BA323 Exam 6 Questions and Correct Answers.
Which of the following statements is CORRECT?
a.
The balance sheet for a given year is designed to give us an idea of what happened to the
firm during that year.
b.
The balance sheet for a given year tells us how much money the company earned
during that year.
c.
The difference between the total assets reported on the balance sheet and the liabilities
reported on this statement tells us the current market value of the stockholders' equity,
assuming the statements are prepared in accordance with generally accepted
accounting principles (GAAP).
d.
If a company's statements were prepared in accordance with generally accepted
accounting principles (GAAP), the market value of the stock equals the book value of the
stock as reported on the balance sheet.
e.
The assets section of a typical company's balance sheet begins with cash, then lists the
assets in the order in which they will probably be converted to cash, with the longest
lived assets listed last.
e.
The assets section of a typical company's balance sheet begins with cash, then lists the assets in
the order in which they will probably be converted to cash, with the longest lived assets listed
last.
Which of the following items is NOT normally considered to be a current asset?
,a.
Accounts receivable.
b.
Inventory.
c.
Bonds.
d.
Cash.
e.
Short-term, highly-liquid, marketable securities.
c.
Bonds.
Which of the following items cannot be found on a firm's balance sheet under
current liabilities?
a.
Accounts payable.
b.
Short-term notes payable to the bank.
c.
Accrued wages.
d.
Cost of goods sold.
,e.
Accrued payroll taxes.
d.
Cost of goods sold.
Which of the following statements is CORRECT?
a.
The focal point of the income statement is the cash account, because that account cannot be
manipulated by "accounting tricks."
b.
The reported income of two otherwise identical firms cannot be manipulated by different
accounting procedures provided the firms follow generally accepted accounting
principles (GAAP).
c.
The reported income of two otherwise identical firms must be identical if the firms are
publicly owned, provided they follow procedures that are permitted by the Securities
and Exchange Commission (SEC).
d.
If a firm follows generally accepted accounting principles (GAAP), then its reported
net income will be identical to its reported cash flow.
e.
The income statement for a given year is designed to give us an idea of how much the
firm earned during that year.
e.
The income statement for a given year is designed to give us an idea of how much the firm
earned during that year.
, Bauer Software's current balance sheet shows total common equity of $5,125,000. The
company has 430,000 shares of stock outstanding, and they sell at a price of $27.50
per share. By how much do the firm's market and book values per share differ?
d. $15.58
Shares outstanding = 430,000
Price per share = $27.50
Total book common equity = $5,125,000
Book value per share = Total book equity/Number of shares = $5,125,000/ 430,000 =
$11.92 Difference between book and market values = 27.50 - 11.92 = $15.58
Brown Fashions Inc.'s December 31, 2015 balance sheet showed total common equity of
$4,050,000 and 225,000 shares of stock outstanding. During 2015, the firm had $450,000
of net income, and it paid out $100,000 as dividends. What was the book value per share
at 12/31/15, assuming no common stock was either issued or retired during 2015?
e. $19.56
common equity $4,050,000
net income $450,000
dividends $100,000
Shares outstanding 225,000
(4,050,000 + 450,000 -100,000)/(225,000)= $19.56
Prezas Company's balance sheet showed total current assets of $3,000, all of which were
required in operations. Its current liabilities consisted of $975 of accounts payable, $600 of
6% short-term notes payable to the bank, and $250 of accrued wages and taxes. What was
its net operating working capital?
e. $1,775
nowc = ca - (cl - account payable)
= 3000 - ((975+600+250) - 600) = 1,775
Rao Construction recently reported $18.00 million of sales, $12.60 million of operating
costs other than depreciation, and $3.00 million of depreciation. It had $8.50 million of
Which of the following statements is CORRECT?
a.
The balance sheet for a given year is designed to give us an idea of what happened to the
firm during that year.
b.
The balance sheet for a given year tells us how much money the company earned
during that year.
c.
The difference between the total assets reported on the balance sheet and the liabilities
reported on this statement tells us the current market value of the stockholders' equity,
assuming the statements are prepared in accordance with generally accepted
accounting principles (GAAP).
d.
If a company's statements were prepared in accordance with generally accepted
accounting principles (GAAP), the market value of the stock equals the book value of the
stock as reported on the balance sheet.
e.
The assets section of a typical company's balance sheet begins with cash, then lists the
assets in the order in which they will probably be converted to cash, with the longest
lived assets listed last.
e.
The assets section of a typical company's balance sheet begins with cash, then lists the assets in
the order in which they will probably be converted to cash, with the longest lived assets listed
last.
Which of the following items is NOT normally considered to be a current asset?
,a.
Accounts receivable.
b.
Inventory.
c.
Bonds.
d.
Cash.
e.
Short-term, highly-liquid, marketable securities.
c.
Bonds.
Which of the following items cannot be found on a firm's balance sheet under
current liabilities?
a.
Accounts payable.
b.
Short-term notes payable to the bank.
c.
Accrued wages.
d.
Cost of goods sold.
,e.
Accrued payroll taxes.
d.
Cost of goods sold.
Which of the following statements is CORRECT?
a.
The focal point of the income statement is the cash account, because that account cannot be
manipulated by "accounting tricks."
b.
The reported income of two otherwise identical firms cannot be manipulated by different
accounting procedures provided the firms follow generally accepted accounting
principles (GAAP).
c.
The reported income of two otherwise identical firms must be identical if the firms are
publicly owned, provided they follow procedures that are permitted by the Securities
and Exchange Commission (SEC).
d.
If a firm follows generally accepted accounting principles (GAAP), then its reported
net income will be identical to its reported cash flow.
e.
The income statement for a given year is designed to give us an idea of how much the
firm earned during that year.
e.
The income statement for a given year is designed to give us an idea of how much the firm
earned during that year.
, Bauer Software's current balance sheet shows total common equity of $5,125,000. The
company has 430,000 shares of stock outstanding, and they sell at a price of $27.50
per share. By how much do the firm's market and book values per share differ?
d. $15.58
Shares outstanding = 430,000
Price per share = $27.50
Total book common equity = $5,125,000
Book value per share = Total book equity/Number of shares = $5,125,000/ 430,000 =
$11.92 Difference between book and market values = 27.50 - 11.92 = $15.58
Brown Fashions Inc.'s December 31, 2015 balance sheet showed total common equity of
$4,050,000 and 225,000 shares of stock outstanding. During 2015, the firm had $450,000
of net income, and it paid out $100,000 as dividends. What was the book value per share
at 12/31/15, assuming no common stock was either issued or retired during 2015?
e. $19.56
common equity $4,050,000
net income $450,000
dividends $100,000
Shares outstanding 225,000
(4,050,000 + 450,000 -100,000)/(225,000)= $19.56
Prezas Company's balance sheet showed total current assets of $3,000, all of which were
required in operations. Its current liabilities consisted of $975 of accounts payable, $600 of
6% short-term notes payable to the bank, and $250 of accrued wages and taxes. What was
its net operating working capital?
e. $1,775
nowc = ca - (cl - account payable)
= 3000 - ((975+600+250) - 600) = 1,775
Rao Construction recently reported $18.00 million of sales, $12.60 million of operating
costs other than depreciation, and $3.00 million of depreciation. It had $8.50 million of
