Carlton, Inc

question 139

Multiple Choice

Carlton, Inc. presented the following information in a note to its financial statements for the year ending December 31, 2016: The company has a loan agreement with Beachside Bank that states:
1) The current ratio should remain at least 2.0 to 1 at all times.
2) The debt-to-equity ratio should not exceed .7 to 1 at any time.
3) The times-interest-earned should be 5.0 or better.
4) The inventory-turnover should be 4.0 or better.
The ratios at year-end are: current ratio, 2.3 to 1; debt-to-equity ratio, .6 to 1; times-interest-earned, 7.1; and inventory-turnover, 3.7. Which of the following statements is true?

• A) Carlton was in default because of the inventory turnover.
• B) Carlton was in default because of the current ratio.
• C) Carlton was in default because of the debt-to-equity ratio.
• D) Carlton was in default because of the times-interest-earned.

Understand the functionalities provided by QBO for managing customers' information efficiently.

Learn how to update the Customers List in QBO before or while entering transactions.

Understand the timing for recording sales transactions using invoices in QBO.

Distinguish between different methods of customer payment processing within QBO.

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Definitions:

Adjusting Entry

An adjustment recorded in the bookkeeping records at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.

Bad Debt Expense

The estimated amount of credit sales that are not expected to be collected, recognized as an expense in the income statement.

Uncollectible Accounts

Accounts receivable that a company does not expect to collect and writes off as a bad debt expense.

Outstanding Accounts Receivable

Amounts due to a company from customers for goods or services provided on credit but not yet paid.