1.ABC Manufacturing Inc.

Income Statement

Year Ended December 31, 20X4

Sale$ 200,000Cost of goods sold$ 120,000Gross Profit$ 80,000Operating Expenses$ 40,000Loss on Sale of equipment$ 2,000$ 42,000Profit from Operations$ 38,000Other expensesInterest Expense$ 2,000Profit before Income Tax$ 36,000Income Tax Expense$ 8,000Profit$ 28,000

ABC Manufacturing Inc. comparative balance sheet at December 31

20X420X3Cash$ 4,500$ 4,300Accounts Receivable$ 72,000$ 6,500Inventory$ 110,000$ 140,000Prepaid Expenses$ 1,550$ 1,020Equipment$ 98,000$ 100,000Accumulated Depreciation - equipment$ (50,000)$ (42,000)Total Assets$ 236,050$ 209,820Account Payable$ 15,330$ 9,900Interest Payable$ 510$ 10Income taxes payable$ 10,800$ 9,500Dividends Payable$ 1,800$ 3,800Long-term Notes Payable$ 50,000$ 65,000Common share$ 130,000$ 120,000Retained Earnings$ 27,610$ 1,610Total Liabilities & Shareholders' Equity$ 236,050$ 209,820

Additional Information:

1. Operating expenses include depreciation expense of $10,000

2. Accounts Payable related to the purchase of inventory

3. Equipment that cost $8,000 was sold at a loss of $2,000

4. New equipment was purchased during the year for $6,000

5. Dividends declared and paid in 20X4 totaled $2,000

6. Common shares were sold for $10,000 cash

7. Interest payable in 20X4 was $500 greater than interest payable in 20X3

The inventory turnover at December 20X4 was:

Equal or below 0.46

None of the other alternatives are correct

Between 0.95 and 1.04

Between 0.47 and 0.94

Equal or above 1.04

2.Seaforce Manufacturing Inc.

Income Statement

Year Ended December 31, 20X5

Sale$ 340,000Cost of goods sold$ 250,100Gross Profit$ 89,900Operating Expenses$ 55,000Loss on Sale of equipment$ 2,500$ 57,500Profit from Operations$ 32,400Other expensesInterest Expense$ 3,500Profit before Income Tax$ 28,900Income Tax Expense$ 12,000Profit$ 16,900

Additional Information:

1.Operating expenses include depreciation expense of $10,000

2. Accounts Payable related to the purchase of inventory

3. Equipment that cost $12,500 was sold at a loss of $2,500

4. New equipment was purchased during the year for $8,500

5. Dividends declared and paid in 20X5 totalled $3,000

6. Common shares were sold for $12,000 cash

7. Interest payable in 20X5 was $800 greater than interest payable in 20X4

Seaforce Manufacturing Inc. comparative balance sheet at December 31 20X5

20X520X4Cash$ 6,450$ 4,100Accounts Receivable$ 72,000$ 6,500Inventory$ 110,250$ 140,000Prepaid Expenses$ 1,750$ 1,020Equipment$ 96,000$ 100,000Accumulated Depreciation - equipment$ (50,000)$ (42,000)Total Assets$ 236,450$ 209,620Account Payable$ 16,230$ 9,900Interest Payable$ 810$ 10Income taxes payable$ 10,800$ 9,500Dividends Payable$ 1,800$ 2,800Long-term Notes Payable$ 55,000$ 62,000Common shares$ 135,000$ 123,000Retained Earnings$ 16,310$ 2,410Total Liabilities & Shareholders' Equity$ 236,450$ 209,620

Round answers to fit 2 decimal places in all questions (in % questions a 0.12 is presented as 12%, so a 0.124 is rounded as 12% and 0.127 is rounded as 13%)

The accounts receivable turnover at December 20X4 was:

Equal or above 4.73

Between 1.18 and 2.35

Not enough data provided to calculate it

Between 2.36 and 4.72

Equal or below 1.17

3.The following information is from Wonder Company's financial statements:

Current liabilities $30,000

Long term liabilities $70,000

Shareholders equity $100,000

Sales $120,000

Cost of goods sold $50,000

Operating expenses $30,000

Net income $40,000

Return on equity (rounded to the zero decimal places) would be:

30%

None of the above

40%

25%

35%