The statement of financial position for Paragon Corporation at November 30, 2009, the end of its current fiscal year, follows. The market price of the company€™s common stock was $4 per share on November 30, 2009.

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, 2009 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, 2009 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, 2009, 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, 2008 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, 2009, the retained earnings balance on December 1, 2008 was
1. $20,000,000.
2. $17,000,000.
3. $15,000,000.
4. $11,000,000.
5. None ofthese.

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(In thousands) Assets Current assets: Cash Accounts receivable Less: Allowance for doubtful accounts Merchandise inventory Supplies on hand Prepaid expenses 6,000 7,000 400 6,600 16,000 400 1,000 Total current assets $30,000 Property, plant, and equipment Land Building Less: Accumulated depreciation 27,500 $36,000 13.500 22 500 Total property, plant, and equipment Total assets 50,000 $80,000 Lia bilities and Stockholders' Equity Current liabilities: Accounts payable Accrued interest payable Accrued income taxes payable Accrued wages payable Deposits received from customers S 6,400 800 2,200 600 2,000 Total current liabilities $12,000 Long-term debt Bonds payable-20-year, 8% convertible debentures due 20,000 December 1, 2014 (Note 7) Less: Unamortized discount 200 19,800 31,800 Total liabilities Stockholders' equity Common stock authorized 40,000,000 shares of S1 par value; 20,000,000 shares issued and outstanding Paid-in capital in excess of par value Total paid-in capital Retained eamings 20,000 32,200 6,000 Total stockholders equity Total liabilities and stockholders' equity 48,200 $80,000