
Operating cycle = Average sale period + Average collection period
= 56.3 days + 33.9 days = 90.2 days

Question 20

Irawaddy Company, a retailer, had cost of goods sold of $230,000 last year. The beginning inventory balance was $24,000 and the ending inventory balance was $22,000. The company's average sale period was closest to:
A)36.5 days
B)73.0 days
C)38.1 days
D)34.9 days

Accepted Answer

The answer of Irawaddy Company, a retailer, had cost of...

Quiz 15: Financial Statement Analysis

Gnas Corporation's total current assets are $210,000, its noncurrent assets are $590,000, its total current liabilities are $160,000, its long-term liabilities are $490,000, and its stockholders' equity is $150,000. The current ratio is closest to:

Orem Corporation's current liabilities are $75,000, its long-term liabilities are $225,000, and its working capital is $100,000. If the corporation's debt-to-equity ratio is 0.30, total long-term assets must equal:

Feiler Corporation has total current assets of $483,000, total current liabilities of $347,000, total stockholders' equity of $1,057,000, total net plant and equipment of $1,031,000, total assets of $1,514,000, and total liabilities of $457,000. The company's current ratio is closest to:

Dratif Corporation's working capital is $33,000 and its current liabilities are $80,000. The corporation's current ratio is closest to:

During the year just ended, the retailer James Corporation purchased $425,000 of inventory. The inventory balance at the beginning of the year was $175,000. If the cost of goods sold for the year was $450,000, then the inventory turnover for the year was:

Harris Corporation, a retailer, had cost of goods sold of $290,000 last year. The beginning inventory balance was $26,000 and the ending inventory balance was $24,000. The corporation's inventory turnover was closest to:

Granger Corporation had $180,000 in sales on account last year. The beginning accounts receivable balance was $10,000 and the ending accounts receivable balance was $18,000. The corporation's average collection period was closest to:

Mcrae Corporation's total current assets are $380,000, its noncurrent assets are $500,000, its total current liabilities are $340,000, its long-term liabilities are $250,000, and its stockholders' equity is $290,000. Working capital is:

Frantic Corporation had $130,000 in sales on account last year. The beginning accounts receivable balance was $10,000 and the ending accounts receivable balance was $16,000. The corporation's accounts receivable turnover was closest to:

Windham Corporation has current assets of $400,000 and current liabilities of $500,000. Windham Corporation's current ratio would be increased by:

Calin Corporation has total current assets of $615,000, total current liabilities of $230,000, total stockholders' equity of $1,183,000, total net plant and equipment of $958,000, total assets of $1,573,000, and total liabilities of $390,000. The company's working capital is:

Spomer Corporation's inventory at the end of Year 2 was $114,000 and its inventory at the end of Year 1 was $120,000. Cost of goods sold amounted to $710,000 in Year 2. The company's inventory turnover for Year 2 is closest to:

Irawaddy Company, a retailer, had cost of goods sold of $230,000 last year. The beginning inventory balance was $24,000 and the ending inventory balance was $22,000. The company's average sale period was closest to: