Braverman Company\'s net income last year was $75,000 and its interest expense w
ID: 2443992 • Letter: B
Question
Braverman Company's net income last year was $75,000 and its interest expense was $10,000. Total assets at the beginning of the year were $650,000 and total assets at the end of the year were $610,000. The company's income tax rate was 30%. The company's return on total assets for the year was closest to:
a. 13.5%.
b. 12.4%.
c. 13.0%.
d. 11.9%.
Selected year-end data for the Brayer Company are presented below:
Current liabilities $600,000
Acid-test ratio 2.5 to 1
Current ratio 3.0 to 1
Cost of goods sold $500,000
The company has no prepaid expenses and inventories remained unchanged during the year. Based on these data, the company's inventory turnover ratio for the year was closest to:
a. 1.20 times.
b. 2.40 times.
c. 1.67 times.
d. 2.33 times.
Frantic Company had $130,000 in sales on account last year. The beginning accounts receivable balance was $10,000 and the ending accounts receivable balance was $16,000. The company's accounts receivable turnover was closest to:
a. 5.00 times.
b. 13.00 times.
c. 10.00 times.
d. 8.13 times.
Eral Company has $17,000 in cash, $3,000 in marketable securities, $36,000 in current receivables, $24,000 in inventories, and $45,000 in current liabilities. The company's acid-test (quick) ratio is closest to:
a. 1.78 to 1.
b. 1.24 to 1.
c. 0.80 to 1.
d. 0.44 to 1.
Granger Company had $180,000 in sales on account last year. The beginning accounts receivable balance was $10,000 and the ending accounts receivable balance was $18,000. The company's average collection period (age of receivables) was closest to:
a. 20.28 days.
b. 28.39 days.
c. 36.50 days.
d. 56.78 days.
Last year Javer Company had a net income of $200,000, income tax expense of $74,000, and interest expense of $20,000. The company's times interest earned was closest to:
a. 10.00 times.
b. 11.00 times.
c. 5.30 times.
d. 14.70 times.
Explanation / Answer
1 return on total asets= Net income/averagetotal assets Net income $75,000 Average total assets=650000+610000/2 630,000 return on total asets=75000/630000 11.90% The answer is D 11.90% 2 current ratio=Current assets/current liabilities=3:1 current ratio=Current assets/600000=3:1 current assets=600000*3=$1800000 Acid test ratio= current assets-inventory/current liabilities=2.5:1 Acid test ratio= current assets/600000=2.5:1 current assets=600000*2.5=$1500000 stock=1800000-1500000=$300000 Stock turnover ratio=Cost of goods sold/Average inventory cost of goods sold $500,000 Average inventory $300,000 stock turnover ratio=500000/300000= 1.67 times The answer is C 1.67 times 3. Accounts receivable turnover ratio Netsales/Average net receivables Net credit sales $130,000 Average net receivables=10000+16000/2 $13,000 Accounts receivable turnover ratio=130000/13000 10 times The answer is C 10 times 4.Acid test ratio cash $17,000 marketable securities $3,000 current receivbles $36,000 $56,000 Current liabilities $45,000 Acid test ratio=56000/45000 1.24:1 So the answer is B 1.24:1 5.Net credit Sales $180,000 Average accounts receivables=10000+18000/2 $14,000 Average collection period=Accounts receivable*360/net credit sales Average collection period=14000*360/180000= 28 days The answer is a 20-28 days 6.Times interest earned Income before income tax and interest expenses/interest expenses income before income tax $200,000 interest expenses $20,000 Times interest earned=200000/20000 10 times The answer is a 10 times