Orca Industries
Below Are the Two Most Recent Balance Sheets

question 14

Multiple Choice

Orca Industries
Below are the two most recent balance sheets and most recent income statement for Orca Industries.The company has an effective tax rate of 35%.
Balance Sheet
$\begin{array}{l}\begin{array}{lll}\\\text {Assets:}\\\text {Cash}\\\text {Accounts Receivable (net) }\\\text {Inventory}\\\text {Long-lived assets}\\\text {Less: Accumulated depreciation}\\\text {Total assets}\\\end{array}\begin{array}{lll}2011&2010\\\\\$ 10,000 & \$ 6,000 \\6,000 & 1,500 \\8,000 & 10,000 \\12,000 & 11,000 \\\underline{(4,000) } & \underline{(2,000) } \\\underline{\$ 32,000 }& \underline{\$ 26,500}\end{array}\end{array}$


$\text { Liabilities and Stockholders' Equity: }$
$\begin{array}{lrr}\text { Accounts payable } & \$ 5,000 & \$ 6,000 \\\text { Deferred revenues } & 1,000 & 2,000 \\\text { Long-term note payable } & 10,000 & 10,000 \\\text { Less: Discount on note payable } & (800) & (1,000) \\\text { Common stock } & 12,000 & 6,000 \\\text { Retained earnings } &\underline{ 4,800 }&\underline{3,500}\\\text { Total liabilities and stockholders' equity } &\underline{ \$ 32.000 }&\underline{ \$ 26,500}\\\end{array}$


Income Statement
For the year ended December 31, 2011
$$\begin{array}{l}\begin{array} { l } \text { Revenues }& \$42,000 \\\text { Cast af goods sold }&( 24,000 ) \\\text { Depreciation expense } &( 2,000 ) \\\text { Interest expense } &( 3,000 ) \\\text { Bad debt exanense }&( 2,000 ) \\\text { Other expense (including income taxes) }&\underline{(9,000) } \\\text { Net incame }&\underline{\$2,000}\end{array}\\\begin{array} { l } \end{array}\end{array}$$
-Refer to the information for Orca Industries.Orca's basic earnings per share is:

• A) .22
• B) .13
• C) .25
• D) .30

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Definitions:

Consumer Credit

Credit extended by retailers to the ultimate customers for the purchase of products or services.

Business Credit

A measure of a company's ability to obtain goods, services, or funds based on the promise to pay in the future.

Trade Credit

The purchase of goods from suppliers that do not demand payment immediately.

Persuasion

The act or process of influencing someone's beliefs, attitudes, or behaviors through argument, reasoning, or appeal.