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Exam 2: A Further Look at Financial Statements

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Question 21

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Using the following balance sheet and income statement data for Castillo Company what is the company's working capital at the period? $\begin{array} { l r l r } \text { Current assets } & \$ 41,000 & \text { Net income } & \$ 48,000 \\\text { Current liabilities } & 22,000 & \text { Stockholders' equity } & 75,000 \\\text { Average assets } & 210,000 & \text { Total liabilities } & 125,000 \\\text { Total assets } & 200,000 & &\end{array}$

A) $10000
B) $19000
C) $27000
D) $50000

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Question 22

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Use the following data to determine the total amount of working capital. $\begin{array} { l } \text {Carne Auto Supplies }\\ \text { Balance Sheet }\\ \text { December 31,2022 }\\\begin{array}{lr}\text { Cash } & \$ 0,000 \\\text { Accounts receivable } & 100,000 \\\text { Inventory } & 140,000 \\\text { Prepaid insurance } & 80,000 \\\text { Stock investments } & 180,000 \\\text { Land } & 190,000\\\text { Buildings } & \$ 230,000 & \\\text { Less: Accumulated } & \\\quad \text { depreciation } (60,000) & 170,000 \\\text { Patent } & 140,000 \\\text { Total assets } & \$ 1,070,000\\\end{array}&\begin{array}{lrr}\text { Accounts payable } & \$ 130,000 \\\text { Salaries and wages payable } & 20,000 \\\text { Mortgage payable } & 180,000 \\\text { Total liabilities } & 330,000\\\\\\\text { Common stock } & 240,000 \\\text { Retained earnings } & 500,000 \\\text { Total stockholders' equity } & 740,000 \\\text { Total liabilities and } & \\\text { stockholders' equity } & \$ 1,070,000\\\end{array}\\\end{array}$

A) $260000
B) $240000
C) $160000
D) $420000

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Question 23

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Long-term investments appear in the property plant and equipment section of the balance sheet.

Ratios that measure the income or operating success of a company for a given period of time are

Use the following data to determine the total dollar amount of assets to be classified as property plant and equipment. $\begin{array} { l } \text { Koonce Office Supplies}\\ \text { Balance Sheet }\\ \text { December 31,2022}\\\begin{array}{lr}\text { Cash } & \$ 195,000 \\\text { Accounts receivable } & 150,000 \\\text { Inventory } & 165,000 \\\text { Prepaid insurance } & 90,000 \\\text { Stock investments } & 255,000 \\\text { Land } & 270,000\\ \text { Buildings}&\$315,000\\ \text {Less: Accumulated }\\\text { depreciation } (60,000) & 255,000 \\\text { Trademarks } & 210,000 \\\text { Total assets } & \$ 1590,000\\\end{array}&\begin{array}{lr}\text { Accounts payable } & \$ 210,000 \\\text { Salaries and wages payable } & 30,000 \\\text { Mortgage payable } & 240,000 \\\quad \text { Total liabilities } & 480,000\\\\\\\text { Common stock } & 360,000 \\\text { Retained earnings } &{750,000} \\\text { Total stockholders' equity } & 1,110,000 \\\text { Total liabilities and } & \\\text { stockholders' equity } & \$ 1590,000\\\end{array}\end{array}$

The investment category on the balance sheet normally includes investments that are intended to be held for a short period of time (less than one year).

On a classified balance sheet short-term investments are classified as

Kingery Corporation has current assets of $1800000 and current liabilities of $750000.If they issue $150000 of new stock what will their new current ratio be? (rounded)

Which statement about long-term investments is not true?

The debt to assets ratio measures the percentage of assets financed by creditors.

Using the following balance sheet and income statement data what is the debt to assets ratio? $\begin{array}{l}\begin{array} { l r l c } \text { Current assets } & \$ 21,000 & \text { Net income } & \$ 45,000 \\\text { Current liabilities } & 12,000 & \text { Stockholders' equity } & 63,000 \\\text { Average assets } & 132,000 & \text { Total liabilities } & 27,000\end{array}\\\text { Total assets } \quad 90,000\end{array}$

Solvency ratios measure the ability of a company to survive over a short period of time.

Cash and supplies are both classified as current assets.

Which of the following is not considered an asset?

K2 Corporation has assets of $3600000 common stock of $936000 and retained earnings of $570000.What are the creditors' claims on their assets?

Ace Company is a retail store.Due to competition it is having trouble selling its products.Thus inventory has been building up.Ace's current ratio has not changed for the past three years in spite of the inventory build-up.Which of the following statements is true?

Solvency is a company's ability to pay interest as it comes due and to repay the balance of a debt due at its maturity.

It is not true that current assets are resources that are expected to be

Mitchell Corporation has current assets of $1600000 and current liabilities of $750000.If they issue $200000 of new stock what will their new current ratio be?

On a classified balance sheet companies usually list current assets