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Merchandise Inventory, Income Tax Rate, and Investments

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7. Keifert Company had a balance in the Merchandise Inventory account of $260,000 at the beginning of the year and a balance of $340,000 at the end of the year. The inventory turnover ratio for 2006 was 4 times. If gross profit as a percentage of sales was 40%, the amount of sales for 2006 was
a. $2,000,000.
b. $1,200,000.
c. $3,000,000.
d. $750,000.

8. Foxter Company reported net income of $140,000 for 2006. The income statement also indicates that interest expense for 2006 was $40,000. Assuming an income tax rate of 30%, the number of times interest earned ratio for 2006 was
a. 5 times.
b. 6 times.
c. 4.5 times.
d. 3.5 times.

9. Simms Company has a 70% interest in the stock of Werton Company. What level of investment does Simms hold?
a. Controlling
b. Significant
c. Insignificant
d. Passive

10. Bechtel Enterprises has a 10% interest in Walton Company. During 2006, Walton earned net income of $45,000 and paid dividends of $20,000. The entry on the books of Bechtel to record income from the investment will include
a. a debit to Stock Investments of $4,500
b. a credit to Investment Income of $2,500.
c. a credit to Dividend Income of $2,000.
d. a credit to Gain on the Sale of Stock Investments for $2,500.

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7. Keifert Company had a balance in the Merchandise Inventory account of $260,000 at the beginning of the year and a balance of $340,000 at the end of the year. The inventory turnover ratio for 2006 was 4 times. If gross profit as a percentage of sales was 40%, the amount of sales for 2006 was
a. $2,000,000.
b. $1,200,000.
c. $3,000,000.
d. $750,000. ...

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