Use the Information That Follows Taken from Carter Company's Financial

question 52

Essay

Use the information that follows taken from Carter Company's financial statements for the years ending December 31, 2017 and 2016.
$\begin{array}{lrr}\text { Balance Sheet Information }&2017&2016\\\hline \text { Assets}\\\text { Cash } & \$ 70 & \$ 80 \\\text { Accounts receivable } & 40 & 40 \\\text { Inventory } & 40 & 60 \\\text { Land, building, and equipment } & \underline{290} & \underline{310} \\\text { Total Assets } & \$ \underline{440} & \$ \underline{490} \\\end{array}$

$\begin{array}{l}\text { Liabilities and Shareholders' Equity }\\\hline \text { Accounts payable } & \$ 95 & \$ 245 \\\text { Common stock } & 210 & 210 \\\text { Retained earnings } & 135& 35\\\text { Total Liabilities \& Shareholders' Equity }& \underline{\$440} &\underline{ \$490} \\\end{array}$

$\begin{array}{lr}\text { Income Statement Information }\\\text { Sales (all sales are on credit) } & \$ 900 \\\text { Cost of goods sold } & \underline{300} \\\text { Gross profit } & {\$600}\\\text { Operating expenses } & \underline{ 500} \\\text { Net income } & \underline{ \$(100)} \end{array}$
If the industry in which Carter is a member has an average current ratio of 1.9, determine if, on December 31, 2017, Carter is more or less solvent than the average firm in its industry as measured by its current ratio.

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Definitions:

Capital Gains

The profit that results from a sale of a capital asset, such as stock, bond, or real estate, where the sale price exceeds the purchase price.

Eligible Dividends

Dividends that are qualified for preferential tax treatment under certain tax laws.

Provincial Tax Brackets

The different rates of tax applied to various levels of income within a specific province, determining how much tax individuals owe based on their income.