QUESTION: 1893

When using transactional analysis, the following changes in the balance sheet account and the corresponding cash flow description would be correct except,

long-term debt; increase or decrease in debt
rent payable; cash paid for inputs
accounts payable; cash paid for inputs
short-term debt; increase or decrease in debt
retained earnings; dividends paid

Answer(s): B

Explanation:

The cash flow of rent payable would be cash expenses.

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Over a given year, a firm's total assets increased by $7,000 and total liabilities decreased by $4,000. If the firm did not issue any new equity and paid out $1,500 in dividends, then its net income during the year was ________.

$1,500
$9,500
$4,500
$12,500

Answer(s): D

Explanation:

Total assets - Total liabilities = Equity. Hence,
Change in Assets - Change in Liabilities = Change in Equity.
Thus, change in equity = 7,000-(-4,000) = $11,000
All of the net income not paid out as dividends goes into increasing the equity. Since no new shares were issued, Net Income = change in equity + dividends paid. This gives net income = $11,000+$1,500 = $12,500.

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QUESTION: 1895

An EPS amount is always shown for:

all of these answers
income before extraordinary items and the cumulative effect of accounting changes
income from continuous operations
cumulative effect of accounting changes

Answer(s): A

Explanation:

All of these responses are true.

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QUESTION: 1896

A firm currently has a financial leverage ratio of
2. After a thorough review, the firm's management has concluded that they have to write-down assets worth 200,000. This will cause the firm's financial leverage to ________.

decrease
insufficient information given
increase
stay constant

Answer(s): C

Explanation:

The write-down of assets effectively decreases assets and equity by the same amount, once tax effects are correctly figured. Since A > E, a decrease in both quantities by the same amount increases the financial leverage (A/E) ratio.

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QUESTION: 1893

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QUESTION: 1894

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QUESTION: 1895

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QUESTION: 1896

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