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              31.Receivable turnover is useful in assessing the profitability of receivables.               32.The inventory turnover ratio measures the number of times on the average the inventory was sold during the period.               33.Inventory turnover is a measure of liquidity that focuses on efficient use of inventory.               34.Profitability ratios are frequently used as.
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*Ex. 210 Mossman Company completed its first year of operations on December 31, 2012. Its initial income statement showed that Mossman had revenues of $177,000 and operating expenses of $88,000. Accounts receivable and accounts payable at year-end were $80,000 and $28,000, respectively. Assume that accounts payable related to operating expenses. Ignore.
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Exercises Ex. 196 Harrell Company reported net income of $320,000 for the current year. Depreciation recorded on buildings and equipment amounted to $65,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of YearBeginning of Year Cash$22,000$15,000 Accounts receivable17,00032,000 Inventories55,00065,000 Prepaid expenses7,5005,000 Accounts.
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186.The following information pertains to Bell Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments              $  40,000 Accounts receivable (net)              25,000 Inventory              20,000 Property, plant and equipment                210,000 Total Assets              $295,000 Liabilities and Stockholders’ Equity Current liabilities              $  60,000 Long-term liabilities             .
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Be. 228 The following items were taken from the financial statements of Clarke, Inc., over a three-year period:        Item         2013       2012    2011  Net Sales$355,000$336,000$300,000 Cost of Goods Sold  214,000  206,000  186,000 Gross Profit$141,000$130,000$114,000 Instructions Compute the following for each of the above time periods. a.The amount and percentage change from 2011 to 2012. b.The amount.
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Ex. 205 A comparative balance sheet for the Visser Corporation is presented below: VISSER CORPORATION Comparative Balance Sheet     2012     2011  Assets Cash$  40,000$  31,000 Accounts receivable (net)80,00060,000 Prepaid insurance22,00017,000 Land18,00040,000 Equipment70,00060,000 Accumulated depreciation   (20,000)   (13,000) Total Assets$210,000$195,000 Liabilities and Stockholders' Equity Accounts payable$  12,000$   6,000 Bonds payable27,00019,000 Common stock140,000115,000 Retained earnings    31,000    55,000 Total liabilities and stockholders' equity$210,000$195,000 Additional information: 1.Net loss for 2012 is $15,000. Net sales for.
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BRIEF Exercises Be. 222 Listed below are some selected Items that may appear on a corporate income statement. Indicate the order in which these items would appear on an income statement. (The first one should be assigned the number “1”, the second “2,” etc.) _____Extraordinary item _____Income before income taxes _____Discontinued operations _____Net income _____Income from continuing.
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MATCHING Set 1 — Indirect Method 226.For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method. A.Added to net income B.Deducted from net income C.Cash outflow—investing activity D.Cash inflow—investing activity E.Cash outflow—financing activity F.Cash inflow—financing activity G.Significant noncash investing and.
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Be. 233 Using these data from the comparative balance sheet of Kile Company, perform vertical analysis. December 31, 2012December 31, 2011 Accounts receivable$   500,000$   400,000 Inventory780,000600,000 Total assets3,250,0003,000,000 Be. 234 Vertical analysis (common-size) percentages for Hillman Company’s sales, cost of goods sold, and expenses are listed here. Vertical Analysis  2013   2012   2011  Sales              100.0%              100.0%              100.0% Cost of goods sold             .
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              21.In a common size income statement, net sales are represented by 100%.               22.In a common size income statement, each item is expressed as a percentage of net income.               23.In a common size balance sheet, total assets are represented by 100%.               24.In the vertical analysis of a balance sheet, the.
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206.Solvency is of most interest to a.short-term creditors. b.stockholders. c.competitors. d.long-term creditors.               207.The current ratio would be of most interest to a.short-term creditors. b.long-term creditors. c.stockholders. d.customers.               208.Which measure(s) is(are) an evaluation of a company’s ability to pay current liabilities? 1.Current cash debt coverage ratio. 2.Current ratio. a.1 only. b.2 only. c.Both 1 and 2. d.Neither 1 nor 2.               209.Which measure(s) is(are) useful in.
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Ex. 206 Information for two companies in the same industry, Hill Corporation and Ace Corporation, is presented here. Hill Ace Corporation Corporation Cash provided by operating activities $140,000 $140,000 Average current liabilities 50,000 100,000 Average total liabilities 200,000 250,000 Net earnings 200,000 200,000 Capital expenditures 60,000 90,000 Dividends paid 5,000 10,000 Instructions Using the cash-based measures presented in this chapter, compare the (a) liquidity and (b) solvency of the two companies. Ex. 207 Condensed financial data of.
