Chapter 4 Practice Exam Questions & Answers

Chapter 4 Practice Exam Questions & Answers -...

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Chapter 4 Test Questions
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The following balance sheet and income statement should be used for questions #1 through #3: KNF, Inc. 2005 Income Statement Net sales $10,300 Less: Cost of goods sold 7,400 Less: Depreciation 1,500 Earnings before interest and taxes
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Question 1 All costs and working capital accounts vary directly with sales. Sales are projected to increase by 7 percent. What is the projected increase in accounts payable? a. $7.50 b. $15.00 c. $70.70 d. $77.70 e. None of the above
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Answer Question 1 LY Accounts Payable = $1010 Sales increase by 7% (AP is a working capital account and so as stated in the question varies directly with sales) $1010 * 7% = $70.70 Answer : C
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Question 2 The net profit margin, the debt-equity ratio, and the dividend payout ratio are constant. Sales are expected to increase by $875.50 next year. What is the projected addition to retained earnings for next year? a. $321.55 b. $389.09 c. $411.16 d. $747.57
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Answer Question 2 LY Net Margin: $689 / $10,300 = 6.68932% LY Dividend Payout Ratio: $310.05 / $689 = 45% Next Year Sales = $10,300 + $875.50 = $11,175.50 Next Year Net Income = $11,175.50 * 6.68932% = $747.57 Next Year Dividend = $747.57 * 45% =
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Question 3 Assume that KNF, Inc. is operating at 80 percent of capacity. All costs and net working capital vary directly with sales. What
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Chapter 4 Practice Exam Questions & Answers -...

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