Question

Exhibit 1 Florence Farm, Inc. has total assets of $15.4 million of which $6.2 million are current assets. Cash makes up 18 percent of the current assets and accounts receivable makes up another 40 percent of current assets. Florence Farm’s gross plant and equipment has an original cost of $10.35 million and other long-term assets have a cost value of $1.5 million.

Use Exhibit 1. What is the balance of inventory on Florence Farm’s balance sheet?

A. less than $2.40 million

B. more than $2.40 million but less than $2.48 million

C. more than $2.48 million but less than $2.56 million

D. more than $2.56 million but less than $2.64 million

E. more than $2.64 million

Use Exhibit 1. What is the balance of depreciation on Florence Farm’s balance sheet?

A. less than $2.35 million

B. more than $2.35 million but less than $2.60 million

C. more than $2.60 million but less than $2.85 million

D. more than $2.85 million but less than $3.10 million

E. more than $3.10 million

Garden Fences, Inc. began the year 2017 with $12.5 million in retained earnings. Although the firm suffered a net loss of $2.4 million in 2017 it paid $1.2 million to its preferred stockholders. If the year-end 2017 balance in retained earnings for Garden Fences is $8.45 million, how much did the firm pay out in dividends to its common stockholders? A. less than $470,000

B. more than $470,000 but less than $525,000

C. more than $525,000 but less than $580,000 D. more than $580,000 but less than $635,000

E. more than $635,000
4. Strongest Gates, Inc. balance sheet for year-end 2016 lists current assets of $245,000, fixed assets of $875,000, current liabilities of $135,000, and long-term debt of $395,000. Calculate the firm’s total stockholders' equity for the end of year 2016.

A. less than $450,000

B. more than $450,000 but less than $495,000

C. more than $495,000 but less than $540,000

D. more than $540,000 but less than $585,000

E. more than $585,000

Answer 1

	A	Total Current Assets	$6,200,000
	B=18%*A	Cash	$1,116,000
	C=40%*A	Accounts Receivable	$2,480,000
	D=A-B-C	Balance of Inventory	$2,604,000
		ANSWER:D
	A	Total   Assets	$15,400,000
	B	Total Current Assets	$6,200,000
	C=A-B	Total Long Term Assets	$9,200,000
	D	Other Long Term Assets	$1,500,000
	E=C-D	Net Plant & equipment	$7,700,000
	F	Gross Plant & equipment(at cost)	$10,350,000
	G=F-E	Accumulated Depreciation	$2,650,000
		ANSWER:E
	A	Beginning of 2017 Retained Earnings	$12,500,000
	B	Net Loss	($2,400,000)
	C=A+B	Retained Earnings before dividends	$10,100,000
	D	Dividend to preferred shareholders	$1,200,000
	E=C-D	Balance Retained Earnings	$8,900,000
	F	End of year 2017 Retained Earnings	$8,450,000
	G=E-F	Dividend payout to common shareholders	$450,000
		ANSWER: A
		Total Assets=Total Liabilities+ Total Shareholders' Equity
	A	Current Assets	$245,000
	B	Fixed Assets	$875,000
	C=A+B	Total Assets	$1,120,000
	D	Current Liabilities	$135,000
	E	Long term debt	$395,000
	F=D+E	Total Liabilities	$530,000
	G=C-F	Total Stockholders'Equity	$590,000
		ANSWER:E