Problem 1: On January 1, 2003, Holt Company purchased 30,000 shares of the 100,000 common shares outstanding of Crane Company for $1,080,000. During 2003, Crane Company reported net income of $240,000 and paid a cash dividend of $110,000. The balance of the Stock Investments account on the books of Holt Company on December 31, 2003, is
a. $1,047,000.
b. $1,119,000.
c. $1,152,000.
d. $1,080,000.
Problem 2: Poole Company made the following intercompany elimination on a work sheet to prepare a consolidated balance sheet on the date of acquisition:
Common Stock Smiley Company 285,000
Retained Earnings Smiley Company 165,000
Excess of Cost Over Book Value of Subsidiary 90,000
Investment in Smiley Company Stock 540,000
The book value of Smiley Company's net assets on the date of acquisition is
a. $285,000.
b. $450,000.
c. $540,000.
d. cannot be determined.
Problem 3: Appier Company reported net income of $40,000 for the year ended December 31, 2003. During the year, inventories decreased by $14,000, accounts payable decreased by $16,000, depreciation expense was $20,000 and a gain on disposal of equipment of $13,000 was recorded. Net cash provided by operations in 2003 using the indirect method was
a. $103,000.
b. $21,000.
c. $77,000.
d. $45,000.
Problem 4: Theel Company had a balance in the Merchandise Inventory account of $260,000 at the beginning of the year and a balance of $340,000 at the end of the year. Inventory turnover for 2003 was 7 times. If gross profit as a percentage of sales was 40%, the amount of sales for 2003 was
a. $3,500,000.
b. $2,100,000.
c. $5,250,000.
d. $1,312,500.
Problem 5: Callis Company reported net income of $140,000 for 2003. The income statement also indicates that interest expense for 2003 was $50,000. Assuming an income tax rate of 30%, the number of times interest earned ratio for 2003 was
a. 4 times.
b. 5 times.
c. 3.8 times.
d. 2.8 times.
Problem 6: During 2003, Ross Company had an asset turnover of 4 times with sales totaling $1,000,000. If net income was $80,000, Ross Company's return on assets in 2003 was
a. 8%.
b. 32%.
c. 40%.
d. 80%.