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Exam 2: Financial Statements and the Annual Report

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Question 61

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______________________________ is a liquidity measure that is calculated by subtracting current assets from current liabilities.

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Question 62

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There is a standard threshold for materiality set by the Financial Accounting Standards Board for all companies.

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Question 63

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Listed below is information from the financial records of Smith Corporation at December 31, 2016: $\begin{array} { l r l r } \text { Retained earnings } & \$ 37,000 & \text { Notes payable } - \text { Due July } 1,2019 & \$ 12,000 \\\text { Accumulated depreciati on } & 13,000 & \text { Interest payable } & 1,000 \\\text { Income taxes payable } & 24,000 & \text { Office supplies } & 2,000 \\\text { Buildings } & 48,000 & \text { Accounts payable } & 46,000 \\\text { Cash } & 11,000 & \text { Inventory } & 33,000 \\\text { Accounts receivable } & 35,000 & \text { Land } & 50,000 \\\text { Capital stock } & 60,000 & \text { Prepaid rent } & 4,000\end{array}$ ​ ​ -Read the information below about Smith Corporation. ​ Required: Calculate the amount of working capital at December 31, 2016 for Smith Corp.What can you learn from the current ratio that you cannot learn from the amount of working capital?

If the current ratio is 2.5 to 1, net income is $6,000, and current liabilities are $18,000, how much is working capital?

What is the primary objective of financial reporting?

Which of the following represents one of the purposes of the notes to financial statements?

Matching Identify whether the following investor questions are associated with (a) primary or (b) secondary financial reporting objectives. -Based on the financial information, should I sell my shares of Apple next quarter?

Use the information from Hopper Inc.to answer the following question(s) . $\begin{array} { l r r } & 2017 & 2016 \\\text { Operating revenues } & \$ 1,900,000 & \$ 1,600,000 \\\text { Operating expenses } & 1,400,000 & 1,100,000 \\\text { Income taxes } & 200,000 & 200,000\end{array}$ ​ ​ -Read the information about Hopper, Inc.Which ratio are you able to calculate given only the information provided by Hopper?

The 2016 income statement of Seikoson shows operating revenues of $130,800, selling expenses of $37,100, general and administrative expenses of $34,900, interest expense of $900, and income tax expense of $11,430.Seikoson's stockholders' equity was $280,000 at the beginning of the year and $320,000 at the end of the year.The company has 20,000 shares of stock outstanding at December 31, 2016. ​ -Read the information about Seikoson.What is Seikoson's profit margin (to the closest tenth of a percent) ?

Excursion Corp.increased its dollar amount of working capital over the past several years.To further evaluate the company's short-run liquidity, which one of the following measures should be used?

Listed below is information from the financial records of Smith Corporation at December 31, 2016: $\begin{array} { l r l r } \text { Retained earnings } & \$ 37,000 & \text { Notes payable } - \text { Due July } 1,2019 & \$ 12,000 \\\text { Accumulated depreciati on } & 13,000 & \text { Interest payable } & 1,000 \\\text { Income taxes payable } & 24,000 & \text { Office supplies } & 2,000 \\\text { Buildings } & 48,000 & \text { Accounts payable } & 46,000 \\\text { Cash } & 11,000 & \text { Inventory } & 33,000 \\\text { Accounts receivable } & 35,000 & \text { Land } & 50,000 \\\text { Capital stock } & 60,000 & \text { Prepaid rent } & 4,000\end{array}$ ​ ​ -Read the information about Smith Corporation. Required: Prepare the current liabilities section of the balance sheet for Smith Corp.at December 31, 2016.You may omit the heading.If the amount of current liabilities were larger, what effect would this have on the current ratio?

Match the selected items from a classified balance sheet and multiple-step income statement to the section in which they would appear on the classified balance sheet or the income statement. -Wages payable

An advantage of the current ratio is that it considers the makeup of the current assets.

To determine the source of a company's noncurrent assets, on which financial statement will you look?

Rosu Company has total current assets of $150,000 and total current liabilities of $50,000.What is the amount of working capital for Rosu Company?

The statement of cash flows, like the income statement, reports only operating activities of a company.

For each item listed, select the section of the balance sheet in which the item would be reported. -Computer available for resale

The ability of a company to pay its debt when due refers to ____________________.

Assume that you want to determine the profit margin for a company.Which one of the following financial statements is the best source of this information?

From the following choices, select the answer that describes the effect on working capital as a result of the transaction. -Borrowed cash using a six-month note