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Ex. 209 The financial statements of Ferguson Company appear below: FERGUSON COMPANY Comparative Balance Sheet December 31     2012     2011  Assets Cash$  47,000$  25,000 Accounts receivable21,00034,000 Merchandise inventory22,00015,000 Property, plant, and equipment50,00078,000 Accumulated depreciation   (20,000)   (24,000) Total$120,000$128,000 Liabilities and Stockholders' Equity Accounts payable$  12,000$  31,000 Income taxes payable13,00010,000 Bonds payable10,00025,000 Common stock41,00024,000 Retained earnings    44,000    38,000 Total$120,000$128,000 FERGUSON COMPANY Income Statement For the Year Ended December 31, 2012 Sales$350,000 Cost of goods sold  280,000 Gross.
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MULTIPLE CHOICE QUESTIONS               46.Which of the following income statement figures would probably be the best indicator of a company’s future performance? a.Total revenues. b.Income from operations. c.Net income. d.Gross profit.               47.Which of the following is the best definition of sustainable income? a.Sustainable income is a measure of solvency that does not include capital expenditure. b.Sustainable income.
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              96.If Year 1 equals $800, Year 2 equals $840, and Year 3 equals $896, the percentage to be assigned for Year 2 in a trend analysis, assuming that Year 1 is the base year, is a.100%. b.89%. c.105%. d.112%.               97.Assume the following sales data for a company: 2013              $900,000 2012              805,000 2011              700,000 If 2011 is the.
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106.Vertical analysis is also known as a.perpendicular analysis. b.common size analysis. c.trend analysis. d.straight-line analysis.               107.In a common size balance sheet, the 100 percent figure is a.total current assets. b.total property, plant and equipment. c.total liabilities. d.total assets. 108.In a common size financial statement, which of the following is given a percentage of 100 percent? a.Total liabilities. b.Net income. c.Total assets. d.Cost of.
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126.Ratios are most useful in identifying a.trends. b.differences. c.causes. d.relationships.               127.Short-term creditors are usually most interested in assessing a.solvency. b.liquidity. c.marketability. d.profitability. 128.A common measure of liquidity is a.return on assets. b.receivables turnover. c.profit margin. d.debt to equity. 129.A common measure of profitability is the a.current ratio. b.current cash debt coverage ratio. c.return on common stockholders’ equity ratio. d.debt to total assets.               130.A common measure of long-term solvency.
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Ex. 200 Hansen Company prepared the tabulation below at December 31, 2012. Net Income .............................              $350,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense, $29,000 ................................______ Increase in accounts receivable, $75,000 .........................______ Decrease in inventory, $18,000 ................................______ Amortization of patent, $4,000 .................................______ Increase in accounts payable, $7,500 ...........................______ Decrease in interest receivable, $4,000.
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156.Hermann Corporation had net income of $200,000 and paid dividends to common stockholders of $50,000 in 2012. The weighted average number of shares outstanding in 2012 was 50,000 shares. Hermann Corporation's common stock is selling for $50 per share on the New York Stock Exchange. Hermann Corporation's price-earnings ratio is a.3.
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216.All of the following are ways that a company's current ratio would decrease except a.purchasing inventory on account. b.adding equal amounts to the numerator and denominator. c.paying off one-third of its accounts payable. d.paying cash for new equipment.               217.All of the following may be indicators of channel stuffing except a.deep discounts to customers. b.customers incentives for.
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176.If the average collection period is 45 days, what is the receivables turnover? a.8.1 times. b.8.9 times. c.4.5 times. d.None of the above. 177.A general rule to use in assessing the average collection period is that it a.should not exceed 30 days. b.can be any length as long as the customer continues to buy merchandise. c.should not greatly.
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136.In ratio analysis, the ratios are never expressed as a a.rate. b.logarithm. c.percentage. d.simple proportion.               137.The current ratio is a.calculated by dividing current liabilities by current assets. b.used to evaluate a company's liquidity and short-term debt paying ability. c.used to evaluate a company's solvency and long-term debt paying ability. d.calculated by subtracting current liabilities from current assets.               138.The.
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Set 2 — Direct Method *227.For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the direct method. A.Added in determining cash receipts from customers B.Deducted in determining cash receipts from customers C.Added in determining cash payments to.
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Be. 231 Horizontal analysis (trend analysis) percentages for Harley Company’s sales, cost of goods sold, and expenses are listed here. Horizontal Analysis  2013   2012   2011  Sales              98.2%              104.8%              100.0% Cost of goods sold              102.5              98.0              100.0 Expenses              108.6              96.4              100.0 Instructions Explain whether Harley’s net income increased, decreased, or remained unchanged over the 3-year period. Be. 232 Using the.
