Orca Industries Below Are the Two Most Recent Balance Sheets

question 36

Multiple Choice

Orca Industries Below are the two most recent balance sheets and most recent income statement for Orca Industries. The company has an effective tax rate of 35%.
$\begin{array}{llcc}\text { Balance Sheet }&2011&2010 \\ \text { Assets: } &\\ \text { Cash} &\$10,000&\$6,000\\ \text { Accounts Receivable (net) } &6,000&1,500\\ \text { Inventory } &8,000&10,000\\ \text { Long-lived assets} &12,000&11,000\\ \text { Less: Accumulated depreciation } &\underline{(4,000) }&\underline{(2,000) } \\ \text { Total assets } &\underline{\$32,000}&\underline{\$26,500}\\\\ \text { Liabilities and Stockholders' Equity: } &\\ \text {Accounts payable } &\$5,000&\$6,000\\ \text { Deferred revenues } &1,000&2,000\\ \text { Long-term note payable } &10,000&10,000\\ \text { Less: Discount on note payable} & (800) &(1,000) \\ \text {Common stock } &12,000&6,000\\ \text { Retained earnings} &\underline{4,800}&\underline{\$3,500}\\ \text {Total liabilities and stockholders' equity } &\underline{\$32,000}&\underline{\$26,500}\\\\ \text { Income Statement} &\\ \text { For the year ended December 31, 2011 } &\\ \text { Revenues} &&\$42,000\\ \text { Cost of goods sold } &&(24,000) \\ \text { Depreciation expense} &&(2,000) \\ \text { Interest expense } &&(3,000) \\ \text { Bad debt expense} &&(2,000) \\ \text { Other expense (including income taxes) }& &\underline{(9,000) }\\ \text { Net income } &&\underline{\$2,000}\\\end{array}$
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Refer to the information for Orca Industries. Orca's inventory turnover is

• A) 2.67
• B) 3.0
• C) 2.4
• D) 1.0

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Definitions:

Stomach

A major digestive organ located in the upper abdomen, responsible for the enzymatic breakdown of food.

Ileocecal Sphincter

A valve situated at the junction of the ileum (last portion of the small intestine) and the cecum (beginning of the large intestine) controlling the flow of digested material.

Ileum

The final and longest segment of the small intestine, where most of the nutrients and minerals from ingested food are absorbed.

Cecum

The beginning of the large intestine, a pouch connected to the junction of the small and large intestines.