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Chapter 06 MC - CHAPTER SIX Multiple Choice Questions Use...

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CHAPTER SIX Multiple Choice Questions Use the following information to answer questions 6-1 through 6-4: Income Statement Balance Sheet for the year ending December 31, 1999 December 31, 1999 (In thousands) (in thousands) Sales $20,000 Assets: COGS 9,100 Total Current Assets $50,000 10,900 Net Plant & Equipment 35,000 Total Assets $85,000 Selling Expenses 2,000 Depreciation 1,500 Liabilities & Equity: Fixed Expenses 2,000 Accounts Payable $20,000 Notes Payable 5,000 EBIT 5,400 Accrued Expenses 5,000 Taxes (40%) 2,160 Bonds Payable 20,000 Net Income 3,240 Common Stock 20,000 Capital in Excess of Par 10,000 Common Stock Div. 600 Retained Earnings 5,000 $ 2,640 Total Liabilities & Equity $85,000 Sales for 2000 are projected to be $25,000; The firm currently uses straight line depreciation; No new equipment purchases are planned for 2000; There will be a 100% earnings distribution for 2000. The current assets, accounts payable, and accrued expenses vary at a constant percent of sales as do COGS and selling expenses. Assume that notes payable is paid off in 2000. 6-1. Retained Earnings for 2000 are projected to be: a. $9,575 b. $5,000 c. $8,825 d. $4,575 6-2. Operating Income for 2000 is projected to be: a. $7,625 b. $6,750 c. $7,125 d. $4,575 63
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6-3. Forecasted total assets for the end of 2000 are: a. $106,250 b. $ 97,500 c. $ 96,000 d. $ 85,000 6-4. Forecasted additional funds needed are: a. $9,750 b. ($1,500) c. 0 d. $1,675 Use the following information to answer 6-5: end of year 1999 Cash $10,000 Accounts Receivable 15,000 Inventory 35,000 Fixed Assets, gross 55,000 Accumulated Depreciation 15,000 Fixed Assets, net 40,000 Accounts Payable 25,000 Notes Payable 5,000 Long-Term Debt 20,000 Common Equity 50,000 6-5. The firm currently uses straight line depreciation. No fixed assets are expected to be purchased or sold. Current assets and accounts payable vary directly with sales. Notes payable will be paid off in the year 2000. Depreciation in 1999 was $2,000. Sales are expected to grow by 50% in 2000. All net income is paid out in dividends and no new stock or bonds will be issued or retired. Calculate total liabilities for the end of the year 2000.
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