WGU C214 Pre-Test Q A

WGU C214 Pre-Test Q & A

• What is included in the Income Statement and NOT in the Statement

of Cash Flows ANS Depreciation Expense

2. Computation of Net Income:

A co. sold products in 2014 for $120k and collected $100k cash and re- mainder in 2015. Co. incurred $70k expenses for 2014 and paid $100k which included $30k for expenses incurred in 2013. What is net income for 2014?-

: Computation of Net Income (R-E=NI)

$50,000

Net Income = $120k - $70k = $50k, or Revenues - Expenses Incurred = Net Income

3. Retained Earning Statement:

The beginning retrained earnings on 1/14/14 is $25k. The NI for 2014 is $50k and the dividend payout ratio is 25% of NI. What are retained earnings on

12/31/14 ANS Retained Earning Statement:

$62,500

Retained earnings on12/31/14 = $25k + $50k - (.25x$50k) = $62,500 1 / 4

4. Retained Earnings:

Firm reported RE of $300 in 12/31/12. For 12/31/13 firm reports RE of $400

and pays dividends of $25. What is NI in 2013 ANS Retained Earnings:

Answer $125 Logic is $300 from $400 is $100 plus the $25 dividend totals

out to $125. 300 + NI - 25 = 400: NI=125, so

300+125-25=400

5. Balance Sheet:

Basic equation for the Balance Sheet is ANS Balance

Sheet: Equity = Assets - Liabilities, or it can also be

seen as

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Assets = Liabilities + Equity

• Investment: Simple Interest:

An investment of $10k made today at 8% simple interest for 3 yrs and 9

mo. will yield in principle and interest of ANS Interest: Simple Interest

$13,000

Principal + Interest = $10,000 + (10k x .08x3.75) = $13k

7. Investment returns:

A stock will be worth $36 at EOY and will pay dividend of $2.25.How much should an investor pay for the stock if investor expects a 12%

rate of return ANS Investment returns:

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