Accounts payable $ 184,400 $ 150,000 $160,000 Accounts receivable, net 206,000 194,000 220,000 Interest Income 15,000 14,000 26,000 Accum. depreciation - building and equipment 47,000 36,000 28,000 Additional paid-in capital 40,000 40,000 40,000 Add'l paid-in capital - Treasury stock 4,000 -0- -0- Cash 5,000 58,000 6,000 Common stock, $1 par 200,000 200,000 200,000 Dividends payable 4,000 8,000 6,000 Income taxes payable 39,600 23,400 30,000 Inventories 182,000 108,000 128,000 Long-term mortgage payable 256,896 240,000 200,000 Prepaid rent 8,000 12,000 10,000 Retained earnings 98,104 90,600 116,000 Short-term notes payable to the bank 47,000 -0- -0- Building and equipment 178,000 86,000 124,000 Patent 158,000 166,000 174,000 Cash Equivalents 192,000 192,000 144,000 Treasury stock -0- 10,000 -0- Utilities payable 8,000 38,000 26,000 PETS INC. INCOME STATEMENT FOR THE YEARS ENDING DECEMBER 31, 2008 and 2007 2008 2007 Net sales (100% credit) $1,080,400 $1,006,000 Cost of goods sold 604,000 690,000 Gross margin $476,400 $316,000 Operating expenses 357,556 204,000 Operating income $118,844 $ 112,000 Interest expense 41,000 60,600 Loss on sale of equipment 8,000 24,000 Income before income tax $69,844 $27,400 Income tax expense 22,340 12,800 Net income $ 47,504 $ 14,600 Additional information:
1. Equipment that cost $50,000 and had accumulated depreciation of $10,000 was sold during 2008.
2. No new stock was sold from 2006-2008.
3. There were no prior period adjustments from 2006-2008.
4. Depreciation expense and amortization expense are included in operating expenses.
5. Industry averages for 2008 and 2007 are as follows: Industry Averages 2008 2007 Accounts Receivable Turnover 5.2 4.7 Inventory Turnover 3.7 3.8 Accounts Payable Turnover 3.5 4.
6 Compare the speed with which Pets Inc. collects cash from its customers to the industry average for 2008 and 2007. How did Pets Inc. compare to the industry? 2008 2007 a. Better Better b. Worse Worse c. Worse Better d. Better Worse 2. Compare the speed with which Pets Inc. pays for the inventory it purchases to the industry average for 2008 and 2007. Did Pets Inc. pay its vendors faster or slower than the industry average? 2008 2007 a. Faster Faster b. Slower Slower c. Slower Faster d. Faster Slower 3. In 2007, approximately how many days, on average, did it take from the time Pets, Inc. purchased its inventory until it collected the cash from its customers? (Hint: Use days in collection period plus days in the selling period. Pick the closest number) a. 138 days b. 155 days c. 189 days d. 300 days 4. Pets Inc.'s total assets at the end of 2007 were: a. $564,000 b. $612,000 c. $650,000 d. $780,000 e. $852,000 5. Pets Inc.'s total liabilities and Shareholders' Equity at the end of 2008 were: a. $283,000 b. $539,896 c. $739,896 d. $882,000 e. $950,000 6. Pets Inc.'s 2008 return on assets was: a. 5.40% b. 5.70% c. 5.79% d. 7.28% e. 13.34% 7.
If using the indirect method for Pets Inc.'s statement of cash flow, the change in utilities payable balance from 2006 to 2007 would be reported on the 2007 statement of cash flows as: a. an addition to net income in the operating section b. a deduction from net income in the operating section c. a cash inflow in the investing section d. a cash outflow in the financing section e. a cash inflow in the financing section 8. Pets Inc. has $20,000 of rent expense included in 2008 operating expenses. The amount of cash paid for rent by Pets Inc. to its landlord during the year was: a. $16,000 b. $20,000 c. $24,000 d. $50,000 e. $0- it was all prepaid 9. If Pets Inc. uses the indirect method for their statement of cash flow, depreciation expense would be: a. added back to net income in the operating section b. subtracted from net income in the operating section c. ignored since it is a noncash item d.
shown as a deduction in the financing section e. shown as a deduction in the investing section 10. During 2008, Pets Inc.'s dividends declared and dividends paid to shareholders were: Dividends Declared Dividends Paid a. $44,000 $40,000 b. $44,000 $48,000 c. $40,000 $44,000 d. $40,000 $36,000 e. None of the above 11. The financing section of Pets Inc.'s 2008 statement of cash flow would include: a. a cash outflow due to the change in short term debt. b. a cash inflow due to the change in long term mortgages c. a cash outflow for interest expense. d. a cash outflow for purchase of treasury stock. e. a cash outflow for paid in capital, treasury stock 12. During 2008, the times interest earned ratio for Pets Inc. is: a. 1.16 b. 1.70 c. 2.70 d. 3.40 e. None of the above. 13. During 2007, the amount of cash Pets, Inc. collected from its customers was: a. $1,032,000. b. $1,060,400. c. $1,061,200. d. $1,068,400. e. $1,092,400. 14. Pets, Inc.'s 2008 asset turnover is: a. 0.67 b. 0.88 c. 1.26 d. 1.29 e. 1.30 15.
Which of the following statements is true regarding the profitability trend of Pets, Inc. from 2007 to 2008? a. Gross Margin percent increased b. Operating income percent increased c. Net income percent decreased d. None of the proceeding statements are true. 16. Pets Inc.' s current ratio for 2007 was: a. 2.01 b. 2.03 c. 2.37 d. 2.47 e. 2.57 17. Return on equity for Pets Inc. for 2008 and 2007 is: a. 13.34%, 11.30% b. 14.34%, 4.3% c. 13.34%, 4.3% d. Cannot determine from information given 18. Based on Pet Inc.'s net revenue change from 2007 to 2008,