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Exam 5: Communicating and Interpreting Accounting Information

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Question 41

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The form 10-Q contains an unaudited set of quarterly financial statements.

A) True
B) False

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Question 42

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Sales by major product category is a required financial statement disclosure.

A) True
B) False

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Question 43

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Describe the return on assets ratio and the DuPont approach for calculating return on assets.

The Willie Company has provided the following information: Operating expenses were $345,000; Income from operations was $415,000; Net sales were $1,100,000; Interest expense was $71,000; Loss from sale of investments was $87,000; Income tax expense was $58,000. - What was Willie's net income?

Ridgetop Corporation reported the following amounts on its balance sheet at December 31,2019: On January 1,2019,total assets were $2,000,000,total liabilities were $1,200,000 and total stockholders' equity was $800,000. Calculate Ridgetop's return on assets.

Determine the effect of the following transactions on the identified financial statement components and ratios.Code your answers as follows: A: If the transaction results in an increase in the financial statement component or ratio. B: If the transaction results in a decrease in the financial statement component or ratio. C: If the transaction does not affect the financial statement component or ratio. Transaction 1: A company acquired land by signing a long-term note payable. Property,plant,and equipment _____ Total asset turnover ratio _____ Net profit margin ratio _____ Return on assets ratio _____ Transaction 2: Cash was used to pay a current liability. Net income _____ Total asset turnover ratio _____ Net profit margin ratio _____ Return on assets ratio _____

The return on assets ratio may increase when sales increase.

External users of accounting information include decision makers such as investors,creditors,and financial analysts.

A company has paid cash to repurchase its common stock that was previously issued.Where will this cash flow be reported on the statement of cash flows?

Panmar Inc.is preparing a statement of stockholders' equity for 2019.On January 1,2019,Panmar started the year with a $200,000 credit balance in its retained earnings account.During 2019,the company earned net income of $140,000.Panmar declared dividends of $80,000 and paid $50,000 of those dividends.Also,the company received cash of $100,000 for additional shares of common stock issued and then paid $30,000 to repurchase shares of common stock.What is the balance in retained earnings on December 31,2019?

The return on assets ratio is calculated by dividing operating income by average total assets.

An intangible asset has no physical existence and no life.

Denmark Inc.is preparing a statement of stockholders' equity for 2019.On January 1,2019,Denmark started the year with a $100,000 credit balance in its retained earnings account.During 2019,the company earned net income of $70,000 and declared dividends of $10,000.Also,the company received cash of $15,000 as an additional investment by its owners.What is the balance in retained earnings on December 31,2019?

Which of the following statements is false when a company sells inventory costing $700 for $1,200 cash and operating expenses are $200?

Which of the following results in an increase in the return on assets ratio?

Harley Company has provided the following selected financial information. - What is Harley's 2019 return on assets (rounded) ?

The audit committee of the board of directors is responsible for maintaining the integrity of a company's financial statements and financial reporting.

Preparers of the statement of cash flow must choose the direct or indirect method for each classification category on the statement.

Financial analysts utilize a company's financial reports to assist them in making earnings forecasts and earnings per share projections.

Net sales plus cost of goods sold is reported on the income statement as income from continuing operations.