BUSINESS

Question 30  of 37

Case 17.5

Bevington Studio reported the following income statement and balance sheet amounts on December 31, 2007.

20072006

Net sales revenue (all credit)$950,000

Cost of goods sold630,000

Gross profit320,000

Selling and general expenses230,000

Interest expense20,000

Net income$70,000

 

Current assets$60,000$55,000

Long-term assets465,000445,000

Total assets – 12/31$525,000$500,000

Current liabilities$25,000$20,000

Long-term liabilities105,000205,000

Common stockholders equity – 12/31395,000275,000

Total liabilities and stockholders’ equity$525,000$500,000

Inventory and prepaid expenses account for $20,000 of the 2007 current assets.

Average inventory for 2007 is $15,000.

Average net accounts receivable for 2007 is $30,000.

Average one-day sales are $3,150.

There are 7,000 shares of common stock outstanding.

Total dividends paid during 2007 were $140,000.

The market price per share of common stock is $21.

Refer to Case 17.5. What is the company’s earnings per share?

 

$12.88

$45.71

$42.86

$10.00

 

Question 31  of 37

The statement of cash flows is designed to fulfill all of the following purposes, except to:

 

evaluate management decisions.

show the relationship of net income to changes in the company’s cash.

assess the collectability of accounts receivable.

help predict future cash flows.

 

Question 32  of 37

The declaration of dividends by the board of directors would be reported on a statement of cash flows as:

 

a cash inflow under the financing activities.

a cash outflow under the investing activities.

a cash outflow under the financing activities.

nothing-this activity would not be reported on a statement of cash flows.

 

Question 33  of 37

Which of the following would be reported on a statement of cash flows as a financing activity?

 

Interest paid on bonds payable

Purchase of treasury stock

Distribution of stock dividend

All of the above

 

Question 34  of 37

Under the indirect method of preparing a statement of cash flows, cash disbursed for the acquisition of a plant asset is:

 

added in the investing activities section.

subtracted in the investing activities section.

added in the financing activities section.

subtracted in the operating activities section.

 

Question 35  of 37

Porter Business Products acquired equipment on January 1, 2008 for $470,000. The equipment has an estimated useful life of 5 years and an estimated residual value of $30,000. The equipment is expected to produce 150,000 units. During 2008, the equipment produced 24,000 units and during 2009, the equipment produced 60,000 units. Calculate depreciation expense for 2008 and 2009 using the straight-line method.

Depreciation Method20082009

Straight-line Double-decllining balance Units-of-production

 

$88,000; $88,000

$188,000; $112,800

$70,320; $175,800

 

Question 36  of 37

Perform a horizontal analysis of current liabilities on the following company’s balance sheet. Which of the following is the correct answer if both the amount and the percentage of change are calculated.

Change

Account20072006                   Amount      Percent

Current assets$121,000$100,000

Accounts receivable117,000125,000

Merchandise inventory70,00085,000

Current liabilities63,50050,000

Long-term liabilities100,000100,000

Common stock50,00050,000

Retained earnings94,500110,000

 

$-15,500 and -14.1%

$13,500 and 27.0%

$-13,500 and -27.0%

$21,000 and 21.0%

 

Question 37  of 37

The following data is provided for last year: Net income was $210,000. Current receivables and prepaid expenses increased by $10,000 and $2,000, respectively. Current payables decreased by $8,000. Under the indirect method, the cash flows from operating activities would be:

 

$190,000.

$206,000.

$214,000.

$230,000.

 

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