Below Is the Balance Sheet for Donald Company: Donald Company

question 92

Multiple Choice

Below is the balance sheet for Donald Company: Donald Company
Balance Sheet
December 31 ,
$\begin{array}{lrr}&20X6&20X5\\\text { Current assets: }\\\text { Cash } & \$ 380 & \$ 242 \\\text { Accounts receivable } & 430 & 194 \\\text { Inventory } & 238 & 388 \\\text { Prepaid insurance } & 32 & 76\\\text { Total current assets }&\$1,080&\$900\\\text { Long-term assets: }\\\quad \text { Fixed assets } & \$ 406 & \$ 452 \\\quad \text { Less: Accumulated depreciation } & \underline{272) } & \underline{228) } \\\text { Total long-term assets } & \underline{\$ 134} & \$ 224 \\\text { Total assets } & \$ 1,214 & \$ 1,124\\\text { Current liabilities: }\\\text { Accounts payable } & \$ 176 & \$ 152 \\\text { Wages payable } & \underline{38} & \underline{32} \\\text { total current liabilities } & \$ 214 & \$ 184\\\text { Long-term liabilities: }\\\text { Notes payable } & \underline{420} & \underline{420} \\\text { Total liabilities } & \underline{\$ 634} & \underline{604}\\\text { Owners' equity: } & & \\\text { Common stock } & \$ 190 & \$ 160 \\\text { Retained income } & 390 & 360\\\text { Total owners' equity } & \underline{\$ 580}&\$520 \\\text { Total liabilities and owners' equity } & \underline{\$ 1,214} & \underline{\$ 1,214}\end{array}$ What issue would be of most concern or source of optimism to financial analysts of Donald Company?

• A)Both common stock and retained earnings increased by the same dollar amount.
• B)The long?term notes payable remained unchanged
• C)Cash and accounts receivable increased 58% and 122%, respectively.
• D)Fixed assets decreased 10%.

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Definitions:

Job Order Costing

A cost accounting system that accumulates costs according to individual jobs or orders, suitable for customized orders.

Process Cost System

An accounting system used to apply costs to similar products that are mass produced in a continuous fashion.

Customers' Specifications

Detailed descriptions provided by customers outlining how they want their ordered products or services to be produced or delivered.

Factory Overhead

This refers to all the indirect costs of production that are not directly tied to a specific product, including utilities, maintenance, and salaries of non-direct labor employees.