Quiz Appendix B-1 Financial Accounting for MBAs, 5th Edition

Cambridge Business Publishers, ©2013
Quiz Appendix B-1 Financial Accounting for MBAs, 5th Edition
Appendix B – Financial Accounting for MBAs, 5
th edition by Easton, Wild, Halsey & McAnally
Practice Quiz
1. A firm uses the indirect method for cash flows. Using the
following information, what is its net
cash flow from operating activities?
Net income …………………………….…… $90,000
Accounts receivable decrease ……….….. 15,000
Inventory increase ………………………… 10,000
Accounts payable decrease ……………… 5,000
Income tax payable increase ..…………… 1,000
Depreciation expense …………………….. 8,000
a. $ 90,000
b. $ 69,000
c. $119,000
d. $ 99,000
2. The following information was obtained from Georgia
Company’s comparative balance sheets.
Assume that Georgia Company’s 2012 income statement showed
depreciation expense of
$4,000, a gain on sale of investments of $10,000, and a net
income of $50,000. Calculate the net
cash flow from operating activities using the indirect
method.
Dec. 31, 2012 Dec. 31, 2011
Cash …………………………. $ 20,000 $ 10,000
Accounts receivable ……….. 40,000 37,000
Inventory …………………….. 50,000 45,000
Prepaid rent ………………… 5,000 7,000
Long-term investments ……. 20,000 34,000
Plant assets …………………. 150,000 100,000
Accumulated depreciation …. 50,000 46,000
Accounts payable …………… 25,000 20,000
Income tax payable ………… 5,000 6,000
Common stock ……………… 121,000 100,000
Retained earnings ………….. 84,000 61,000
a. $42,000
b. $52,000
c. $43,000
d. $34,000Cambridge Business Publishers, ©2013
Quiz Appendix B-2 Financial Accounting for MBAs, 5th Edition
3. Count Company had a $25,000 net loss from operations for
2012. Depreciation expense for
2012 was $9,000 and a 2012 cash dividend of $5,000 was
declared and paid. Balances of the
current asset and current liability accounts at the
beginning and end-of 2012 follow. Calculate the
net cash flow from operating activities using the indirect
method.
Ending Beginning
Cash …………………………. $ 4,000 $ 8,000
Accounts receivable ……….. 10,000 20,000
Inventory …………………….. 45,000 50,000
Prepaid expenses ..………… 5,000 10,000
Accounts payable …………… 15,000 10,000
Accrued liabilities …………… 5,000 8,000
a. $56,000
b. $16,000
c. $ 6,000
d. ($ 4,000)
4. Calculate the cash flow for the following:
Cash paid for merchandise purchased:
Cost of goods sold …………………………. $100,000
Inventory, beginning year ……….…….….. 20,000
Inventory, end of year ……………………… 23,000
Accounts payable, beginning year ……….. 12,000
Accounts payable, end of year ……………. 6,000
a. $109,000
b. $91,000
c. $97,000
d. $103,000Cambridge Business Publishers, ©2013
Quiz Appendix B-3 Financial Accounting for MBAs, 5th Edition
5. Use the following information about Can Corporation for
2012.
Accounts payable increase …………………………… $10,000
Accounts receivable increase ………………………… 5,000
Accrued liabilities decrease …………………………… 4,000
Amortization expense ………………………………….. 7,000
Cash paid as dividends ………………………………… 30,000
Cash paid to purchase land …………………………… 85,000
Cash paid to retire bonds payable at par ……………. 55,000
Cash received from issuance of common stock ……. 40,000
Cash received from sale of equipment ………………. 20,000
Depreciation expense …………………………………. 30,000
Gain on sale of equipment ……………………………. 5,000
Inventory decrease ………………………………….…. 12,000
Net income ……………………………………………… 75,000
Prepaid expenses increase …………………………… 1,000
What is the net cash flow from investing activities?
a. ($73,000)
b. ($65,000)
c. ($85,000)
d. $20,000
6. Use the following information about the 2012 cash flows
of Thomas Corporation to compute the
net cash flow from financing.
Cash paid to employees and suppliers ……….. $150,000
Cash received from sale of land ……………….. 50,000
Cash paid to acquire treasury stock …………… 12,000
Cash received as interest ………………………. 7,000
Cash paid as income taxes …………………….. 12,000
Cash paid to purchase equipment …………….. 90,000
Cash received from customers …………………. 200,000
Cash received from issuing bonds payable …… 33,000
Cash paid as dividends ………………………….. 19,000
a. $ 21,000
b. $ 14,000
c. $ 2,000
d. ($31,000)
7. During 2012, Loda Corporation’s long-term investments account
(at cost) increased $30,000,
which was the net result of purchasing stocks costing
$160,000 and selling stocks costing
$130,000 at a $12,000 loss. Also, its bonds payable account
decreased $80,000, the net result
of issuing $200,000 of bonds at $206,000 and retiring bonds
with a face value (and book value) of
$280,000 at an $18,000 gain. Calculate Loda’s net cash flow
from investing activities for 2012.
a. ($42,000)
b. ($30,000)
c. ($98,000)
d. $160,000Cambridge Business Publishers, ©2013
Quiz Appendix B-4 Financial Accounting for MBAs, 5th Edition
8. Fox Company’s income statement and comparative balance
sheets follow.
