Q1. Impala Corporation reported the following financial information:

		2006	2007
Balance sheet values as of December 31:
	Prepaid insurance	$650,000	$475,000
	Interest payable	250,000	300,000
Cash flows for the year ended December 31:
	Insurance premiums paid	$845,000	$750,000
	Interest paid	900,000	900,000

Calculate Impala’s insurance expense and interest expense for the year ended December 31, 2007.

          Insurance expense        Interest expense

A) $925,000                                  $950,000

B) $1,020,000                               $950,000

C) $925,000                                  $850,000

Q2. What is the impact on accounts receivable if sales exceed cash collections and what is the impact on accounts payable if cash paid to suppliers exceeds purchases?

A)   Both will increase.

B)   Only accounts receivable will increase.

C)   Only accounts payable will increase.

Q3. Murray Company reported the following revenues and expenses for the year ended 2007:

Sales revenue                               $200,000

Wage expense                              89,000

Insurance expense                       17,000

Interest expense                            10,400

Depreciation expense                  50,000

Following are the related balance sheet accounts:

                                                                        2007                2006

Unearned revenue                                       $15,600          $13,200

Wages payable                                             5,400               6,600

Prepaid insurance                                        1,200               0

Interest payable                                            500                  1,600

Accumulated depreciation                         95,000             45,000

Calculate cash collections and cash expenses.

          Cash collections             Cash expenses

A) $202,400                                  $119,900

B) $202,400                                  $58,100

C) $197,600                                  $119,900

Q4. Maverick Company reported the following financial information for 2007:

                                                                         in millions

Beginning accounts receivable            $180

Ending accounts receivable                  225

Sales                                                          11,000

Beginning inventory                                2,000

Ending inventory                                     2,300

Purchases                                                 8,100

Beginning accounts payable                1,600

Ending accounts payable                      1,200

Calculate Maverick’s cost of goods sold and cash paid to suppliers for 2007.

          Cost of goods sold         Cash paid to suppliers

A) $7,800 million                          $7,100 million

B) $7,800 million                         $8,500 million

C) $3,800 million                         $8,500 million

答案和详解如下：

Q1. Impala Corporation reported the following financial information:

Calculate Impala’s insurance expense and interest expense for the year ended December 31, 2007.

          Insurance expense        Interest expense

A) $925,000                                  $950,000

B) $1,020,000                               $950,000

C) $925,000                                  $850,000

Correct answer is A)

Cash paid for insurance = insurance expense + change in prepaid insurance, so insurance expense for 2007 is equal to $925,000 [($750,000 cash paid for insurance − (-$175,000)]. Interest expense for 2007 is equal to $950,000 ($900,000 cash interest paid + $50,000 increase in interest payable).

Q2. What is the impact on accounts receivable if sales exceed cash collections and what is the impact on accounts payable if cash paid to suppliers exceeds purchases?

A)   Both will increase.

B)   Only accounts receivable will increase.

C)   Only accounts payable will increase.

Correct answer is B)

If a firm sells more than it collects, accounts receivable will increase. If a firm pays suppliers more than it purchases, accounts payable will decrease.

Q3. Murray Company reported the following revenues and expenses for the year ended 2007:

Sales revenue                               $200,000

Wage expense                              89,000

Insurance expense                       17,000

Interest expense                            10,400

Depreciation expense                  50,000

Following are the related balance sheet accounts:

                                                                        2007                2006

Unearned revenue                                       $15,600          $13,200

Wages payable                                             5,400               6,600

Prepaid insurance                                        1,200               0

Interest payable                                            500                  1,600

Accumulated depreciation                         95,000             45,000

Calculate cash collections and cash expenses.

          Cash collections             Cash expenses

A) $202,400                                  $119,900

B) $202,400                                  $58,100

C) $197,600                                  $119,900

Correct answer is A)

Cash collections are $202,400 ($200,000 sales + $2,400 increase in unearned revenue). Cash expenses are $119,900 (–$89,000 wages expense – $1,200 decrease in wages payable – $17,000 insurance expense – $1,200 increase in prepaid insurance – $10,400 interest expense – $1,100 decrease in interest payable). Depreciation expense is a non-cash expense.

Q4. Maverick Company reported the following financial information for 2007:

                                                                         in millions

Beginning accounts receivable            $180

Ending accounts receivable                  225

Sales                                                          11,000

Beginning inventory                                2,000

Ending inventory                                     2,300

Purchases                                                 8,100

Beginning accounts payable                1,600

Ending accounts payable                      1,200

Calculate Maverick’s cost of goods sold and cash paid to suppliers for 2007.

          Cost of goods sold         Cash paid to suppliers

A) $7,800 million                          $7,100 million

B) $7,800 million                         $8,500 million

C) $3,800 million                         $8,500 million

Correct answer is B)

Cost of goods sold is equal to $7,800 million ($2,000 million beginning inventory + $8,100 million purchases – $2,300 million ending inventory). Cash paid to suppliers is equal to $8,500 million (–$7,800 COGS – $300 million increase in inventory – $400 million decrease in accounts payable). Alternate solution: Cash paid to suppliers is equal to $8,500 million (–$8,100 million purchases – $400 decrease in accounts payable).

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