Chapter 02 - Algo
1. Award: 10.00 points
A firm has common stock of $89, paid-in surplus of $260, total liabilities of $405, current assets of
$380, and net fixed assets of $590. What is the amount of the shareholders' equity?
$970
$525
$754
$185
$565
Shareholders' equity = Current assets + Net fixed assets − Total liabilities.
Shareholders’ equity = $380 + 590 − 405 = $565
References
Multiple Choice Learning Objective:
02-01 Describe the
difference between
accounting value (or
book value) and
market value.
Difficulty: 1 Basic Section: 2.1 The
Balance Sheet
,2. Award: 10.00 points
Recently, the owner of Martha's Wares encountered severe legal problems and is trying to sell her
business. The company built a building at a cost of $1,190,000 that is currently appraised at
$1,390,000. The equipment originally cost $670,000 and is currently valued at $417,000. The
inventory is valued on the balance sheet at $360,000 but has a market value of only one-half of that
amount. The owner expects to collect 97 percent of the $200,200 in accounts receivable. The firm
has $11,200 in cash and owes a total of $1,390,000. The legal problems are personal and unrelated
to the actual business. What is the market value of this firm?
$597,000
$802,394
$1,182,594
$1,542,594
$982,394
Market value = $1,390,000 (building) + 417,000 (equipment) + (.5 × $360,000) (inventory) + (.97 ×
$200,200) (accounts receivable) + 11,200 cash − 1,390,000 (amount owed)
Market value = $802,394
References
Multiple Choice Learning Objective:
02-01 Describe the
difference between
accounting value (or
book value) and
market value.
Difficulty: 1 Basic Section: 2.1 The
Balance Sheet
,3. Award: 10.00 points
Ivan's, Incorporated, paid $468 in dividends and $579 in interest this past year. Common stock
increased by $189 and retained earnings decreased by $115. What is the net income for the year?
$353
$468
$932
$579
$768
Net income = Dividends paid + Change in retained earnings
Net income = $468 + (− $115) = $353
In this case, the change in retained earnings was a negative value.
References
Multiple Choice Learning Objective:
02-02 Describe the
difference between
accounting income
and cash flow.
Difficulty: 1 Basic Section: 2.2 The
Income Statement
, 4. Award: 10.00 points
A firm paid taxes of $48,290 for the year. What is the average tax rate for the firm if it had taxable
income of $199,800?
rev: 09_11_2023_QC_HETS-11423
29.00%
26.59%
24.17%
30.21%
21.75%
Average tax rate = $48,290.00 ÷ $199,800
Average tax rate = .2417, or 24.17%
References
Multiple Choice Learning Objective:
02-03 Describe the
difference between
average and
marginal tax rates.
Difficulty: 1 Basic Section: 2.3 Taxes
