Question

1. Assume the following sales data for a company:

Year 2	$562,500
Year 1	450,000

What is the percentage increase in sales from Year 1 to Year 2 (to the nearest percent)?

a.80%

b.25%

c.125%

d.20%

2 Based on the following data, what is the amount of quick assets?

Accounts payable	$30,000
Accounts receivable	45,000
Accrued liabilities	7,000
Cash	20,000
Intangible assets	40,000
Inventory	72,000
Long-term investments	100,000
Long-term liabilities	75,000
Marketable securities	36,000
Notes payable (short-term)	20,000
Property, plant, and equipment	625,000
Prepaid expenses	2,000

a.$65,000

b.$101,000

c.$175,000

d.$173,000

3 Duke Company has income before income tax of $100,000, interest expense of $20,000, and total stockholders' equity of $100,000. Duke's times interest earned ratio is

a.6.

b.0.2.

c.1.2.

d.4.

4 The balance sheets at the end of each of the first two years of operations indicate the following:

	Year 2	Year 1
Total current assets	$600,000	$560,000
Total investments	60,000	40,000
Total property, plant, and equipment	900,000	700,000
Total current liabilities	150,000	80,000
Total long-term liabilities	350,000	250,000
Preferred 9% stock, $100 par	100,000	100,000
Common stock, $10 par	600,000	600,000
Paid-in capital in excess of par—common stock	60,000	60,000
Retained earnings	325,000	210,000

5 If net income is $125,000 and preferred dividends are $9,000 for Year 2, what is the earnings per share on common stock for Year 2? (Round to two decimal places.)

a.$0.19

b.$1.75

c.$2.08

d.$1.93

Answer 1

1

Answer: percentage increase in sales from Year 1 to Year 2 =25%

Working notes for the above answer is as under

Calculation for the percentage increase in sales from Year 1 to Year 2

Year 2	$562,500
Year 1	450,000
Year2-year1	112,500
% increse =112500/450,000	25.0%

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2

Answer: Quick Assets =$101,000

Working notes for the above answer is as under

Calculation for Quick Assets

Quick Assets
Accounts receivable	45,000
Cash	20,000
Marketable securities	36,000
Total Quick Assets	101,000

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3

Answer: Times Interest earned ratio=6

Working notes for the above answer is as under

Times Interest earned ratio

=(Income before tax+ Interest expanses) /Interest expanses

=(100,000+20,000) /20,000

=120,000/20,000

=6

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4

Answer: Earnings per share for the year2 =$1.93

Working notes for the above answer is as under

Earnings per share for the year2

EPS

= Net Income - Preferred dividend /Weighted Average Common Shares Outstanding

Weighted Average Common Shares outstanding = 600000/10 = 60000 shares

Preferred Dividend = $9000

Earnings per share = (125000-9000)/60000

Earnings per share

= 116000/60000

= $1.93