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Ex. 204 The comparative balance sheets for Gallup Company appear below: GALLUP COMPANY Comparative Balance Sheet Dec. 31, 2012Dec. 31, 2011 Assets Cash$  28,000$13,000 Accounts receivable18,00014,000 Prepaid expenses7,0009,000 Inventory25,00015,000 Long-term investments-0-18,000 Equipment60,00030,000 Accumulated depreciation—equipment  (18,000)(14,000) Total assets$120,000$85,000 Liabilities and Stockholders' Equity Accounts payable$  25,000$  7,000 Bonds payable37,00045,000 Common stock40,00023,000 Retained earnings    18,000  10,000 Total liabilities and stockholders' equity$120,000$85,000 Additional information: 1.Net income for the year ending December 31, 2012, was $20,000. 2.Cash.
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*Be. 192 a.Sales = $650,500; Accounts receivable increased by $27,500. Calculate cash receipts from sales. b.Cost of goods sold = $430,000; inventory decreased by $75,000; accounts payable decreased by $28,500. Calculate cash payments for purchases. c.The Income statement shows $12,500 in income taxes. The balance sheet shows an increase in taxes payable of.
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COMPLETION STATEMENTS               212.A statement of cash flows summarizes the operating, ____________, and  ___________ activities of an entity.               213.The cash effects of selling goods and services appears in the ______________ activities section of a statement of cash flows.               214.Net cash provided/used by operating activities can be determined using the ____________ method.
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              86.A comparison with other companies that provides insight into a company's competitive position is most commonly known as which of the following types of comparisons? a.Industry average comparison. b.Intracompany comparison. c.Intercompany comparison. d.Comprehensive income comparison.               87.When a horizontal analysis is performed and a zero or negative amount is reported in the base year,.
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Be. 190 Hutton Company prepared the tabulation below at December 31, 2012. Net Income .......................              $275,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense, $45,000 ................................______ Increase in accounts receivable, $55,000 .........................______ Decrease in inventory, $12,000 ................................______ Increase in accounts payable, $6,600 ...........................______ Increase in prepaid expenses, $4,000 ...........................______ Decrease in income taxes.
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196.The following information pertains to Lance Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments              $  45,000 Accounts receivable (net)              25,000 Inventory              20,000 Property, plant and equipment                210,000 Total Assets              $300,000 Liabilities and Stockholders’ Equity Current liabilities              $  50,000 Long-term liabilities             .
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Ex. 198 Use the following information to perform the calculations below (using the indirect method). Clearly label the amount of each answer as positive or negative and show all your calculations. Net income$369,000Beginning accounts payable$119,000 Depreciation expense 97,000Ending accounts payable146,000 Beginning accounts receivable420,000Purchase of long-term assets612,000 Ending accounts receivable439,000Issuance of long-term debt200,000 Beginning inventory516,000Issuance of stock.
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              56.The discontinued operations section of the income statement refers to a.discontinuance of a product line. b.the income or loss on products that have been completed and sold. c.obsolete equipment and discontinued inventory items. d.the disposal of a significant segment of a business.               57.Which one of the following would be classified as an extraordinary.
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              11.Comparisons of company data with industry averages provide information about a company's relative position within the industry.               12.Horizontal, vertical, and circular analyses are the basic tools of financial statement analysis.               13.In horizontal analysis, the base year is the most current year being examined.               14.Horizontal analysis is.
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              66.Gregor Company reported income before taxes of $800,000 and an extraordinary loss of $200,000. Assume that the company’s tax rate is 30%. What amounts will be reported on the income statement for income before irregular items and extraordinary items, respectively? a.$560,000 and $200,000. b.$560,000 and $140,000. c.$660,000 and $200,000. d.$660,000 and $140,000.               67.Sweet.
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*Be. 194 The general ledger of the Alexander Company provides the following information: End of YearBeginning of Year Accounts Receivable$  69,000$  84,000 Inventory240,000205,000 Accounts Payable42,00067,000 The company's net sales for the year was $2,000,000 and cost of goods sold amounted to $1,700,000. Instructions Compute the following: (a)Cash receipts from customers (b)Cash payments to suppliers *Be. 195 The income statement of Runge Inc..
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Be. 187 Ballester Company reported net income of $150,000 for the current year. Depreciation recorded on buildings and equipment amounted to $75,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of YearBeginning of Year Cash$20,000$15,000 Accounts receivable19,00032,000 Inventories50,00060,000 Accounts payable12,00018,000 Instructions Prepare.
