The Financial Statements of Snapit Company Are Given Below

question 80

Multiple Choice

The financial statements of Snapit Company are given below. $\begin{array}{c} \text { Snapit Company } \\\text { Income Statement (2009) }\\\begin{array}{lrr} \hline \text { Sales } & \$ 4,000,000 \\\text { Cost of goods sold } & \underline {3,040,000} \\\text { Gross profit } & 960,000 \\\text { Selling \& administrative expenses } & \underline { 430,000} \\\text { Operating profit } & 530,000 \\\text { Interest expense } & \underline {160,000 }\\\text { Income before tax } & 370,000 \\\text { Tax expense } & \underline {148,000} \\ \text { Net income } & \underline {\$ 222,000} \\\end{array} \end{array}$
$\begin{array}{c}\begin{array}{lll} \text { Balance Sheet } &2009\\\\ \text { Cash } &\$ 60,000 \\ \text { Accounts receivable } & 550,000 \\ \text { Inventory } & \underline {690,000} \\ \text {Total current assets } &\$ 1,300,000 \\ \text {Fixed assets } & \underline {1,300,000} \\ \text { Total assets } & \underline {\$ 2,600,000} \\\\ \text { Accounts Payable } &\$ 270,000 \\ \text { Bank loan } & \underline {580,000 } \\ \text { Total current liabilities } & \$ 850,000 \\ \text {Bond payable } & \underline { 900,000} \\ \text { Total liabilities } & \underline {\$ 1,750,000 }\\ \text { Common stock ( 130,000 shares) } & \$ 2500,000 \\ \text {Retained earnings } & \underline {600,000}\\ \text { Total liabilities \& equity } & \underline {\$ 2,600,000} \\\end{array}\begin{array}{lll}2008\\\\\$ 50,000 \\500,000 \\ \underline { 620,000 }\\ \$ 1,170,000 \\ \underline { 1,230,000} \\ \underline { \$ 2,400,000 }\\\\\$ 250,000 \\ \underline { 500,000 } \\ \$ 750,000 \\ \underline {1,000,000} \\ \underline {\$ 1,750,000 }\\\$ 250,000\\ \underline {400,000} \\ \underline { \$ 2,400,000 } \\\end{array}\end{array}$
Note: The common shares are trading in the stock market for $100 each. Refer to the financial statements of Snapit Company. The firm's market-to-book value for 2009 is

• A) 0.7256.
• B) 1.5294.
• C) 2.9400.
• D) 3.6142.

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Definitions:

Overapplication of Overhead

A situation where the allocated overhead costs exceed the actual overhead costs incurred.

Machine Hours

Machine hours denote the total amount of time a machine is operated within a specific period, used for costing and operational efficiency measures.

Overhead Applied

Overhead applied is an accounting term referring to the allocation of indirect costs to the production of goods or services, based on a predetermined rate.

Overapplication of Overhead

The situation where the allocated manufacturing overhead costs exceed the actual overhead costs incurred during a period.