Question

The year-end financial statement of Wando's Vineyards reported Net revenues of $19,425,412 and Cost of goods sold of $7,204,884 in year 2. Note 3 to the financial statements reported that Inventories consisted of:

	Year 2	Year 1
Winemaking and packaging materials	$817,836	$690,292
Work-in-process	6,634,014	6,058,701
Finished goods	4,518,806	3,883,469
Total inventories	$11,970,656	$10,632,462

The inventory turnover for Year 2 was:

Select one:

a. 0.68

b. 0.64

c. None of these are correct.

d. 0.6

e. 1.71

2)

Costco Wholesale Corporation collects annual non-refundable membership fees from customers.

When should Costco recognize revenue for these membership fees?

Select one:

A. Immediately when cash is received because the fees are nonrefundable

B. Evenly over the current fiscal year

C. At the end of the membership year when Costco has discharged its obligation to the customer

D. Pro rata over the customer's actual purchasing pattern

E. Evenly over the membership year

3)

Selected financial data for Wilmington Corporation is presented below.

WILMINGTON CORPORATION
Balance Sheet
	Dec. 31, Year 7	Dec. 31, Year 6
Current Assets
Cash and cash equivalents	$576,843	$305,088
Marketable securities	166,106	187,064
Accounts receivable (net)	258,387	289,100
Inventories	424,493	391,135
Prepaid expenses	55,369	25,509
Other current assets	83,053	85,029
Total Current Assets	1,564,251	1,282,925
Property, plant and equipment	1,384,217	625,421
Long-term investment	568,003	425,000
Total Assets	$3,516,471	$2,333,346
Current Liabilities
Short-term borrowings	$306,376	$170,419
Current portion of long-term debt	155,000	168,000
Accounts payable	254,111	286,257
Accrued liabilities	273,658	166,983
Income taxes payable	97,735	178,911
Total Current Liabilities	1,086,880	970,570
Long-term debt	500,000	300,000
Deferred income taxes	215,017	262,404
Total Liabilities	1,801,897	1,532,974
Common stock	$425,250	$125,000
Additional paid-in capital	356,450	344,335
Retained earnings	932,874	331,037
Total Stockholders' Equity	1,714,574	800,372
Total Liabilities and Stockholders' Equity	$3,516,471	$2,333,346

Selected Income Statement Data for the year ending December 31, Year 7
Net sales	$4,885,340
Cost of goods sold	(2,942,353)
Selling expenses	(884,685)
Operating income	1,058,302
Interest expense	(55,240)
Earnings before income taxes	1,003,062
Income tax expense	(401,225)
Net income	$601,837

Selected Statement of Cash Flow Data for the year ending December 31, Year 7
Cash flows from operations	$1,456,084
Capital expenditures	$745,862

Required

Wilmington Corporation’s times interest earned ratio in Year 7 was:

Select one:

a. 18.16

b. 19.16

c. 10.89

d. 88.44

4)

The fiscal year-end financial statements of Reed Enterprises shows average net operating assets (NOA) of $4,699 million, average net nonoperating obligations (NNO) of $605 million, average total liabilities of $6,203 million, and year-end equity of $5,135 million. The company’s 2017 financial leverage (FLEV) is:

Select one:

a. There is not enough information to determine the ratio.

b. 0.129

c. 0.148

d. 0.134

e. 0.118

Answer 1