Chapter 3 Understanding Financial Statements and Cash Flows

13) Use the following information to calculate the change in the company's cash balance for the year.

Credit Sales	$800,000
Cash Sales	$500,000
Operating Expenses on Credit	$200,000
Cash Operating Expenses	$700,000
Accounts Receivable (Beg. of Year)	$50,000
Accounts Receivable (End of Year)	$80,000
Accounts Payable (Beg. of Year)	$50,000
Accounts Payable (End of Year)	$100,000
Income Taxes Paid	$160,000

A) $145,000

B) $180,000

C) $260,000

D) $365,000

14) Given the following financial statements for ARGON Corporation, what is the company's after-tax cash flow from operations?

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		Fixed Assets	430,000		350,000
Operating Expenses	200,000		Total Assets	$480,000		$395,000
Depreciation	100,000
EBIT	250,000		Current Liabilities	$35,000		$50,000
Interest Expense	50,000		Long-term Debt	330,000		270,000
EBT	200,000		Common Stock	5,000		5,000
Taxes	80,000		Retained Earnings	110,000		70,000
Net Income	$120,000		Total Liabilities & Equity	$480,000		$395,000

A) $10,000

B) $270,000

C) $120,000

D) $295,000

15) Given the following financial statements for ARGON Corporation, and assuming that ARGON paid a common dividend of $80,000 in 2010, what is the company's financing cash flow 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) -$10,000

B) -$15,000

C) -$65,000

D) -$70,000

16) Racing Horse Corporation reported net income for 2010 of $200,000, sales of $540,000, expenses (excluding depreciation) of $180,000, and depreciation expense of $60,000. The company's accounts receivable balance increased by $40,000 during the year and its accounts payable balance remained the same. The company's change in cash for the year is estimated to be

A) $100,000.

B) $160,000.

C) $220,000.

D) $380,000.

17) Examples of uses of cash include

A) paying cash dividends to stockholders.

B) borrowing an additional amount using a secured loan.

C) selling machinery.

D) all of the above

18) Siskiyou, Inc. has total current assets of $1,200,000; total current liabilities of $500,000; and long-term assets of $800,000. How much is the firm's Total Liabilities & Equity?

A) $2,500,000

B) $1,300,000

C) $2,000,000

D) $1,800,000

19) Siskiyou, Inc. has total current assets of $1,200,000; total current liabilities of $500,000; long-term assets of $800,000; and long-term debt of $600,000. How much is the firm's total equity?

A) $1,200,000

B) $800,000

C) $900,000

D) $2,000,000

20) What information does a firm's statement of cash flows provide to the viewing public?

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

B) a report documenting a firm's cash inflows and cash outflows from operating, financing, and investing activities 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 for a defined period of time

21) Which of the following best describes cash flow from financing activities?

A) Interest income, plus dividend income, minus taxes

B) Interest expense, minus dividends paid

C) Interest paid, plus dividends paid, plus increase (or minus decrease) in stock, plus increase (or minus decrease) in debt

D) Increase (or minus decrease) in stock, plus increase (or minus decrease) in debt, minus interest paid, minus dividends paid.

Please refer to Table 3-2 for the following questions.

Table 3-2

Enigma has the following financial information:

Net Income	$70,000
Taxable Income (EBT)	$100,000
Interest Expense	$20,000
Depreciation Expense	$15,000
Tax Expense	$30,000
Increase in Current Assets	$20,000
Increase in A/P and Accruals	$10,000
Decrease in Gross Fixed Assets	$100,000

No changes were made in interest payable or taxes payable.

22) Based on the information in Table 3-2, what is Enigma's cash flow from operations?

A) $85,000

B) $100,000

C) $105,000

D) $75,000