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(a) If operations for an accounting period resulted in cash sales of $25,000, sales on account of $30,000, and expenses paid in cash of $50,000, did the business incur a net income or a net loss for the period? (b) What is the amount of net income or net loss? (c) If liabilities are $65,000 and owner’s equity is $35,000, the amount of the assets is: (d) If assets are $205,000 and owner’s equity is $75,000, the amount of the liabilities is:

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Bunny Greenfelder
Bunny GreenfelderLv2
28 Sep 2019

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Kim Hsu is the owner of Hsu’s Financial Services. At the end ofits accounting period, December 31, 2013, Hsu’s has assets of$775,000 and owner’s equity of $365,000. Using the accountingequation and considering each cased independently, determine thefollowing amounts. a. Hsu’s liabilities as of December 31, 2013. b.Hsu’s liabilities as of December 31, 2014, assuming that assetsincreased by $70,000 and owner’s equity decreased by $25,000. c.Net income or net loss during 2014, assuming that as of December31, 2014, assets were $692,000, liabilities were $590,000, andthere were no additional investments or withdrawals.

QUESTION 1

The ownership of a corporation is represented by:

shares of stock.

the owner's capital account.

the revenue account.

cash in bank account.

QUESTION 2

How many classifications does a Capital Stock Account have?

One

Two

Three

Four

QUESTION 3

The equity contributed by stockholders and equity earned throughbusiness profits represent the stockholders' equity for a:

partnership firm.

sole proprietorship.

corporation.

none of these.

QUESTION 4

Retained earnings are a part of a/an:

asset account.

permanent account.

stockholders' equity account.

temporary account.

QUESTION 5

How many sections does an Income Statement have?

Two

Three

Four

Five

QUESTION 6

Net sales are related to the:

net income section.

gross profit on sales section.

revenue section.

cost of merchandise sold section.

QUESTION 7

Sales discount and sales return and allowance are:

revenue accounts.

contra revenue accounts.

permanent accounts.

contra expenses accounts.

QUESTION 8

The total cost related to merchandise purchases during anaccounting period is the:

net purchase.

cost of merchandise sold.

cost of merchandise available for sale.

beginning merchandise inventory.

QUESTION 9

The gross profit on sale is $65,000, and operating expenses is$35,000. What will be the operating profit?

$65,000

$35,000

$100,000

$30,000

QUESTION 10

A balance sheet has the following sections:

Assets, liabilities, and stockholders' equity.

Income, expenses, and stockholders' equity.

Assets, liabilities, and income.

Operating income, operating expenses, and stockholders'equity.

QUESTION 11

A cash flow statement is used to assess the:

net increase or decrease of cash.

net increases of cash only.

net decrease of cash only.

net profit or loss of business.

EXERCISE 15-8 Selected Financial Ratios (L015-2, LO15-3, L015-4] The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash.. Accounts receivable, net ................ Merchandise inventory ................. Prepaid expenses ..................... Total current assets ...................... Property and equipment, net ............... Total assets $ 6,500 35,000 70,000 3,500 115,000 185,000 $300,000 $ 50,000 80,000 130,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities .......... Bonds payable, 10% .......... Total liabilities ................. Stockholders' equity: Common stock, $5 per value ............. Retained earnings .... Total stockholders' equity ................. Total liabilities and equity ................. $ 30,000 140,000 170,000 $300,000 Castile Products, Inc. Income Statement For the Year Ended December 31 Sales .... Cost of goods sold .......... Gross margin ............ Selling and administrative expenses ....... Net operating income ........ Interest expense......................... Net income before taxes ........... Income taxes (30%) Net income .......... $420,000 292,500 127,500 89,500 38,000 8,000 30,000 9,000 $ 21,000 Account balances at the beginning of the year were: accounts receivable, $25,000; and inven- tory, $60,000. All sales were on account. Required: Compute the following financial data and ratios: 1. Working capital. 2. Current ratio. 3. Acid-test ratio. 4. Debt-to-equity ratio. 5. Times interest earned ratio. 6. Average collection period. 7. Average sale period. 8. Operating cycle.

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