Financial Reporting And Analysis MCQ - Financial Reporting And Analysis Section 2

6 An analyst collects the following information for Baking Butter Corporation:

Net revenue	$200,000
Gross profit	$50,000
Increase in inventory	$8,000
Increase in accounts payable	$12,000

The cash paid to its suppliers is closest to:

Cash paid to suppliers = Cost of goods sold + increase in inventory - increase in payables. Cash paid to suppliers = 200,000 - 50,000 + 8,000 - 12,000 = $146,000.

7 In 2016 MG Laptops Ltd reported a cost of goods sold worth 120, 000. During 2016 the inventory balance increased by 50,000 and accounts payable increased by $40,000. The cash paid to suppliers is closest to:

The cash paid to suppliers is 120,000 + 50,000 – 40,000 = 130,000.

8 At the beginning of the year, Donald owed his employees 16,000. The total salary expense incurred during the year amounted to 40,000. The cash flow statement showed a salary expense of $49,000. What liability did Donald record at the end of the year?

Salary payable = Beginning salary payable + Salary expense - Cash paid Salary payable = 16,000 + 40,000 - 49,000 = 7,000.

9 The other operating expenses reported by King Fishers Ltd. were $20 million. These comprised electricity expenses and insurance expense. The prepaid insurance expense decreased by $6 million. The accrued electricity expense increased by $8 million. The cash paid for other operating expenses is closest to:

Cash paid = Operating expenses - decrease in prepaid expense - increase in accrued expense Cash paid = 20 - 6 - 8 = 6.

10 The balance sheet extract for Jackal Labs Ltd. shows the machinery and accumulated depreciation balances for the years 2011 and 2012.

	2011	2012
Machinery	$80 million	$91 million
Accumulated depreciation	$25 million	$31 million

Further information provided is as follows:

Gain on sale of machinery	$1.5 million
Depreciation expense for 2012	$7 million
Capital expenditure on machinery	$14 million

How much did the company receive in cash from the sale of machinery?

Gain = Selling Price - Book Value

Historical cost:
Beginning value of machinery + machinery bought – machinery sold = Ending value of machinery 80 million + 14 million – 91 million = 3 million
Machinery sold = 3 million

Accumulated depreciation:
Beginning value of depreciation + depreciation expense – machinery depreciation = Ending value of depreciation 25 million + 7 million – 31 million = 1 million
Machinery depreciation = 1 million

Book value:
Book value = Historical cost – accumulated depreciation
Book value = 3 - 1 = 2 million
Selling price:
Selling price = Gain + Book Value
Selling price = 1.5 million + 2 million = 3.5 million.