Below Is Selected Data for Gertup Corporation as of 12/31/05

question 10

Multiple Choice

Below is selected data for Gertup Corporation as of 12/31/05:
$$\begin{array} { l r } \text { Total assets } & \$ 5,500 \\\text { Current assets } & 2,750 \\\text { Long-term debt } & 450 \\\text { Current ratio } & 2.5 \\\text { Inventory } & 1,500 \\\text { For year ended 12/31/05 } & \\\text { Sales } & \$ 18,500 \\\text { Cost of goods sold } & 14,800\end{array}$$
-Due to competitive pressures, Gertup has had to increase credit terms to customers to maintain sales. This resulted in Gertup's accounts receivable doubling from 12/31/04 to 12/31/05. The average accounts receivable turnover was 30 days. Without the increased credit terms, accounts receivable turnover would have remained at 12/31/04 levels. The impact of the change in credit policy was:

• A)none as sales remained the same.
• B)decreased liquidity and decreased available cash.
• C)increased current ratio and liquidity of the company.
• D)current ratio stayed the same and liquidity remained constant.

Calculate and understand the financial implications of discounting notes receivable.

Understand the criteria for determining reportable segments under GAAP.

Identify components and characteristics of an auditor's report.

Calculate segment reporting measures such as operating profit.

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