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chapter 2
Student: ___________________________________________________________________________
1. A balance sheet is a financial statement that:
A. reports the cash flows of a firm as of a specified date.
B. reflects a firm's accounting value on a particular date.
C. records the revenues and expenses for a firm over a period of time.
D. reflects the market value of a firm as of the statement date.
E. reports the net income for a designated period of time based on the Generally Accepted Accounting
Principles.
2. A current asset is defined as an asset that:
A. was purchased after the last financial statement date.
B. was purchased within the past twelve months.
C. normally converts to cash within one year.
D. was manufactured within the past year and has yet to be sold.
E. is highly illiquid.
3. An intangible asset is a:
A. valuable fixed asset that has no physical existence.
B. physical fixed asset that loses value over time, such as equipment.
C. fully-depreciated fixed asset which has no remaining market value.
D. current asset with a negligible book value but considerable market value.
E. current asset with minimal market value and no physical existence.
4. Net working capital is defined as the:
A. change in current assets over a stated period of time.
B. amount of money used to acquire new fixed assets minus any asset sales.
C. net change in the cash flow related to the current assets of a firm.
D. difference between a firm's current assets and its current liabilities.
E. amount of cash generated by the daily operations that is reinvested in the firm.
5. Which of these accounts are included in net working capital?
I. accounts payable
II. bonds payable
III. equipment
IV. cash
A. IV only
B. II and III only
C. I and IV only
D. III and IV only
E. I, III, and IV only
6. The book value of an asset is equal to the:
A. initial cost less depreciation plus interest earned.
B. initial cost plus depreciation minus the interest charges.
C. initial cost minus the depreciation to date.
D. higher of the original cost or the current market value.
E. lower of the original cost or the current market value.
7. Le Son, Inc., has current liabilities of $11,700 and accounts receivable of $15,200. The firm has total assets
of $43,400 and net fixed assets of $24,800. The owners' equity has a book value of $21,000. What is the amount
of the net working capital?
A. -$8,300
B. -$3,800
C. $3,500
D. $6,900
E. $10,700
8. Paulette's Clutter has sales of $67,300. The costs of goods sold are $41,000 and the other costs are $13,000.
Depreciation is $8,500 and the tax rate is 34%. What is the net income of the firm?
A. $3,168
B. $3,319
C. $5,632
D. $13,629
E. $14,388
9. Holbotton, Inc., owes a total of $11,354 in taxes for this year. Their taxable income is $51,609. If Holbotton
earns $100 more in income, they will owe an additional $34 in taxes. What is Holbotton's average tax rate on
income of $51,709?
A. 21 percent
B. 22 percent
C. 34 percent
D. 35 percent
E. 39 percent
10. Use the following tax table to answer this question:
Theresa's Boutique, Inc., has taxable income of $82,348. How much does Theresa's owe in taxes?
A. $13,750
B. $14,689
C. $16,248
D. $20,587
E. $27,998