The Following Is a Summary of Information Presented on the Financial

question 9

Multiple Choice

The following is a summary of information presented on the financial statements of The Cake Company on December 31, 2014.
$\begin{array}{|l|r|c|}\hline \text { Account }&2014&2013\\\hline \text { Current assets } & \$ 65,000 & \$ 50,000 \\\hline \text { Accounts receivable } & 80,000 & 75,000 \\\hline \text { Merchandise inventory } & 50,000 & 40,000 \\\hline \text { Current liabilities } & 75,000 & 50,000 \\\hline \text { Long-term liabilities } & 30,000 & 50,000 \\\hline \text { Common stock } & 50,000 & 40,000 \\\hline \text { Retained earnings } & 40,000 & 25,000\\\hline \\\hline \text { Net sales revenue } & \$ 525,000 & \$ 500,000 \\\hline \text { Cost of goods sold } & 400,000 & 395,000 \\\hline \text { Gross profit } & \$ 125,000 & \$ 105,000 \\\hline \text { Selling and general expenses } & 45,000 & 50,000 \\\hline \text { Net income before income tax expense } & \$ 80,000 & \$ 55,000 \\\hline \text { Income tax expense } & \$ 24,000 & 16,500 \\\hline \text { Net income } & \$ 56,000 & \$ 38,500 \\\hline\end{array}$

-
What would a horizontal analysis report with respect to current liabilities?

• A) That current liabilities are 38.46% of total capital
• B) A 50.00% increase in current liabilities
• C) A current ratio of .87
• D) A 33.33% increase in current liabilities

---

Definitions:

Self-Report Inventories

Psychometric tests where individuals provide subjective information about their own feelings, behaviors, and attitudes, often used in psychological studies.

Projective Techniques

Assessment instruments in psychology that employ vague stimuli to provoke reactions, thereby uncovering facets of a person's character.

Adults

Individuals in the stage of life who have reached the age where they are considered to have the full physical, intellectual, and emotional capabilities of a mature person.

Imitated

refers to the action of copying or mimicking someone else’s behavior, actions, or expressions.