Devlin Company
Devlin Company
Statement of Financial Position
as of May 31
(in thousands)

\begin{array}{lll}\text { Assets }&\text {year 7}&\text {year 6}\\\text { Current assets } & & \\\text { Cash } & \$ 45 & \$ 38 \\\text { Trading securities } & 30 & 20 \\\text { Accounts receivable (net) } & 68 & 48 \\\text { Inventories } & 90 & 80\\\text { Prepaid expenses }&22&30\\\text { Total current assets } & \$ 255 & \$ 216 \\\text { Investments, at equity } & 38 & 30 \\\text { Property, plant, and equipment (net) } & 375 & 400 \\\text { Intangible assets (net) } & 80 & 45\\\text { Total assets } &\$ 748 &\$ 691 \\\text { Liabilities and shareholders' equity } & & \\\text { Current liabilities } & \\\text { Notes payable } &\$ 35 & \$ 18 \\\text { Accounts payable } &70 & 42 \\\text { Accrued expenses } & 5 & 4 \\\text { Income taxes pavable } & 15 & 16\\\text { Total current liabilities } & 125 & 80 \\\text { Long-term debt } & 35 & 35 \\\text { Deferred taxes } & 3 & 2\\\text { Total liabilities } &\$ 163 &\$ 117 \\\text { Shareholders' equity } & \\\text { Preferred stock, } 6 \%, \$ 100 \text { par value, cumulative } & 150 & 150\\\text { Common stock, } \$ 10 \text { par value } & 225 & 195 \\\text { Additional paid-in capital-common stock } & 114 & 100 \\\text { Retained earmings } & 96 & 129 \\\text { Total shareholders' equity }&\$585&\$574\\\text { Total liabilities and shareholders' equity }&\$748&\$691\end{array}

Devlin Company
Income Statement
For the year ended May 31
(in thousands)

\begin{array}{lll}&\text { Year } 7&\text { Year } 6\\\text { Net sales } & \$ 480 & \$ 460 \\\text { Costs and expenses } & & \\\text { Cost of goods sold } & 330 & 315 \\\text { Selling, general, and administrative } & 52 & 51\\\text { Interest expense }&8&9\\\text { Income before taxes } & \$ 90 & \$ 85 \\\text { Income taxes } & 36 & 34\\\text { Net income }&\$54&\$51\end{array}

(CMA adapted, Jun 97 #18) Refer to the Devlin Company example.Devlin Company's times interest earned for the year ended May 31, Year 7, was
A)6.75 times
B)11.25 times
C)12.25 times
D)18.75 times
E)20.75 times

The Value of Common Stock Investments Will Likely Change Between

Multiple Choice

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