Peartree Company Provides the Following Data What Is Peartree's Debt Ratio at Year-End 2017?
A)0

question 28

Multiple Choice

Peartree Company provides the following data: $\begin{array}{|l|r|r|}\hline \text { BALANCE SHEET } & 31 \text { Dec } 2017 & 31 \text { Dec } 2016 \\\hline \text { Cash } & \$ 21000 & \$ 18000 \\\hline \text { Accounts receivable, net } & 31000 & 35000 \\\hline \text { Inventory } & 53000 & 25000 \\\hline \text { PP\&E, net } & 120000 & 90000 \\\hline \text { Total assets } & \$ 225000 & \$ 168000 \\\hline\\\hline \text { Accounts payable } & \$ 4000 & \$ 6000 \\\hline \text { Accrued liabilities } & 2000 & 1000 \\\hline \text { Long-term loans payable } & 84000 & 90000 \\\hline \text { Total liabilities } & \$ 90000 & \$ 97000 \\\hline\\\hline \text { Share capital } & \$ 30000 & \$ 2000 \\\hline \text { Retained earnings } & 105000 & 69000 \\\hline \text { Total shareholders' equity } & \$ 135000 & \$ 71000 \\\hline \text { Total liabilities and } & & \\\text { Shareholders'equity } & \$ 225000 & \$ 168000\\\hline\end{array}$ What is Peartree's debt ratio at year-end 2017?

• A)0.67
• B)4.67
• C)0.40
• D)1.00

Recognize the implications of intra-group transactions on consolidated financial statements, including sales and inventory transactions.

Understand the calculation and reporting of noncontrolling interests in consolidated financial statements.

Identify and calculate goodwill in business combinations.

Apply the equity method of accounting for investments in associates and joint ventures.

---

Definitions:

Long-Run

Pertains to a period in which all factors of production and costs are variable, allowing companies to adjust all inputs.

AVC

Average Variable Cost, the total variable cost divided by the number of units produced, reflecting costs that change with output.

Short-Run

A period during which at least one of a firm's inputs is fixed, limiting its ability to adjust to demand changes.

AVC

Average Variable Cost, which is the total variable costs of production divided by the quantity of output.