Week 13 Quiz

Which financial statement lists what a business owns and what it owes as of one date, a snapshot at a single point in time?

Select one.

• The income statement
• The balance sheet
• The statement of cash flows
• The break-even schedule

The illustrative coffee cart's owner withdrew 13,000 dollars during the year. True or false: owner withdrawals are an expense on the income statement, so they lower the cart's net income.

True or false.

• True
• False

The illustrative coffee cart's start-up balance sheet, as of opening day, shows cash of 8,000 dollars, inventory of 2,000 dollars, cart and equipment of 20,000 dollars, and an equipment loan of 10,000 dollars. Using the accounting equation, what is the owner's equity?

Select one.

• 8,000 dollars, the cash the owner holds
• 30,000 dollars, the total of everything the cart owns
• 20,000 dollars, the owner's claim on the assets
• 10,000 dollars, the same as the loan

The illustrative coffee cart's income statement for the year ended on its first anniversary shows revenue of 75,000 dollars, cost of goods sold of 30,000 dollars, operating expenses of 35,000 dollars, and interest expense of 1,000 dollars. The owner also withdrew 13,000 dollars. What is the cart's net income?

Select one.

• 9,000 dollars
• 45,000 dollars
• 10,000 dollars
• a loss of 4,000 dollars

The illustrative coffee cart began its first year with owner's equity of 20,000 dollars. During the year it earned net income of 9,000 dollars, and the owner withdrew 13,000 dollars. What is the owner's equity on the year-end balance sheet?

Select one.

• 29,000 dollars
• 7,000 dollars
• 33,000 dollars
• 16,000 dollars

The illustrative coffee cart earned net income of 9,000 dollars in its first year, yet its cash rose only from 8,000 dollars to 10,000 dollars. Which explanation fits the cart's statement of cash flows?

Select one.

• The income statement overstated revenue, so the true net income was only 2,000 dollars
• The 4,000 dollars of depreciation was paid out in cash, which pulled the cash balance down
• The owner withdrew 13,000 dollars and repaid 2,000 dollars of the loan, taking cash without lowering net income
• The balance sheet counts cash only as of one date, so the rise in cash cannot be compared with profit

The illustrative coffee cart's year-end balance sheet shows cash of 10,000 dollars, inventory of 2,000 dollars, accounts payable of 4,000 dollars, and 2,000 dollars of the equipment loan due within the coming year. What is the cart's current ratio?

Select one.

• 0.5
• 2.0
• 0.75
• 3.0

The illustrative coffee cart had revenue of 75,000 dollars, gross profit of 45,000 dollars, operating income of 10,000 dollars, and net income of 9,000 dollars for its first year. What is its net profit margin?

Select one.

• 60 percent
• about 13 percent
• 12 percent
• about 833 percent

The illustrative coffee cart has fixed costs of 36,000 dollars a year, a price of 5 dollars a drink, and a variable cost of 2 dollars a drink, so its break-even is 12,000 drinks. It sold 15,000 drinks in its first year. How much profit do the drinks past break-even produce?

Select one.

• 15,000 dollars
• 45,000 dollars
• 3,000 dollars
• 9,000 dollars

A classmate reports that the illustrative coffee cart's gross margin is 150 percent, because each 5-dollar drink costs 2 dollars to make. Which statement identifies the slip?

Select one.

• The classmate computed the markup on cost; gross margin divides gross profit by revenue, which gives the 60 percent margin on price
• The classmate used the right measure, because gross margin and markup on cost are two names for one percentage
• The classmate should have divided the 2-dollar cost by the 5-dollar price, which gives the gross margin of 40 percent
• The classmate should have divided net income by revenue, because gross margin includes every expense