Question

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%

Answer 1

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%