Use This Balance Sheet and Income Statement for the First

question 10

Multiple Choice

Use this balance sheet and income statement for the first year of operations for Layton Novelties,Inc.to answer the following question.Use ending balances whenever average balances are required for computing ratios. $\begin{array}{c} \text {Layton Novelties. Inc.}\\ \text {Income Statement}\\ \text {For the Year Ended December 31, 2010}\\\begin{array}{llr} \text { Net sales } &\$80,000\\ \text { Costs of goods sold } &32,000\\ \text { Gross margin } &\$48,000\\ \text { Operating expenses} &12,000\\ \text {Income before income taxes } &\$36,000\\ \text { Income taxes } &14,400\\ \text { Net income} &\$21,600\end{array}\end{array}$

The total amount of working capital of Layton Novelties is

• A) $8,000.
• B) $28,000.
• C) $12,000.
• D) $4,000.

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Definitions:

Alternate Forms

A method in psychological and educational measurement where two different versions of a test are used to assess the same construct, reducing possible test-retest bias.

True Score

The theoretical perfect score that would be obtained if there were no measurement errors in a test.

Measurement Error

The difference between the observed value and the true value of a variable, due to imprecision in measurement tools or techniques.

Reactivity

The phenomenon in which the presence of an observer or the awareness of being measured alters the behavior or responses of subjects.