Chapter 3 Understanding Financial Statements and Cash Flows

31) All of the following are equity accounts on a balance sheet EXCEPT

A) retained earnings.

B) cash.

C) common stock.

D) paid-in capital.

32) The two principal sources of financing for corporations are

A) debt and accounts payable.

B) debt and equity.

C) common equity and preferred equity.

D) cash and common equity.

33) Net working capital is equal to

A) total assets minus total liabilities.

B) current assets minus total liabilities.

C) total operating capital minus net income.

D) current assets minus current liabilities.

34) Given the following financial statements for ACME Corporation, what amount did the company pay in dividends for 2010?

Income Statement		Balance Sheet
Year Ended 12/31/10			12/31/2010		12/31/2009
Sales	$1,300,000		Current Assets	$50,000		$45,000
Cost of Goods Sold	750,000		Gross Fixed Assets	880,000		650,000
Operating Expenses	200,000		Less Accumulated Depreciation	450,000		350,000
Depreciation Expense	100,000		Fixed Assets	430,000		350,000
EBIT	250,000		Total Assets	$480,000		$395,000
Interest Expense	50,000
EBT	200,000		Current Liabilities	$35,000		$50,000
Taxes	80,000		Long-term Debt	330,000		270,000
Net Income	$120,000		Common Stock	5,000		5,000
			Retained Earnings	110,000		70,000
			Total Liabilities & Equity	$480,000		$395,000

A) $45,000

B) $25,000

C) $100,000

D) $80,000

35) All of the following statements about balance sheets are true EXCEPT

A) Assets - Liabilities = Shareholders' Equity.

B) assets are reported at historical cost.

C) balance sheets show average asset balances over a one-year period.

D) a balance sheet reports a company's financial position at a specific point in time.

36) All of the following are income statement items EXCEPT

A) accrued expenses.

B) depreciation expense.

C) cost of goods sold.

D) interest expense.

37) California Retailing Inc. has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000. The firm's interest expense is $250,000, and the corporate tax rate is 40%. The firm paid dividends to preferred stockholders of $40,000, and the firm distributed $60,000 in dividend payments to common stockholders. What is California Retailing's "Addition to Retained Earnings"?

A) $650,000

B) $390,000

C) $330,000

D) $290,000

38) What information does a firm's balance sheet provide to the viewing public?

A) a report of investments made and their cost for a specific period of time

B) a complete listing of all of a firm's cash receipts and cash expenditures for a defined period of time

C) a report of revenues and expenses for a defined period of time

D) an itemization of all of a firm's assets, liabilities, and equity as of the balance sheet date

39) Which of the following accounts belongs on the asset side of a balance sheet?

A) depreciation expense

B) accounts payable

C) inventory

D) accruals

40) Which of the following accounts does NOT belong on the asset side of a balance sheet?

A) accounts receivable

B) marketable securities

C) cash

D) common stock