Reference: 13-08
Financial Statements for Oratz Company Appear Below:
Oratz

question 26

Multiple Choice

Reference: 13-08
Financial statements for Oratz Company appear below:
Oratz Company
Balance Sheet
December 31, 20X6 and 20X5
(dollars in thousands) $\begin{array}{|l|l|l|}\hline & 20 X 6 & 20 X 5 \\\hline \text { Current assets: } & & \\\hline \text { Cash and marketable securities } & \$ 150 & \$ 150 \\\hline \text { Accounts receivable, net } & 130 & 130 \\\hline \text { Inventory } & 180 & 180 \\\hline \text { Prepaid expenses } & {30} &{30} \\\hline \text { Total current assets } & 490 & 490 \\\hline \text { Noncurrent assets: } & & \\\hline \text { Plant \& equipment, net } & {1,430} & 1,370 \\\hline \text { Total assets } & \underline{\$ 1,920} & \underline{\$ 1,860} \\\hline & & \\\hline \text { Current liabilities: } & & \\\hline \text { Accounts payable } & \$ 70 & \$ 100 \\\hline \text { Accrued liabilities } & 100 & 70 \\\hline \text { Notes payable, short term } & 230 & 220 \\\hline \text { Total current liabilities } & 400 & 390 \\\hline \text { Noncurrent liabilities: } & & \\\hline \text { Bonds payable } & 300 & 300 \\\hline \text { Total liabilities } & 700 & 690 \\\hline \text { Shareholders' equity: } & & \\\hline \text { Preferred shares, \$10 par, 5\% } & 120 & 120 \\\hline \text { Common shares, \$15 par } & 140 & 140 \\\hline \text { Additional paid-in capital--common shares } & 240 & 240 \\\hline \text { Retained earnings } & 720 & 670 \\\hline \text { Total shareholders' equity } & \underline{1,220} & \underline{1,170} \\\hline \text { Total liabilities \& shareholders' equity } & \underline{\$ 1,920} & \underline{\$ 1,860} \\\hline\end{array}$ Oratz Company
Income Statement
For the Year Ended December 31, 20X6 (dollars in thousands) $$\begin{array} { | l | r | } \hline \text { Sales (all on account) } & \$ 1,630 \\\hline \text { Cost of goods sold } & 1,140 \\\hline \text { Gross margin } & 490 \\\hline \text { Operating expenses } & 190 \\\hline \text { Net operating income } & 300 \\\hline \text { Interest expense } & 30 \\\hline \text { Net income before taxes } & 270 \\\hline \text { Income taxes (30\%) } & 81 \\\hline \text { Net income } & \$ 189 \\\hline\end{array}$$ Dividends during 20X6 totalled $139 thousand, of which $6 thousand were preferred dividends. The market price of a share of common stock on December 31, 20X6 was $260.
-Selected financial data for Irvington Company appear below: $$\begin{array} { | l | l | l | } \hline & \text { Account Balances } & \\\hline & \text { End of year } & \text { Beginning of year } \\\hline \text { Preferred shares } & \$ 125,000 & \$ 125,000 \\\hline \text { Common shares } & \$ 400,000 & \$ 300,000 \\\hline \text { Retained earnings } & \$ 185,000 & \$ 75,000 \\\hline\end{array}$$ During the year, the company paid dividends of $10,000 on its preferred shares. The company's net income for the year was $120,000. The company's return on common shareholders' equity for the year is closest to:

• A)19%.
• B)17%.
• C)23%.
• D)25%.

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Definitions:

Suppliers

They are businesses or individuals that provide the goods or services that companies need to operate and produce their own goods.

Internal User

An internal user is an individual within an organization, such as managers and employees, who uses the financial information to make decisions regarding the operations of the company.

Accounting Data

Accounting data encompasses all the financial information and records of a business’s transactions, including sales, purchases, expenses, and revenues.