the statement of financial position for paragon corporation at november 30 2001 the 544574
The statement of financial position for Paragon Corporation at November 30, 2001, the end of its current fiscal year, is presented below. The market price of the company’s common stock was $4 per share on November 30, 2001.
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Current assets: |
In thousands |
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Cash |
$ 6,000 |
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Accounts receivable |
$ 7,000 |
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Less: Allowance for doubtful accounts |
400 |
6,600 |
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Merchandise inventory |
16,000 |
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Supplies on hand |
400 |
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Prepaid expenses |
1,000 |
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Total current assets |
$30,000 |
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Property, plant, and equipment: |
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Land |
27,500 |
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Building |
36,000 |
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Less: Accumulated depreciation |
13,500 |
22,500 |
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Total property, plant, and equipment |
50,000 |
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Total assets |
$80,000 |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
$ 6,400 |
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Accrued interest payable |
800 |
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Accrued income taxes payable |
2,200 |
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Accrued wages payable |
600 |
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Deposits received from customers |
2,000 |
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Total current liabilities |
$12,000 |
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Long-term debt: |
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Bonds payable—20-year, 8% convertible |
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debentures due December 1, 2007 (Note 7) |
20,000 |
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Less: Unamortized discount |
200 |
19,800 |
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Total liabilities |
31,800 |
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Stockholders’ equity: |
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Common stock—authorized 40,000,000 shares |
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of $1 par value; 20,000,000 shares issued |
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and outstanding |
20,000 |
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Paid-in capital in excess of par value |
12,200 |
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Total paid-in capital |
32,200 |
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Retained earnings |
16,000 |
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Total stockholders’ equity |
48,200 |
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Total liabilities and stockholders’ equity |
$80,000 |
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All items are to be considered independent of one another, and any transactions given in the items are to be considered the only transactions to affect Paragon Corporation during the just-completed current or coming fiscal year. Average balance sheet account balances are used in computing ratios involving income statement accounts. Ending balance sheet account balances are used in computing ratios involving only balance sheet items.
Required Answer the following multiple-choice questions:
a.If Paragon paid back all of the deposits received from customers, its current ratio would be
1. 2.50 to 1.00
2. 2.80 to 1.00
3. 2.33 to 1.00
4. 3.00 to 1.00
5. 2.29 to 1.00
b.If Paragon paid back all of the deposits received from customers, its quick (acid- test) ratio would be
1. 1.06 to 1.00
2. 1.00 to 1.00
3. 0.88 to 1.00
4. 1.26 to 1.00
5. 1.20 to 1.00
c.A 2-for-1 common stock split by Paragon would
1. Result in each $1,000 bond being convertible into 600 new shares of Paragon common stock
2. Decrease the retained earnings due to the capitalization of retained earnings
3. Not affect the number of common shares outstanding
4. Increase the total paid-in capital
5. Increase the total stockholders’ equity
d. Paragon Corporation’s building is being depreciated using the straight-line method, salvage value of $6,000,000, and life of 20 years.
The number of years the building has been depreciated by Paragon as of November 30, 2001, is
1. 7.5 years
2.12. 5 years
3.9. 0 years
4. 15.0 years
5. None of these.
e.Paragon’ s book value per share of common stock as of November 30, 2001, is
1.$4.00
2.$1. 61
3.$1. 00
4. $2.41
5. None of these
f.If, during the current fiscal year ending November 30, 2001, Paragon had sales of $90,000,000 with a gross profit of 20% and an inventory turnover of five times per year, the merchandise inventory balance on December 1, 2000, was
1.$14,400,000
2.$12,800,000
3.$18,000,000
4. $20,000,000
5. $16,000,000
g.If Paragon has a payout ratio of 80% and declared and paid $4,000,000 of cash dividends during the current fiscal year ended November 30, 2001, the retained earnings balance on December 1, 2000, was
1.$20,000,000
2.$17,000,000
3.$15,000,000
4. $11,000,000
5. None of these
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