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Exam 2: A Further Look at Financial Statements

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Question 41

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The current ratio is computed as current liabilities divided by current assets.

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Question 42

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Both investors and creditors have an interest in a company's ability to generate favorable cash flows.

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Question 43

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

N3 Corporation has assets of $4200000 common stock of $1092000 and retained earnings of $665000.What are the creditors' claims on their assets?

A current asset is

Stockholders' equity is divided into two parts: common stock and retained earnings.

Intangible assets are

The current ratio is calculated by dividing current assets by current liabilities.

Long-term creditors consider a lower debt to assets ratio to be less risky.

Based on the following data what is the amount of current assets? $\begin{array} { l } \text {Accounts payable. }&\$62,000\\ \text {Accounts receivable }&100,000\\ \text {Cash. }&70,000\\ \text {Intangible assets. }&100,000\\ \text { Inventory.}&138,000\\ \text {Long-term investments. }&160,000\\ \text {Long-term liabilities. }&200,000\\ \text {Short-term investments. }&80,000\\ \text {Notes payable (short-term) }&56,000\\ \text {Property, plant, and equipment. }&1,340,000\\ \text {Prepaid insurance. }&2,000\\\end{array}$

Trademarks would appear in which balance sheet section?

Which of the following is not classified properly as a current asset?

Current assets divided by current liabilities is known as the

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

The current ratio is

Using the following balance sheet and income statement data what is the total amount of working capital? $\begin{array}{l}\begin{array} { l r l r } \text { Current assets } & \$ 32,000 & \text { Net income } & \$ 42,000 \\\text { Current liabilities } & 16,000 & \text { Stockholders' equity } & 78,000 \\\text { Average assets } & 160,000 & \text { Total liabilities } & 42,000\end{array}\\\text { Total assets } \quad 120,000\end{array}$

The debt to assets ratio is computed by dividing

Use the following data to determine the total dollar amount of assets to be classified as current assets. $\begin{array} { l } \text {Edie's Flomer Shoppe }\\\text {Balance Sheet }\\\text { December 31,2022 }\\\begin{array}{lr}\text { Cash } & \$ 126,000 \\\text { Accounts receivable } & 120,000 \\\text { Inventory } & 210,000 \\\text { Prepaid insurance } & 90,000 \\\text { Stock investments } & 255,000 \\\text { Land } & 285,000\\\text { Buildings } & \$ 339,000 & \\\text { Less: Accumulated } & & \\\quad \text { depreciation } (60,000) & 279,000 \\\text { Trademarks } & 210,000 \\\text { Total assets } & \$ 1575,000\end{array}&\begin{array}{lr}\text { Accounts payable } & \$ 165,000 \\\text { Salaries and wages payable } & 30,000 \\\text { Mortgage payable } & 270,000 \\\hline \text { Total liabilities } & 465,000\\\\\\\text { Common stock } & \$ 360,000 \\\text { Retained earnings } &{750,000}\\\text { Total stockholders' equity } & 1,110,000 \\\text { Total liabilities and } & \\\text { stockholders' equity } & \$ 1,575,000\end{array}\end{array}$

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

Which of the following would not be classified as a long-term liability?