Use the Selected Data from Pinecrest Company's Financial Statements to Answer

question 147

Multiple Choice

Use the selected data from Pinecrest Company's financial statements to answer the following question. $$\begin{array} { l r r } & \underline { 2017 } & \underline { 2016 } \\\text { Cash } & \$ 22,000 & \$ 14,000 \\\text { Accounts receivable } & 42,000 & 16,000 \\\text { Merchandise inventory } & 22,000 & 83,000 \\\text { Prepaid expenses }& \underline { 23,000 } & \underline { 18,000 } \\\text { Total current assets } & \underline { \mathbf { \$ 1 0 9 , 0 0 0 } } & \underline { \mathbf { \$ 1 3 1 , 0 0 0 } } \\\\\text { Total current liabilities } & \$ 65,000 & \$ 72,000 \\\text { Net credit sales } & 221,000 & 326,000 \\\text { Cost of goods sold } & 168,000 & 299,000 \\\text { Net cash flow from operating activities } & 16,000 & 29,000\end{array}$$ ​
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-Refer to the data for Pinecrest Company. ?
Which of the following statements is true?

• A) The current ratio increased from 2016 to 2017.
• B) The acid-test ratio decreased from 2016 to 2017.
• C) The amount of working capital decreased from 2016 to 2017.
• D) Assuming extreme conditions do not exist, the company appears to be in a worse position to pay its current debts at the end of 2017 compared to 2016.

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Definitions:

Drum Brakes

A brake system in which a rotating drum fixed to the wheel assembly turns around stationary friction-faced shoes. Braking action is achieved when the shoes are forced into the drum inside diameter. The common foundation brake system used on trucks using S-cam actuation of the shoes.

S-cam Type Foundation Brakes

A type of drum brake system commonly used in heavy vehicles, where an S-shaped cam forces the brake shoes apart and against the drum to create friction and stop the vehicle.

Axle Spindle

A component of the wheel assembly that provides a mounting point for the wheel and its bearing, allowing the wheel to rotate freely around the axle.

Brake Drum

A component of a drum brake system, where brake shoes press against the interior to create friction and slow down the vehicle.