Question 6 Use the following to answer questions 6 - 10 Given below are comparat

Question

Question 6 Use the following to answer questions 6 - 10
Given below are comparative balance sheets and an income statement for Pearl Corporation
Pearl Corporation
Balance Sheets ? 2005
Dec. 31 Jan. 1                Pearl Corporation
Income Statement for the 2005            
Cash    $ 15,000    $ 15,000        Sales    $220,000        
Accounts receivable    45,000    37,000        Cost of goods sold    (132,250)        
Inventory    32,000    35,000        Gross profit on sales    $ 87,750        
Equipment (net)    55,000    64,000        Operating expenses    (72,950)        
    $147,000    $151,000        Operating income    $ 14,800        
Accounts payable    25,000    28,000        Interest expense and income taxes    (8,750)        
Dividends payable    8,000    4,000        Net income    $ 6,050        
Long-term note payable    14,000    14,000                    
Capital stock, $5 par    70,000    70,000                    
Retained earnings    30,000    35,000                    
    $147,000    $151,000                    
                            

All sales were made on account. Cash dividends declared during the year totaled $11,050.
6. Refer to the above data. Pearl Corporation's accounts receivable turnover for 2005 is:
        A) 4.6 times.
        B) 2.9 times.
        C) 5.4 times.
        D) 68 days.

7. Refer to the above data. Pearl Corporation's inventory turnover for 2005 is:
        A) 6.6 times.
        B) 3.9 times.
        C) 4.1 times.
        D) 94 days.

8. Refer to the above data. Pearl Corporation's gross profit rate for 2005 is:
        A) 60.1%.
        B) 39.9%.
        C) 33%.
        D) 68%.

9. Refer to the above data. Pearl Corporation's return on assets for 2005, rounded to the nearest tenth of a percent, is
        A) 9.9%.
        B) 4.1%.
        C) 5.9%.
        D) 16.9%.

10. Refer to the above data. Pearl Corporation's return on common stockholders' equity for 2005, rounded to the nearest tenth of a percent, is:

        A) 5.9.%.
        B) 6.05%.
        C) 14.4%.
        D) 9.4%.

12. Quick assets include which of the following
        A). Cash, marketable securities and receivables.
        B). Cash, marketable securities and inventories.
        C). Cash, inventories and receivables
        D). Market securities, receivables and inventories.

14. In evaluating the quality of a company's earnings, which of the following factors is least important?
Answer
        A). The accounting methods used by management.
        B). The trend of the company's earnings over a period of years.
        C). The dollar amount of earnings per share.
        D). The stability and sources of the company's earnings.

Explanation / Answer

6. Refer to the above data. Pearl Corporation's accounts receivable turnover for 2005 is:

C) 5.4 times.


7. Refer to the above data. Pearl Corporation's inventory turnover for 2005 is:

B) 3.9 times.


8. Refer to the above data. Pearl Corporation's gross profit rate for 2005 is:

B) 39.9%.


9. Refer to the above data. Pearl Corporation's return on assets for 2005, rounded to the nearest tenth of a percent, is

A) 9.9%.


10. Refer to the above data. Pearl Corporation's return on common stockholders' equity for 2005, rounded to the nearest tenth of a percent, is:


C) 14.4%.


12. Quick assets include which of the following

A). Cash, marketable securities and receivables.


14. In evaluating the quality of a company's earnings, which of the following factors is least important?
Answer
A). The accounting methods used by management.
.

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