Q1. Harry Company's statement of cash flows shows the following items scattered among the three sections of the statement.

Accounts receivable decrease $36,000

Gain on sale of equipment 13,000

Prepaid rent increase 22,000

Cash used to repay long-term loans 80,000

Accounts payable decrease 18,000

Inventory decrease 50,000

Dividends (declared and paid) 40,000

Interest payable decrease 26,000

Cash paid to purchase new equipment 125,000

Depreciation expense 25,000

Net cash flow from operating activities positive 100,000

This is not a list of all of the items in Harry's statement of cash flows, but Harry has no other items reported in the operating activities section of its statement of cash flows (prepared using the indirect method). What is Harry's net income?

$28,000

$42,000

$68,000

$118,000

$92,000

$290,000

$108,000

$132,000

Q2. Lily Company had the following account totals as of December 31, 20X2.

Cost of goods sold $150,000

Accounts receivable 100,000

Rent revenue 10,000

Accounts payable 25,000

Sales 200,000

Inventory 50,000

Bank Loan Payable* 20,000

Cash 18,000

Retained earnings (beginning of year, January 1, 20X2) 80,000

Prepaid insurance (6-month insurance policy) 15,000

Paid-in capital 38,000

Equipment 45,000

Unearned rent revenue (9-month contract) 5,000

*Of the $20,000 bank loan payable, $3,000 will be repaid in 20X3. What is Lily Company's CURRENT RATIO?

5.74

6.14

4.06

5.90

5.55

Q3. The following items have been extracted from the financial statements of Lorien Company for the year 20X1.

Total liabilities $700

Net income 50

Gross profit 400

EBIT (also called operating income) 220

Sales 1,000

Total assets 1,600

Income tax expense 40

Cost of goods sold 600

Note: This list does not include all of the items in Lorien's 20X1 financial statements. However, the list does include all of the items you need to correctly answer the question below. What is the value of Lorien Company's TIMES INTEREST EARNED ratio for 20X1?

1.69

3.08

3.38

3.00

1.29

5.50

4.40

2.69

Q4. Rocky Company borrowed $10,000 on February 1, 20X1. The loan has an annual interest rate of 14%. Rocky Company repaid the loan in full (both principal and interest) on January 31, 20X2; no payments were made on the loan between February 1, 20X1 and January 31, 20X2. [Note: The correct adjusting entry with respect to this loan was recorded on December 31, 20X1.] The single journal entry to record the repayment of the loan (both principal and interest) on January 31, 20X2 includes a

Debit to Interest Expense for $1,283

Credit to Interest Expense for $1,283

Debit to Interest Expense for $1,167

Credit to Interest Expense for $1,167

Debit to Interest Expense for $1,400

Credit to Interest Expense for $1,400