FINA 5320 Ch.2 Questions with Correct
Answers
1 ) A firm has common stock of $ 86 , paid - in surplus of $ 230 , total liabilities of $ 390 ,
current assets of $ 350 , and net fixed assets of $ 560 . What is the amount of the
shareholders ' equity ? A ) $ 170 B ) $ 706 C ) $ 510 D ) $ 910 E ) $ 520
E
2 ) Recently , the owner of Martha's Wares encountered severe legal problems and is
trying to sell her business . The company built a building at a cost of $ 1,290,000 that is
currently appraised at $ 1,490,000 . The equipment originally cost $ 770,000 and is
currently valued at 517,000 . The inventory is valued on the balance sheet at $ 460,000
but has a market value of only one - half of that amount . The owner expects to collect
99 percent of the $ 250,200 in accounts receivable . The firm has $ 11,000 in cash and
owes a total of $ 1,490,000 . The legal problems are personal and unrelated to the actual
business . What is the market value of this firm ? A ) $ 747,000 B ) $ 1,945,898 C ) $
1,005,698 D ) $ 1,235,698 E ) $ 1,485,898
C
3 ) Ivan's , Incorporated , paid $ 484 in dividends Common stock increased by $ 197 and
retained earnings and $ 587 in interest this past year . income for the year ? decreased
by $ 123 . What is the net A) $ 361 B ) $ 784 C ) $ 484 D ) $ 587 E ) $ 948
A
4 ) The tax rates for a particular year are shown below : Taxable Income Tax Rate $ 0
50,000 158 50,00175,000 25 % 75,001 100,000 34 % 100,001 335,000 398 What is the
, average tax rate for a firm with taxable income of $ 121,513 ? A ) 39.00 % B ) 20.00 %
C ) 25.22 % D ) 27.71 % E ) 36.12 %
C
5 ) The tax rates are as shown below : Taxable Income Tax Rate $ 0 50,000 15 %
50,00175,000 25 % 75,001 - 100,000 34 % Your firm currently has taxable income of $
81,200 . How much additional tax will you owe if you increase your taxable income by $
22,400 ? A ) $ 7,406 B ) $ 8,736 C ) $ 7,416 D ) $ 7,796 E ) $ 7,616
D
6 ) Your firm has net income of $ 273 on total sales of $ 1,240 . Costs are $ 690 and
depreciation is $ 130 . The tax rate is 35 percent . The firm does not have interest
expenses . What is the operating cash flow ? A) 420 B)273 C)550 D)693 E)403
E
7 ) Teddy's Pillows had beginning net fixed assets of $ 458 and ending net fixed assets of
$ 524 . Assets valued at $ 306 were sold during the year . Depreciation was $ 16 . What
is the amount of net capital spending ? A) $ 82 B ) $ 234 C ) $ 388 D ) $ 50 E ) $ 66
A
8 ) At the beginning of the year , a firm has current assets of $ 332 and current liabilities
of $ 236 . At the end of the year , the current assets are $ 501 and the current liabilities
are $ 276 . What is the change in net working capital ? A ) - $ 129 B ) $0 C ) $ 169 ( D ) $
129 E ) $ 209
D
Answers
1 ) A firm has common stock of $ 86 , paid - in surplus of $ 230 , total liabilities of $ 390 ,
current assets of $ 350 , and net fixed assets of $ 560 . What is the amount of the
shareholders ' equity ? A ) $ 170 B ) $ 706 C ) $ 510 D ) $ 910 E ) $ 520
E
2 ) Recently , the owner of Martha's Wares encountered severe legal problems and is
trying to sell her business . The company built a building at a cost of $ 1,290,000 that is
currently appraised at $ 1,490,000 . The equipment originally cost $ 770,000 and is
currently valued at 517,000 . The inventory is valued on the balance sheet at $ 460,000
but has a market value of only one - half of that amount . The owner expects to collect
99 percent of the $ 250,200 in accounts receivable . The firm has $ 11,000 in cash and
owes a total of $ 1,490,000 . The legal problems are personal and unrelated to the actual
business . What is the market value of this firm ? A ) $ 747,000 B ) $ 1,945,898 C ) $
1,005,698 D ) $ 1,235,698 E ) $ 1,485,898
C
3 ) Ivan's , Incorporated , paid $ 484 in dividends Common stock increased by $ 197 and
retained earnings and $ 587 in interest this past year . income for the year ? decreased
by $ 123 . What is the net A) $ 361 B ) $ 784 C ) $ 484 D ) $ 587 E ) $ 948
A
4 ) The tax rates for a particular year are shown below : Taxable Income Tax Rate $ 0
50,000 158 50,00175,000 25 % 75,001 100,000 34 % 100,001 335,000 398 What is the
, average tax rate for a firm with taxable income of $ 121,513 ? A ) 39.00 % B ) 20.00 %
C ) 25.22 % D ) 27.71 % E ) 36.12 %
C
5 ) The tax rates are as shown below : Taxable Income Tax Rate $ 0 50,000 15 %
50,00175,000 25 % 75,001 - 100,000 34 % Your firm currently has taxable income of $
81,200 . How much additional tax will you owe if you increase your taxable income by $
22,400 ? A ) $ 7,406 B ) $ 8,736 C ) $ 7,416 D ) $ 7,796 E ) $ 7,616
D
6 ) Your firm has net income of $ 273 on total sales of $ 1,240 . Costs are $ 690 and
depreciation is $ 130 . The tax rate is 35 percent . The firm does not have interest
expenses . What is the operating cash flow ? A) 420 B)273 C)550 D)693 E)403
E
7 ) Teddy's Pillows had beginning net fixed assets of $ 458 and ending net fixed assets of
$ 524 . Assets valued at $ 306 were sold during the year . Depreciation was $ 16 . What
is the amount of net capital spending ? A) $ 82 B ) $ 234 C ) $ 388 D ) $ 50 E ) $ 66
A
8 ) At the beginning of the year , a firm has current assets of $ 332 and current liabilities
of $ 236 . At the end of the year , the current assets are $ 501 and the current liabilities
are $ 276 . What is the change in net working capital ? A ) - $ 129 B ) $0 C ) $ 169 ( D ) $
129 E ) $ 209
D
