Income Statement/ Balance Sheet

Question 1

A firm reported retain earnings of $300 in 2022. For 2023, the firm reports retained earnings of $400 and pay dividends of $25. What was the net income in 2023?
a. 300
b. 400
c. 125
d. 100

Net income = dividend paid + change in retained earnings

Answer 1

c. 125

Net income = dividend paid + change in retained earnings

Net income = 25 + (400-300)
Net income = 25 + 100 = 125

Question 2

A basic equation for the balance sheet is:
a equity = assets - liabilities
b liabilities = equity + assets
c assets = liabilities - equity
d assets = equity - liabilities

Answer 2

A. Equity = assets - liabilities

Question 3

Why is the balance sheet known as a permanent statement?
A because the statement is sent to the SEC
B because the other statements are reset at the end of the fiscal year
C because it is printed out an archived
D because it persists in the minds of the shareholders

Answer 3

B because the other statements are reset at the end of the fiscal year

Question 4

How do you calculate the change and retained earnings?
A ending retain earnings - change in cash
B EBIT divided by Total assets + dividends
C EBIT - change in cash B- dividends
D Net income - dividends

Answer 4

D Net income - dividends

Question 5

Which of the following is generally true?
A. Gross profit and operating income are the same.
B. Cost of goods sold + operating expenses = net income
C. Operating income and EBIT are the same
D. EBIT + income taxes = net income

Answer 5

C. Operating income and EBIT are the same

Question 6

Which components are part of total assets?
A. Cash, accounts, receivable, short-term debt.
B. Cash, account accounts, receivable, inventory, long-term assets.
C. Accounts payable, long-term assets, long-term debt.
D. Accounts payable, net income, equity.

Answer 6

B. Cash, accounts, receivable, inventory, long-term assets.

Question 7

Which components are part of current assets?
A. Cash, accounts, receivable, property plant & equipment
B. Accounts receivable, accounts, payable, inventory.
C. Long-term deck, property plant & equipment, common stock
D. Inventory, cash, accounts, receivable, short-term investments.

Answer 7

D. Inventory, cash, accounts, receivable, short-term investments

Question 8

Which components are part of total liabilities?
A. Accounts payable, account accounts, receivable, short-term debt
B. Long-term debt, common stock, retained earnings
C. Bonds, accounts payable, mortgage.
D. Common stock, long-term debt, short-term investments.

Answer 8

C. Bonds, accounts payable, mortgage.