On January 1, Steigel Company had a balance of $815,000 in its Land account. During the year, Steigel sold land that had cost $278,000 for $459,000 cash. The balance in the Land account was $1,075,000 on December 31. What is the net cash outflow from investing activities?

Select the incorrect statement regarding the contribution margin income statement.
Multiple Choice
The contribution margin approach for the income statement is unacceptable for external reporting.
The contribution margin approach requires that all costs be classified as fixed or variable.
Contribution margin represents the amount available to cover product costs and thereafter to provide profit. Correct
Assuming no change in fixed costs, a $1 increase in contribution margin will result in a $1 increase in profit.
Answer
Contribution margin represents the amount available to cover product costs and thereafter to provide profit. Correct
 
Explanation
The contribution margin represents the amount available to cover fixed expenses and thereafter to provide company profits.

As of December 31, Year 1, Gant Corporation had a current ratio of 1.29, quick ratio of 1.05, and working capital of $18,000. The company uses a perpetual inventory system and sells merchandise for more than it cost. On January 1, Year 2, Gant sold inventory on account for $6,000. Which of the following statements is incorrect?

Multiple Choice
Gant's quick ratio will increase. Correct
None of these answers are correct.
Gant's current ratio will decrease.Gant's working capital will increase.
Answer
Gant's quick ratio will increase. Correct
Explanation
The sale of inventory on account for an amount in excess of its cost is an asset source transaction; the current asset account Accounts Receivable increases by $6,000 and the revenue account Sales also increases. In addition, the current asset account Inventory decreases and the expense account Cost of Goods Sold increases. The quick ratio is calculated by dividing quick assets (which include the asset accounts Cash, Accounts Receivable, and Current Marketable Securities) by current liabilities. Since this transaction increases the numerator (that is, the quick asset Accounts Receivable) but does not affect the denominator, it increases (rather than decreases) the quick ratio.

The following beginning and ending balances were drawn from the records of Grimes Company:


If Grimes Company sold equipment that had an original cost of $1,700 and accumulated depreciation of $1,400 for $2,450, how much did Grimes pay for new equipment?
Multiple Choice

$2,500 Correct

$2,455


$4,950


$2,400 
Answer
$2,500 Correct
Explanation
Beginning balance + Purchases of equipment − Cost of equipment sold = Ending balance
$2,500 + Purchases of equipment − $1,700 = $3,300
Purchases of equipment = $3,300 − $2,500 + $1,700 = $2,500

Rose Corporation sells backpacks. Variable costs for this product are $34 per unit, and the sales price per unit is $44 per unit. Total fixed costs amount to $113,000. How many backpacks does Rose need to sell to achieve a desired profit of $42,000?

Multiple Choice
14,265 units
15,500 units Correct
1,235 units
4,559 units
Answer
15,500 units Correct
Explanation
Sales volume in units = (Fixed costs + Desired profit) ÷ Contribution margin per unit
Sales volume in units = ($113,000 + $42,000) ÷ ($44 per unit − $34 per unit) = 15,500 units

Financial statement analysis involves forms of comparison including:

Multiple Choice
Comparing changes in the same item over a number of periods.

Comparing key items to industry averages.
All of these answers are correct.Correct
Comparing key relationships within the same year.

Answer
 All of these answers are correct. Correct


What are the two methods used to prepare the statement of cash flows?

Multiple Choice

Sources and uses


Cash and noncash


Inflow and outflow


Indirect and direct

Answer

Indirect and direct 

On January 1, Steigel Company had a balance of $815,000 in its Land account. During the year, Steigel sold land that had cost $278,000 for $459,000 cash. The balance in the Land account was $1,075,000 on December 31. What is the net cash outflow from investing activities?

Multiple Choice

$158,000


$79,000

Correct

$356,000


$181,000
Answer
$79,000 Correct

Explanation
Beginning balance of land + Cash outflow to purchase land − Cash inflow from sale of land = Ending balance of Land
$815,000 + Cash outflow to purchase land − $278,000 = $1,075,000
Cash outflow to purchase land = $1,075,000 − $815,000 + $278,000 = $538,000
Net cash flow from investing activities = Cash inflow from sale of land − Cash outflow for purchase of land
Net cash flow from investing activities = $459,000 − $538,000 = ($79,000)