Question

Net Sales						$8,436,500
	Cost of Sales						3,374,600
	Gross Profit						5,061,900
	Operating, selling, and general and administrative expenses						2,530,950
	Operating profit						2,530,950
	Interest expense, net						180,650
	Income before income taxes						2,350,300
	Income tax expense						470,060
	Net Income						$1,880,240

james estimates that net sales will increase by 6% in the year 2018. Cost of Sales are estimated to be 42% of net sales, Operating, selling, general and administrative expenses are expected to be 29% of net sales, Interest expense is expected to be $175,000 and Income Tax expense is expected to be 21%.

What is james projected Cost of Sales for 2018?

$1,417,332

$3,577,076

$3,755,930

$4,791,932

Stanley Company reported an $188 million loss on its 2017 Income Statement. Stanley had reported positive income in years 2002 through 2016, but had been experiencing rapid economic decline recently and was unsure as to whether they would continue to be profitable in the future. Stanley carried the loss back to offset income taxes paid in the past two years, however, they have $120,000 of the loss remaining after offsetting the previous two years’ income. With respect to the overflow loss from the year 2017, Stanley should

Create a deferred tax asset and carry the loss forward to offset income in the next two years.

Create a deferred tax asset and carry the loss forward to offset income in the next 20 years.

Create deferred tax asset to carry forward the loss to offset income for the next 20 years, but establish a valuation account to reduce the benefit if it is more likely than not that they will not use the full benefit.

None of these answers are correct.

Dane Company obtained a $200,000, 7% note on January 1, 2015. Interest is paid each December 31. How would Danereport the a) principal and b) interest payment on their Statement of Cash Flows?

Principal: inflow from financing, Interest: outflow from financing

Principal inflow from investing, Interest: outflow from investing

Principal: inflow from financing, Interest: outflow from operating

Principal: inflow from investing, Interest: outflow from operating

None of these answers are correct.

On April 1, 2016, Wayne Company sold a truck for $25,000 when the book value of the truck was $27,000. How would Wayne record the sale of the truck on the Statement of Cash Flows using the Indirect Method?

Truck: a $25,000 cash inflow from investing activities, Loss: $2,000 cash outflow for financing activities.

Truck: a $25,000 cash inflow from financing activities, Loss: a $2,000 cash outflow for investing activities.

Truck: a $25,000 cash inflow from investing activities: Loss: an addition to net income in the operating section

Truck: a $25,000 cash inflow from investing activities: Loss: a deduction from net income in the operating section

None of these answers are correct.

Cash dividends paid would be a cash outflow outflow for ___________activities and cash dividends received would be a cash inflow for ___________ activities:

Investing, financing

Financing, investing

Investing, Operating

Financing, Operating

None of these answers are correct.

Answer 1

1	Option C is the correct answer
	Net Sales	89,42,690
	Projected Cost of Sales in 2018	37,55,930
2	Option C is the correct answer
	As per “Statement of Financial Accounting Standards No. 109.” requires creation of a “valuation allowance” if it is more likely than not that some portion/all of the deferred tax asset will not be realized.
3	Option B is the correct answer
	Dane Company has obtained $200,000, 7% note for investing.
4	Option D is the correct answer
	Truck: a $25,000 cash inflow from investing activities: Loss: a deduction from net income in the operating section
5	Option B is the correct answer
	Cash dividends paid would be a cash outflow for Financing activities and cash dividends received would be a cash inflow for Investing activities