12.4-64 The following data represent selected information from the income statement and balance sheet for
Duenke Company for the year ended December 31, 20X7:
20X7
Cash
$10,000
Net accounts receivable
30,000
Inventory
43,000
Prepaid expenses
5,000
Total current assets
88,000
Total noncurrent assets
112,000
Total current liabilities
70,000
Total noncurrent liabilities
40,000
Share capital, no-par
60,000
Retained earnings
30,000
Net credit sales
370,000
Cost of goods sold
150,000
Gross profit
220,000
Income from operations
95,000
Interest expense
8,000
Net income
70,000
The acid-test ratio for Duenke Company on December 31, 20X7, was:
A) 1.26.
B) 0.57.
C) 0.67.
D) 1.45.
12.4-65 The following data represent selected information from the comparative income statement and
balance sheet for Dunkin Company for the years ended December 31, 20X7 and 20X6:
20X7
20X6
Cash
$10,000
$15,000
Net accounts receivable
30,000
25,000
Inventory
43,000
40,000
Prepaid expenses
5,000
7,000
Total current assets
88,000
87,000
Total noncurrent assets
112,000
114,000
Total current liabilities
70,000
60,000
Total noncurrent liabilities
40,000
45,000
Share capital, no-par
60,000
60,000
Retained earnings
30,000
36,000
Net credit sales
370,000
333,000
Cost of goods sold
150,000
160,000
Gross profit
220,000
173,000
Income from operations
95,000
87,000
Interest expense
8,000
8,000
Net income
70,000
57,000
Using 365 days in the year, Dunkin Company’s days’ sales in receivables for the year ended
December 31, 20X7, was closest to:
A) 23.
B) 27.
C) 33.
D) 30.
12.4-66 The following data represent selected information from the comparative income statement and
balance sheet for Dunkin Company for the years ended December 31, 20X7 and 20X6:
20X7
20X6
Cash
$10,000
$15,000
Net accounts receivable
30,000
25,000
Inventory
43,000
40,000
Prepaid expenses
5,000
7,000
Total current assets
88,000
87,000
Total noncurrent assets
112,000
114,000
Total current liabilities
70,000
60,000
Total noncurrent liabilities
40,000
45,000
Share capital, no-par
60,000
60,000
Retained earnings
30,000
36,000
Net credit sales
370,000
333,000
Cost of goods sold
150,000
160,000
Gross profit
220,000
173,000
Income from operations
95,000
87,000
Interest expense
8,000
8,000
Net income
70,000
57,000
The inventory turnover for Dunkin Company for the year ended December 31, 20X7, was:
A) 3.61.
B) 4.
C) 3.49.
D) 3.86.
12.4-67 The following data represent selected information from the comparative income statement and
balance sheet for Dunkin Company for the years ended December 31, 20X7 and 20X6:
20X7
20X6
Cash
$10,000
$15,000
Net accounts receivable
30,000
25,000
Inventory
43,000
40,000
Prepaid expenses
5,000
7,000
Total current assets
88,000
87,000
Total noncurrent assets
112,000
114,000
Total current liabilities
70,000
60,000
Total noncurrent liabilities
40,000
45,000
Share capital, no-par
60,000
60,000
Retained earnings
30,000
36,000
Net credit sales
370,000
333,000
Cost of goods sold
150,000
160,000
Gross profit
220,000
173,000
Income from operations
95,000
87,000
Interest expense
8,000
8,000
Net income
70,000
57,000
Dunkin Company’s times-interest-earned ratio for the year ended December 31, 20X7, was:
A) 11.88.
B) 11.38.
C) 22.75.
D) 10.88.
12.4-68 The following data represent selected information from the comparative income statement and
balance sheet for Dunkin Company for the years ended December 31, 20X7 and 20X6:
20X7
20X6
Cash
$10,000
$15,000
Net accounts receivable
30,000
25,000
Inventory
43,000
40,000
Prepaid expenses
5,000
7,000
Total current assets
88,000
87,000
Total noncurrent assets
112,000
114,000
Total current liabilities
70,000
60,000
Total noncurrent liabilities
40,000
45,000
Share capital, no-par
60,000
60,000
Retained earnings
30,000
36,000
Net credit sales
370,000
333,000
Cost of goods sold
150,000
160,000
Gross profit
220,000
173,000
Income from operations
95,000
87,000
Interest expense
8,000
8,000
Net income
70,000
57,000
The accounts receivable turnover for Dunkin Company for the year ended December 31, 20X7,
was:
A) 13.45.
B) 12.11.
C) 12.33.
D) 13.32.
12.4-69 The following data represent selected information from the comparative income statement and
balance sheet for Dunkin Company for the years ended December 31, 20X7 and 20X6:
20X7
20X6
Cash
$10,000
$15,000
Net accounts receivable
30,000
25,000
Inventory
43,000
40,000
Prepaid expenses
5,000
7,000
Total current assets
88,000
87,000
Total noncurrent assets
112,000
114,000
Total current liabilities
70,000
60,000
Total noncurrent liabilities
40,000
45,000
Share capital, no-par
60,000
60,000
Retained earnings
30,000
36,000
Net credit sales
370,000
333,000
Cost of goods sold
150,000
160,000
Gross profit
220,000
173,000
Income from operations
95,000
87,000
Interest expense
8,000
8,000
Net income
70,000
57,000
The debt ratio for Dunkin Company for 20X7, was:
A) 1.87.
