FIN 200 QUIZ 1 QUESTIONS WITH
CORRECT ANSWERS
At the beginning of the year, Vendors, Incorporated, had owners' equity of $51,020.
During the year, net income was $7,200 and the company paid dividends of $4,820.
The company also repurchased $9,220 in equity. What was the owners' equity account
at the end of the year?
A) $34,600
B) $48,220
C) $41,800
D) $36,980
E) $44,180 - Answer- E) $44,180
Ending owners' equity = $51,020 + 7,200 − 4,820 − 9,220 = $44,180 (Owners' equity +
Net income - Dividends - Repurchases)
Adison Winery had beginning long-term debt of $39,721 and ending long-term debt of
$45,126. The beginning and ending total debt balances were $49,141 and $54,212,
respectively. The company paid interest of $4,345 during the year. What was the
company's cash flow to creditors?
A) $5,405
B) −$1,060
C) $9,416
D) −$726
E) $726 - Answer- B) -$1,060
Cash flow to creditors = $4,345 − ($45,126 − 39,721) = −$1,060
Company paid interest - (Ending long-term debt - beginning long term debt)
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) $1,005,698
B) $1,945,898
C) $747,000
D) $1,235,698
, E) $1,485,898 - Answer- A) $1,005,698
Market value = $1,490,000 (building) + 517,000 (equipment) + (.5 × $460,000)
(inventory) + (.99 × $250,200) (accounts receivable) + 11,000 cash − 1,490,000
(amount owed)
Market value = $1,005,698
At the beginning of the year, a firm has current assets of $329 and current liabilities of
$233. At the end of the year, the current assets are $495 and the current liabilities are
$273. What is the change in net working capital?
A) $206
B) −$126
C) $0
D) $126
E) $166 - Answer- D) $126
Change in net working capital = ($495 − 273) − ($329 − 233) = $126
(End Current assets - End of Year Current liabilities) - (Beginning Current Assets -
Beginning Current Liabilities)
For the past year, Kayla, Incorporated, has sales of $45,602, interest expense of
$3,542, cost of goods sold of $15,959, selling and administrative expense of $11,386,
and depreciation of $5,835. If the tax rate is 24 percent, what is the operating cash
flow?
A) $14,753
B) $12,584
C) $6,749
D) $16,126
E) $8,880 - Answer- D) $16,126
BIT = $45,602 − 15,959 − 11,386 − 5,835 = $12,422
EBT = $12,422 − 3,542 = $8,880
Taxes = $8,880(.24) = $2,131
OCF = $12,422 + 5,835 − 2,131 = $16,126
The tax rates are as shown below:
Taxable Income. Tax Rate
$0 − 50,000 15%
50,001 − 75,000 25%
75,001 − 100,000 34%
100,001 − 335,000 39%
The taxable income is $80,200. How much additional tax will you owe if you increase
your taxable income by $21,400?
A) $7,356
B) $8,346
C) $6,966
D) $7,276
E) $6,976 - Answer- A) $7,356
CORRECT ANSWERS
At the beginning of the year, Vendors, Incorporated, had owners' equity of $51,020.
During the year, net income was $7,200 and the company paid dividends of $4,820.
The company also repurchased $9,220 in equity. What was the owners' equity account
at the end of the year?
A) $34,600
B) $48,220
C) $41,800
D) $36,980
E) $44,180 - Answer- E) $44,180
Ending owners' equity = $51,020 + 7,200 − 4,820 − 9,220 = $44,180 (Owners' equity +
Net income - Dividends - Repurchases)
Adison Winery had beginning long-term debt of $39,721 and ending long-term debt of
$45,126. The beginning and ending total debt balances were $49,141 and $54,212,
respectively. The company paid interest of $4,345 during the year. What was the
company's cash flow to creditors?
A) $5,405
B) −$1,060
C) $9,416
D) −$726
E) $726 - Answer- B) -$1,060
Cash flow to creditors = $4,345 − ($45,126 − 39,721) = −$1,060
Company paid interest - (Ending long-term debt - beginning long term debt)
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) $1,005,698
B) $1,945,898
C) $747,000
D) $1,235,698
, E) $1,485,898 - Answer- A) $1,005,698
Market value = $1,490,000 (building) + 517,000 (equipment) + (.5 × $460,000)
(inventory) + (.99 × $250,200) (accounts receivable) + 11,000 cash − 1,490,000
(amount owed)
Market value = $1,005,698
At the beginning of the year, a firm has current assets of $329 and current liabilities of
$233. At the end of the year, the current assets are $495 and the current liabilities are
$273. What is the change in net working capital?
A) $206
B) −$126
C) $0
D) $126
E) $166 - Answer- D) $126
Change in net working capital = ($495 − 273) − ($329 − 233) = $126
(End Current assets - End of Year Current liabilities) - (Beginning Current Assets -
Beginning Current Liabilities)
For the past year, Kayla, Incorporated, has sales of $45,602, interest expense of
$3,542, cost of goods sold of $15,959, selling and administrative expense of $11,386,
and depreciation of $5,835. If the tax rate is 24 percent, what is the operating cash
flow?
A) $14,753
B) $12,584
C) $6,749
D) $16,126
E) $8,880 - Answer- D) $16,126
BIT = $45,602 − 15,959 − 11,386 − 5,835 = $12,422
EBT = $12,422 − 3,542 = $8,880
Taxes = $8,880(.24) = $2,131
OCF = $12,422 + 5,835 − 2,131 = $16,126
The tax rates are as shown below:
Taxable Income. Tax Rate
$0 − 50,000 15%
50,001 − 75,000 25%
75,001 − 100,000 34%
100,001 − 335,000 39%
The taxable income is $80,200. How much additional tax will you owe if you increase
your taxable income by $21,400?
A) $7,356
B) $8,346
C) $6,966
D) $7,276
E) $6,976 - Answer- A) $7,356
