MEGAFRAME COMPUTER COMPANY
Balarce Sheet
as of Decermber 31 MEGAFRAME COMPUTER COMPANY
Income Staternent
for the Year Ended Decernber

question 59

Multiple Choice

MEGAFRAME COMPUTER COMPANY
Balarce Sheet
As of Decermber 31
$\begin{array}{lr}\text { ASSETS } \\\text { Cash } & \$ 50,000 \\\text { Accounts receivable } & 70,000 \\\text { Inventory } & 110,000 \\\text { Net plant and equipment } & 220,000\\\text { Total assets }&\$450,000\\\\\text { LIABIITES AND STOCKHOLDERS' EQUTTY }\\\text { Accounts payable } & \$ 0,000 \\\text { Accrued expenses } & 50,000 \\\text { Long-term debt } & 130,000 \\\text { Common stock } & 70,000 \\\text { Paid-in capital } & 40,000 \\\text { Retained earnings } & 90,000\\\text { Total liabilities and stockholders' equity }&\$450,000\end{array}$
MEGAFRAME COMPUTER COMPANY
Income Staternent
For the year ended Decernber 31
$\begin{array}{ll}\text { Sales (all on credit) }&\$875,000\\\text { Cost of goods sold }&600,000\\\text { Gross profit }&\$275,000\\\text { Sales and administrative expenses }&30,000\\\text { Depreciation }&55,000\\\text { Operating profit }&\$190,000\\\text { Interest expense }&25,000\\\text { Profit before taxes }&\$165,000\\(\text { Taxes (30\%) }&49,000\\\text { Net income }&\$115,500\\\end{array}$

Refer to the tables above. What is Megaframe Computer's total asset turnover?

• A) 7.58x
• B) 3.6x
• C) 2x
• D) 1.94x

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Definitions:

Indirect Method

A way of preparing a cash flow statement where net income is adjusted for changes in balance sheet accounts to calculate cash flow from operating activities.

Operating Activities

Transactions and events related to the primary operations of a business, such as revenue from sales and expenses from operations.

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered but not yet paid for.

Direct Method

A method of computing the net cash provided by operating activities in which the income statement is reconstructed on a cash basis from top to bottom.