Question

In: Accounting

1. The net income reported on the income statement for the current year was $288,417. Depreciation...

1. The net income reported on the income statement for the current year was $288,417. Depreciation recorded on fixed assets and amortization of patents for the year were $41,876, and $11,524, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:

End Beginning
Cash $46,710 $55,173
Accounts receivable 100,038 129,780
Inventories 87,496 101,142
Prepaid expenses 7,305 4,393
Accounts payable (merchandise creditors) 62,403 55,238

What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?

a. $315,644

b. $389,458

c. $276,574

d. $385,205

2.

Determine the relationship of $219,652 to $115,020, expressed as a ratio.

Select the correct answer.

a. 1.9 to 1

b. 1.1 to 1

c. 0.5 to 1

d. 0.7 to 1

3.

Based on the following data for Privett Company, what is the quick ratio, rounded to one decimal point?

Privett Company
Accounts payable $33,191
Accounts receivable 68,636
Accrued liabilities 6,715
Cash 23,006
Intangible assets 35,944
Inventory 88,660
Long-term investments 99,015
Long-term liabilities 71,468
Marketable securities 38,057
Notes payable (short-term) 23,392
Property, plant, and equipment 691,785
Prepaid expenses 1,629

a. 16.5

b. 1

c. 2

d. 3.5

4.

The balance sheets at the end of each of the first two years of operations indicate the following:

Kellman Company
Year 2 Year 1
Total current assets $618,015 $564,556
Total investments 60,948 41,643
Total property, plant, and equipment 882,682 618,461
Total current liabilities 101,282 83,040
Total long-term liabilities 302,446 237,252
Preferred 9% stock, $100 par 84,252 84,252
Common stock, $10 par 521,610 521,610
Paid-in capital in excess of par-common stock 65,163 65,163
Retained earnings 486,892 233,343

Using the balance sheets for Kellman Company, if net income is $113,275 and interest expense is $33,061 for Year 2, what is the return on total assets for the year (round percent to two decimal points)?

a. 9.25%

b. 10.50%

c. 7.25%

d. 10.99%

Solutions

Expert Solution

1

Answer:

cash flows from operating activities =$389,458

Working notes for the answer is as under

Cash flows from operating activities

Net Income

288417

Adjust to reconcile net income to net cash provided

Depreciation expenses

$41,876

Amortisation expenses

$11,524

Changes in current assets and current liabilities

Decrease in Accounts receivable (129780-100038)

$29,742

Decrease in Merchandise Inventory(101142-87496)

$13,646

Increse in prepaid exp (7305-4393)

($2,912)

Increase in Account payable (62403-55238)

$7,165

$101,041

Cash flows from operating activities

$389,458

_________________________________________________

2

Answer:

a. 1.9 to 1

Working notes for the answer is as under

the relationship of $219,652 to $115,020

= $219,652 / $115,020

=1.909

=1.9

so it expressed as a ratio =1.9 to 1

_______________________________________________________

3

Quick ratio=2

Working notes for the answer is as under

Quick ratio

Quick ratio=(Current assets-inventory-prepaid expenses)/Current liabilities

=(AR+Cash+marketable securities)/(AP+Accrued liabilites+Notes payable)

=(68636+23006+38057)/(33191+6715+23392)

=2

___________________________________________

4

return on total assets = b. 10.50%

Working notes for the answer is as under

Year 2

Year 1

Total current assets

$618,015

$564,556

Total investments

60,948

41,643

Total property, plant, and equipment

882,682

618,461

Total Asstes

1,561,645

1,224,660

return on total assets

=Net income before interest expanses / average total assets

=(113275+33061) / (1561645+1224660)/2

=146336 /(2786305/2)

=146336 /1393152.5

=10.50%


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