A 4 b 9 c 12 d 36 62 a company has the following

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a. 4. b. 9. c. 12. d. 36. 62. A company has the following account balances. Cash $160,000 Equipment 50,000 Inventory 35,000 Accounts receivable 25,000 Accrued wages 10,000 Long-term debt 30,000 Accounts payable 5,000 What is the company’s net working capital? a. $180,000. b. $205,000. c. $220,000. b. $225,000.
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476 63. The common stock of a beverage company has a current market price of $34. The beverage company is estimated to earn $2 per share in the next year. The average price/earnings ratio of companies in the beverage industry is 15. Using the price/earnings ratio as the comparable valuation method, the beverage company’s stock is a. $2 undervalued. b. $2 overvalued. c. $4 undervalued. d. $4 overvalued. 64. A retail company has three segments with total operating income of $500,000. Selected financial information for Segment 1 is presented below. Segment 1 Unit Sales 28,000 Sales revenue $700,000 Cost of sales 420,000 Administrative expenses 144,000 Commissions 14,000 Rent 140,000 Salaries 32,000 Administrative expenses are allocated to the three segments equally. Commissions are paid to the salespersons in each segment based on 2% of gross sales. The company rents the entire building and allocates the rent to the three segments based on the square footage occupied by each. Salaries represent payments to the employees in the segment. The controller has expressed concern about the operating loss for Segment 1 and has suggested that it be closed. If the segment is closed, none of the employees would be retained. Should the company drop Segment 1? a. Yes, because total operating income would increase by $50,000. b. No, because total operating income would decrease by $234,000. c. No, because total operating income would decrease by $126,000. d. No, because total operating income would decrease by $94,000.
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477 65. A company uses a joint process to produce three products: A, B and C, all derived from one input. The company can sell these products at the point of split-off or process them further. The joint production costs during October were $10,000. The company allocates joint costs to the products in proportion to the relative physical volume of output. Additional information is presented below. If Processed Further Units Produced Unit Sales Price at Split-off Unit Sales Price Unit Additional Cost Product A 1,000 $4.00 $5.00 $0.75 B 2,000 2.25 4.00 1.20 C 1,500 3.00 3.75 0.90 Assuming sufficient demand exists, to maximize profits, the company should sell a. product C at split-off and perform additional processing on products A and B. b. product B at split-off and perform additional processing on products C and A. c. product A at split-off and perform additional processing on products B and C. d. products A, B, and C at split-off. 66. A company with an accounts receivable turnover of 8.1 would be most concerned if a. a best practice analysis indicated an accounts receivable turnover of 13.0. b. last year’s days sales outstanding in receivables was 44.9.
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