The Following Information Is Available for Pohler Company Invested Capital Is Defined as Total Assets

question 55

Multiple Choice

The following information is available for Pohler Company:
$\begin{array}{lclc}\text { Current assets } & \$ 100,000 &{\text { Current liabilities }} & \$ 75,000 \\\text { Property, plant and } & & \text { Long-term liabilities } & 100,000 \\\text { equipment } & 50,000 & \text { Stockholders'equity } & 125,000 \\\text { Other assets } & {150,000} & \text { Total liabilities and } \\\text { Total assets } &{\$ 300,000}& \text { stockholders'equity } & \$ 300,000\\\end{array}$
Invested capital is defined as total assets.Before-tax operating profit is $175,000.After-tax operating profit is $125,000.The after-tax cost of capital is 10%.What is economic profit?

• A) $95,000
• B) $125,000
• C) $145,000
• D) $175,000

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Definitions:

Cost Of Goods Sold

The immediate expenses linked to the manufacturing of products sold by a business, comprising costs for materials and labor.

Direct Method

An approach in cost accounting that traces costs directly to cost objects without distributing indirect costs.

Inventories

The raw materials, work-in-progress products, and finished goods that a company holds for the purpose of sale in the future.

Accounts Payable

Liabilities to creditors that must be paid within a short period, usually less than a year.