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Ex. 201 The current sections of Bennington Inc.'s balance sheets at December 31, 2011 and 2012, are presented here. Bennington's net income for 2012 was $138,000. Depreciation expense was $34,000.    2012     2011  Current assets     Cash $106,000 $  99,000     Accounts receivable 98,000 89,000     Inventory 168,000 173,000     Prepaid expenses     28,000     22,000 Total current assets $400,000 $383,000 Current liabilities     Accrued expenses payable $  13,000 $    5,000     Accounts payable     85,000     92,000 Total.
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sIFRS QUESTIONS 1. Under IFRS, the cash flow statement can be prepared using     a. the direct method only.     b. the indirect method only.     c. either the direct or indirect method.     d. the T-account method only. 2. Under IFRS,  bank overdrafts are classified as     a. operating activities.     b. investing activities.     c. financing activities.    .
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Ex. 199 The following information is available for Mehring Corporation for the year ended December 31, 2012: Collection of principal on long-term loan to a supplier$35,000 Acquisition of equipment for cash10,000 Proceeds from the sale of long-term investment at book value22,000 Issuance of common stock for cash20,000 Depreciation expense25,000 Redemption of bonds payable at carrying (book) value34,000 Payment.
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116.In performing a vertical analysis, the base for sales returns and allowances is a.sales. b.sales discounts. c.net sales. d.total revenues.               117.In performing a vertical analysis, the base for cost of goods sold is a.total selling expenses. b.net sales. c.total revenues. d.total expenses. 118.Mitchell, Inc. has the following Income Statement (in millions): MITCHELL, INC. Income Statement For the Year Ended December 31, 2012 Net.
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TRUE-FALSE STATEMENTS               1.Analysts are interested in sustainable income, which is equal to the past year’s net income.               2.One objective of the income statement is to separate the results of continuing operations from those of discontinued operations.               3.When the disposal of a significant segment occurs, the income statement should.
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              76.Steinkuhler, Inc. decided on January 1 to discontinue its telescope manufacturing division. On July 1, the division’s assets with a book value of $840,000 are sold for $600,000. Operating income from January 1 to June 30 for the division amounted to $100,000. Ignoring income taxes, what total amount should.
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Ex. 208 The income statement of Decker Company is shown below: DECKER COMPANY Income Statement For the Year Ended December 31, 2012 Sales$8,500,000 Cost of goods sold  5,300,000 Gross profit3,200,000 Operating expenses Selling and administrative expenses$1,210,000 Depreciation expense70,000 Amortization expense    30,000  1,310,000 Net income$1,890,000 Additional information: 1.Accounts receivable increased $600,000 during the year. 2.Inventory increased $250,000 during the year. 3.Prepaid expenses increased $150,000 during the year. 4.Accounts.
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SHORT-ANSWER ESSAY QUESTIONS S-A E 228 Why is the statement of cash flows useful? S-A E 229 Distinguish among the three activities reported in the statement of cash flows. S-A E 230 (a) What are the phases of the corporate life cycle? (b) What effect does each phase have on the numbers reported in a statement of.
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166.A weakness of the current ratio is a.the difficulty of the calculation. b.it uses year-end balances of current asset and current liability accounts. c.it is rarely used by sophisticated analysts. d.it can be expressed as a percentage, as a rate, or as a proportion. 167.A supplier to a company would be most interested in the a.asset.
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              146.Goll Clothing Store had a balance in the Accounts Receivable account of $820,000 at the beginning of the year and a balance of $880,000 at the end of the year. Net credit sales during the year amounted to $7,310,000. The average collection period of the receivables in terms of.
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BRIEF Exercises Be. 184 Selected transactions of the Rains Company are listed below.               1.Common stock is sold for cash above par value.               2.Bonds payable are issued for cash at a discount.               3.Interest on a short-term note receivable is collected.               4.Merchandise is sold to customers for cash.               5.Cash is paid to purchase inventory.              .
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Be. 226 Comparative information taken from the Goreham Company financial statements is shown below:     2012    2011  (a)Accounts receivable175,000140,000 (b)Retained earnings30,000(40,000) (c)Sales855,000750,000 (d)Operating expenses170,000200,000 (e)Income taxes payable22,00020,000 Instructions Using horizontal analysis, show the percentage change from 2011 to 2012 with 2011 as the base year. Be. 227 The following items were taken from the financial statements of Stine, Inc., over a.
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Be. 235 Selected information from the comparative financial statements of Francona Company for the year ended December 31 appears below:       2012     2011  Accounts receivable (net)$   175,000$200,000 Inventory130,000170,000 Total assets1,100,000800,000 Current liabilities140,000110,000 Long-term debt410,000300,000 Net credit sales  900,000700,000 Cost of goods sold600,000530,000 Interest expense40,00025,000 Income tax expense60,00029,000 Net income120,00085,000 Net cash provided by operating activities220,000135,000 Instructions Answer the following questions relating to the year ended.
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