B) 0.50.
C) 0.55.
D) 1.82.
12.4-70 The following data represent selected information from the comparative income statement and
balance sheet for Dunkin Company for the years ended December 31, 20X7 and 20X6:
20X7
20X6
Cash
$10,000
$15,000
Net accounts receivable
30,000
25,000
Inventory
43,000
40,000
Prepaid expenses
5,000
7,000
Total current assets
88,000
87,000
Total noncurrent assets
112,000
114,000
Total current liabilities
70,000
60,000
Total noncurrent liabilities
40,000
45,000
Share capital, no-par
60,000
60,000
Retained earnings
30,000
36,000
Net credit sales
370,000
333,000
Cost of goods sold
150,000
160,000
Gross profit
220,000
173,000
Income from operations
95,000
87,000
Interest expense
8,000
8,000
Net income
70,000
57,000
The rate of return on total assets for Dunkin Company for 20X7, was closest to:
A) 1.87.
B) 0.54.
C) 0.39.
D) 1.82.
12.4-71 The following data represent selected information from the comparative income statement and
balance sheet for Dunkin Company for the years ended December 31, 20X7 and 20X6:
20X7
20X6
Cash
$10,000
$15,000
Net accounts receivable
30,000
25,000
Inventory
43,000
40,000
Prepaid expenses
5,000
7,000
Total current assets
88,000
87,000
Total noncurrent assets
112,000
114,000
Total current liabilities
70,000
60,000
Total noncurrent liabilities
40,000
45,000
Share capital, no-par
60,000
60,000
Retained earnings
30,000
36,000
Net credit sales
370,000
333,000
Cost of goods sold
150,000
160,000
Gross profit
220,000
173,000
Income from operations
95,000
87,000
Interest expense
8,000
8,000
Net income
70,000
57,000
The rate of return on ordinary shareholders’ equity for Dunkin Company for 20X7 was closest to:
A) 1.02.
B) 0.77.
C) 0.65.
D) .75.
12.4-72 The following data represent selected information from the comparative income statement and
balance sheet for Dunkin Company for the years ended December 31, 20X7 and 20X6:
20X7
20X6
Cash
$10,000
$15,000
Net accounts receivable
30,000
25,000
Inventory
43,000
40,000
Prepaid expenses
5,000
7,000
Total current assets
88,000
87,000
Total noncurrent assets
112,000
114,000
Total current liabilities
70,000
60,000
Total noncurrent liabilities
40,000
45,000
Share capital, no-par *
60,000
60,000
Retained earnings
30,000
36,000
Net credit sales
370,000
333,000
Cost of goods sold
150,000
160,000
Gross profit
220,000
173,000
Income from operations
95,000
87,000
Interest expense
8,000
8,000
Net income
70,000
57,000
* 10,000 ordinary shares have been issued and outstanding since the company was established.
They had a market value of $90 per share on December 31, 20X6, and they were selling for
$91.50 on December 31, 20X7.
The earnings per share for Dunkin Company for 20X7, was:
A) 9.50.
B) 1.16.
C) 7.00.
D) .70.
12.4-73 The debt ratio is an indicator of a company’s:
A) percentage of assets financed with debt.
B) relationship between current liabilities and current assets.
C) relationship between interest expense and income.
D) relationship between debt and interest expense.
12.4-74 If all else is held equal, an increase in the current ratio of a company is generally considered to be
an indication that:
A) the company will have increased difficulty meeting short-term obligations.
B) current liabilities have increased.
C) the company will be better able to meet short-term debt obligations.
D) current assets have decreased.
12.4-75 Mickey Corporation has total current assets equal to $80,000 and working capital of $20,000.
Minnie Company has the same amount of working capital, but it has total current assets of
$300,000. The company with the better current ratio:
A) is Minnie Company.
B) is Mickey Corporation.
C) is the same for both companies.
D) cannot be determined from the information given.
12.4-76 Yukon Company has total current liabilities equal to $600,000 and working capital of $30,000.
Northwest Company has the same amount of working capital, but it has total current liabilities of
$40,000. The company with the better working capital position:
A) is Northwest Company.
B) is Yukon Company.
C) is neither Northwest nor Yukon. They both have exactly the same working capital position.
D) cannot be determined from the information given.
12.4-77 A very low accounts receivable turnover would most likely indicate that:
A) the company is unsuccessful in its efforts to collect cash from customers.
B) the company is successful in its efforts to collect cash from customers.
C) policies for extending credit to customers are too tight.
D) none of the above are true.
12.4-78 Which of the following statements about inventory turnover is most appropriate?
A) A high ratio indicates the company is having trouble selling its inventory.
B) Companies generally strive to have the lowest possible inventory turnover ratio.
C) A low ratio generally means the company is not keeping enough inventory on hand.
D) The most profitable turnover ratio may not necessarily be the highest.
12.4-79 If cost of goods sold for the year was overstated, but all other financial statement items were
properly reported, the calculated inventory turnover ratio would:
A) indicate the chance of running out of inventory was lower than it was.
B) indicate the company was more profitable than it actually was.
C) be unaffected by this error.
D) indicate that inventory was being turned over more times than it was.