The ending balance in retained earnings would be a

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Beginning retained earnings were $500,000. The ending balance in retained earnings would be: a. $500,000 b. $300,000 c. $400,000 d. $600,000 4-20. Depreciation: a. is not a true expense b. represents a cash outflow on the cash flow statement c. is deducted from net income d. is a tax deductible non-cash expense 4-21. Selling expenses are subtracted: a. from depreciation expense 35
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b. before gross profit c. before operating income d. after net income 4-22. Interest expense is deducted: a. before gross profit is calculated b. before operating income is calculated c. before taxes are calculated but after operating expenses d. after preferred dividends but before common stock dividends 4-23. Preferred stock dividends: a. are deducted before net income but after interest expense is calculated b. are deducted from retained earnings c. are subtracted from operating income d. are deducted after net income is calculated 4-24. The basic accounting equation: a. says that all assets of the firm are funded by the liabilities and equity of the firm b. says that current and non-current assets = current and non-current liabilities c. is an economic and not an accounting concept d. is a secret known only by CPAs 4-25. Earnings per share are: a. are earnings available to all preferred stock investors b. reflect residual earnings of the firm c. are calculated before preferred stock dividends are deducted d. are calculated before taxes are deducted 4-26. Which of the following statements is true of the statement of cash flows: a. it measures changes in profit from one year to the next year b. it includes changes in net working capital only c. it is the same as the income statement d. it includes dividends paid 36
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4-27. A firm increases its debt ratio from 50% to 75%. Which of the following statements is most correct: a. the firm probably has very low borrowing b. the firm’s positive ROE will increase c. the stockholders’ leverage has decreased d. earnings after interest expense but before taxes will increase 4-28. Which of the following items is not part of current assets? a. prepaid expenses b. accounts receivable c. accounts payable d. marketable securities 4-29. Which of the following statements is true? a. The marginal tax rate always exceeds the average tax rate. b. The marginal tax rate always equals the average tax rate.
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