Fox Company
Income Statement
For Year Ended December 31, 2012
Sales …………………………. $1,270,000
Cost of goods sold …………. $860,000
Wages expense …………….. 172,000
Insurance expense ..……….. 16,000
Depreciation expense ……… 34,000
Interest expense …………… 18,000
Income tax expense ……….. 58,000 1,158,000
Net income ………………….. $ 112,000
Fox Company
Balance Sheets
Dec. 31, 2012 Dec. 31, 2012
Assets
Cash …………………………………… $ 22,000 $ 10,000
Accounts receivable ………………… 82,000 64,000
Inventory ……………………………… 180,000 120,000
Prepaid insurance …………………… 10,000 14,000
Plant assets ………………………….. 500,000 390,000
Accumulated depreciation ………….. (136,000) (102,000)
Total assets ………………………….. $658,000 $496,000
Liabilities and Stockholders Equity
Accounts payable ……………………. $ 14,000 $ 20,000
Wages payable ………………………. 18,000 12,000
Income tax payable …………………. 14,000 16,000
Bonds payable ………………………. 260,000 150,000
Common stock ………………………. 180,000 180,000
Retained earnings …………………… 172,000 118,000
Total liabilities and equity …………… $658,000 $496,000
Cash dividends of $58,000 were declared and paid during
2012. Also in 2012, plant assets were
purchased for cash, and bonds payable were issued for cash.
Bond interest is paid semiannually
on June 30 and December 31. Accounts payable relate to
merchandise purchases. Compute
the net cash flow from financing activities for 2012.
a. $ 110,000
b. ($ 58,000)
c. ($110,000)
d. $ 52,000Cambridge Business Publishers, ©2013
Quiz Appendix B-5 Financial Accounting for MBAs, 5th Edition
9. Polar Company’s income statement and comparative balance
sheets follow.
Polar Company
Income Statement
For Year Ended December 31, 2012
Sales …………………………. $1,456,000
Cost of goods sold …………. $1,068,000
Wages expense …………….. 380,000
Advertising expense ..……… 62,000
Depreciation expense ……… 44,000
Interest expense …………… 36,000
Gain on sale of land ……….. (50,000) 1,540,000
Net loss ………………….….. $ (84,000)
Polar Company
Balance Sheets
Dec. 31, 2012 Dec. 31, 2012
Assets
Cash …………………………………… $ 98,000 $ 56,000
Accounts receivable ………………… 84,000 100,000
Inventory ……………………………… 214,000 226,000
Prepaid advertising ………………….. 20,000 26,000
Plant assets ………………………….. 720,000 444,000
Accumulated depreciation ………….. (156,000) (112,000)
Total assets ………………………….. $980,000 $740,000
Liabilities and Stockholders Equity
Accounts payable ……………………. $ 34,000 $ 62,000
Interest payable ……………..………. 12,000 —
Bonds payable ………………………. 400,000 —
Common stock ………………………. 490,000 490,000
Retained earnings …………………… 104,000 188,000
Treasury stock ……………………….. (60,000) —
Total liabilities and equity …………… $980,000 $740,000
During 2012, Polar sold land for $140,000 cash that had
originally cost $90,000. Polar also
purchased equipment for cash, acquired treasury stock for
cash, and issued bonds payable for
cash in 2012. Accounts payable relate to merchandise
purchases.
Calculate Polar’s net cash flow from investing activities
for 2012.
a. $ 140,000
b. $ 50,000
c. ($276,000)
d. ($226,000)Cambridge Business Publishers, ©2013
Quiz Appendix B-6 Financial Accounting for MBAs, 5th Edition
10. Locker Company’s income statement and comparative
balance sheets follow.
Locker Company
Income Statement
For Year Ended December 31, 2012
Sales ………………………………………. $1,400,000
Cost of goods sold ……………………….. $880,000
Wages and other operating expenses …. 190,000
Depreciation expense ………………………. 44,000
Amortization expense ……………………. 14,000
Interest expense ………………………..… 20,000
Income tax expense ……………………… 72,000
Loss of bond retirement ………………….. 10,000 1,230,000
Net income ……………………………..….. $ 170,000
Locker Company
Balance Sheets
Dec. 31, 2012 Dec. 31, 2011
Assets
Cash …………………………………… $ 54,000 $ 36,000
Accounts receivable ………………… 106,000 96,000
Inventory ……………………………… 206,000 218,000
Prepaid expenses …………..……….. 24,000 20,000
Plant assets ………………………….. 720,000 672,000
Accumulated depreciation ………….. (174,000) (168,000)
Intangible assets …………………….. 86,000 100,000
Total assets ………………………….. $1,022,000 $974,000
Liabilities and Stockholders Equity
Accounts payable ……………………. $64,000 $52,000
Interest payable ……………..………. 8,000 14,000
Income tax payable …………………. 12,000 16,000
Bonds payable ……………………….. 120,000 240,000
Common stock ………………………. 504,000 456,000
Retained earnings …………………… 314,000 196,000
Total liabilities and equity …………… $1,022,000 $974,000
During 2012, the company sold for $34,000 cash old equipment
that had cost $72,000 and had
$38,000 accumulated depreciation. Also in 2012, new
equipment worth $120,000 was acquired
in exchange for $120,000 of bonds payable, and bonds payable
of $240,000 were retired for cash
at a loss. A $52,000 cash dividend was declared and paid in
2012. Any stock issuances were for
cash.
Calculate Locker’s net cash flow from financing activities
for 2012.
a. ($250,000)
b. ($254,000)
c. $ 48,000
d. ($ 52,000)