The Following Information Pertains to Barnum Company: Balance Sheet
at $31,20 \times 2$

question 150

Multiple Choice

The following information pertains to Barnum Company: Balance Sheet
At D ecember $31,20 \times 2$
$\begin{array}{llll}\text { Current assets } & \$ 18,700 & \text { Current liabilities } & \$ 7,600 \\\text { Long-term assets } & \underline{29,700} & \text { Long- term liabilities } & 13,250 \\& & \text { Stockholders' eauity } & 27,550\\\text { Total assets }& \$ 8400 & \text { Total liabilities and s.e. } &\$ 48,400\\\end{array}$

Barnum Company Income Statement
For the Year Ended December 31, 20X2
$\begin{array}{ll}\text { Sales } & \$ 106,950 \\\text { Less: Cost of goods sold } & (61,800) \\\text { Gross profit } & \$ 45,150 \\\text { Less: Operating expenses } & \underline{31,700} \\\text { Operatingincome } & \$ 13,450 \\\text { Less other expenses: interest } & (1,300) \\\text { Income before taxes } & \$ 12,150 \\\text { Less: Income tax expense } & \underline{(4,850) } \\\text { Net income } & \$ 7,300\end{array}$ There were 1,000 shares of common stock outstanding with a market value of $75 as of December 31, 20X2. Dividends declared and paid was $5 per share. The gross profit rate for 20X2 is:

• A) 12.6%
• B) 6.8%
• C) 16.2%
• D) 42.2%

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Definitions:

Surplus

A situation where the quantity supplied exceeds the quantity demanded at the current price; often refers to excess in budget or resources.

Equilibrium Quantity

The quantity of goods or services supplied equals the quantity demanded at the market equilibrium price.

Economic Welfare

The overall health and well-being of an economy, measured by factors such as wealth, happiness, and the distribution of resources.

Rent Controls

A restriction set by authorities on how much landlords can demand for renting out houses or apartments.