Freiman Corporation's most recent balance sheet and income statement appear below:Balance SheetDecember 31, Year 2 and Year 1(in thousands of dollars) Year 2Year 1Assets Current assets: Cash$160 $120 Accounts receivable, net 220 240 Inventory 120 130 Prepaid expenses 40 40 Total current assets 540 530 Plant and equipment, net 700 700 Total assets$ 1,240 $ 1,230 Liabilities and Stockholders' Equity Current liabilities: Accounts payable$130 $150 Accrued liabilities 90 90 Notes payable, short term 60 70 Total current liabilities 280 310 Bonds payable 280 290 Total liabilities 560 600 Stockholders' equity: Common stock, $2 par value 100 100
Additional paid-in capital 200 200 Retained earnings 380 330 Total stockholders' equity 680 630 Total liabilities & stockholders' equity$ 1,240 $ 1,230 Income StatementFor the Year Ended December 31, Year 2(in thousands of dollars)Sales (all on account)$1,310 Cost of goods sold 780 Gross margin 530 Selling and administrative expenses 359 Net operating income 171 Interest expense 35 Net income before taxes 136 Income taxes (30%) 41 Net income$ 95 The working capital at the end of Year 2 is:
A. $540 thousand
B. $260 thousand
C. $680 thousand
D. $700 thousand
Answer: B
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If the finished goods inventory increases between the beginning and the end of the period, the cost of goods manufactured for the period is larger than the cost of goods sold
Indicate whether the statement is true or false
Which of the following transactions involves an accrued asset?
a. Wages earned by employees but not yet paid b. Rent collected in advance from a tenant c. Rent owed by a tenant but not yet collected d. One year's premium on life insurance policy paid in advance
Serena purchased a home for $220,000, insuring it for $120,000 with Falcon Insurance. She later purchased a $60,000 policy from Devon Life. The home was totally destroyed by fire six months later. Under these circumstances, which of the following statements is true?
A. Serena cannot recover $180,000-the total of both policies. B. She cannot claim insurance from either as policies with pro rata clauses cover only partial losses. C. Serena cannot claim more than $60,000 from Devon Life. D. Serena can claim the entire damages, $220,000, only from Falcon Insurance as its policy amount is greater.
Using the Indirect Method For the following question(s), indicate how each transaction described would be classified on a statement of cash flows if the operating activities section is prepared under the indirect method. When using the indirect method, where would the payment of cash dividends be shown on the statement of cash flows?
A) Operating activities B) Investing activities C) Financing activities D) Noncash investing and financing activity