Question

A company acquired land by signing a long-term note payable. What is the journal entry? Does the transaction increase, decrease, or have no effect on the following ratios:

(a) asset turnover ratio.

(b) net profit margin ratio.

(c) return on assets.

(d) current ratio.

Answer #1

Journal Entry For the transaction is as follows:

LAND A/C Dr.

To Note Payable A/C

( Being asset aquired by issuing a note payable)

Effect on the Ratios

A) On Asset Turnover ratio : This ratio Will decrease as the formula is Sale/Total Asset. As total asset increases, this ratio will decreases.

B) No Effect

C)Return on Asset : This ratio Will decrease As the return is calculated on total Assets. Total assets has been increased but Income Has not Changed, so Ratio will decrease.

D) No Effect On Current Ratio

If Any More query related to this, feel free to ask in the comment section.

A
company makes a payment of $5,000 on a long term note payable . The
journal the transaction would be recorded in is the

The balance sheet and income statement for the A. Thiel Mfg.
Company are as follows:
Balance Sheet ($000)
Cash
$ 500
Accounts receivable
2,000
Inventories
1,000
Current assets
$3,500
Net fixed assets
4,500
Total assets
$8,000
Accounts payable
$1,100
Accrued expenses
600
Short-term notes payable
300
Current liabilities
$2,000
Long-term debt
2,000
Owners’ equity
4,000
Total liabilities and owners’ equity
$8,000
Income Statement ($000)
Sales (all credit)
$8,000
Cost of goods sold
(3,300)
Gross profit
$4,700
Operating expenses (includes $500...

Ratios and Fixed Assets [L{)2] The Maurer company has a
long-term debt ratio of .35 and a current ratio of 1.30. Current
liabilities are $955, sales 'are $7,210, profit margin is 8.3
percent, and RoE is 17.5 percent. what is the amount of the firm's
net fixed assets?

The Smathers Company has a long-term debt ratio (i.e., the ratio
of long-term debt to long-term debt plus equity) of .53 and a
current ratio of 1.42. Current liabilities are $2,470, sales are
$10,690, profit margin is 10 percent, and ROE is 15 percent.
What is the amount of the firm’s net fixed assets?
(Do not round intermediate calculations
and round your answer to 2 decimal places, e.g.,
32.16.)
Net fixed assets
$

The Smathers Company has a long-term debt ratio (i.e., the ratio
of long-term debt to long-term debt plus equity) of .55 and a
current ratio of 1.44. Current liabilities are $2,480, sales are
$10,720, profit margin is 12 percent, and ROE is 17 percent.
What is the amount of the firm’s net fixed assets? (Do not round
intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)

Quick assets=50 A/P= 10 taxes
payable=10 long term bond payable=30
Find the quick ratio.
Inventory( Jan 1)=80 Inventory
(Dec 31)=60 COGS=280
Find inventory turnover
Inventory turnover=20 . Find days’ sales in inventory ( use 360
days)
Average assets= 100 sales
=70 , net income=8, gross profit=10. Find return on
assets.

(Transaction effects on ratios)
Two lists follow: one for ratios (including the ratio prior to the
transactions) and another for transactions.
Ratios:
1.
Current ratio, 1.9:1
2.
Quick ratio, 0.8:1
3.
Accounts receivable turnover, 10.6 times
4.
Inventory turnover, 7.8 times
5.
Return on assets, 12%
6.
Profit margin, 10.4%
Transactions:
a.
Goods costing $360,000 are sold to customers for $480,000 in
cash.
b.
Accounts receivable of $130,000 are collected.
c.
Inventory costing $80,000 is purchased from suppliers on
credit....

Q9 to Q12- Write the formula for the following ratios and what
each ratio measures:
Return on equity (ROE)
Return on assets (ROA)
Gross profit
Gross margin
Profit margin (also called the “net profit margin”)
Asset turnover
Fixed-Asset Turnover
Inventory Turnover
Inventory Period (also called “days inventory
outstanding”)
Collection Period (also called “account receivable
period”)
Payables Period (also called “account payable period”)
Operating Cycle
Cash Conversion Cycle
Financial Leverage (also called “equity multiplier” )
Debt-to-assets ratio
Debt-to-equity ratio
Times interest...

A company is evaluating their financial performance and digging
into their ratios. The company wants to keep the same Return on
Equity (ROE) (as it looks good) but they are faced with the reality
that their total asset turnover ratio as well as their net profit
margin are declining. What can management do?
A. reduce their revenue while increasing the quality of assets
on their balance sheet
B. decrease their leverage (equity multiplier)
C. increase their leverage (equity multiplier)
D....

Simon Company’s year-end balance sheets follow.
At December 31
Current Yr
1 Yr Ago
2 Yrs Ago
Assets
Cash
$
30,400
$
35,750
$
37,800
Accounts receivable, net
89,700
63,500
50,500
Merchandise inventory
112,000
82,000
53,000
Prepaid expenses
10,850
9,300
4,700
Plant assets, net
278,000
256,500
227,000
Total assets
$
520,950
$
447,050
$
373,000
Liabilities and Equity
Accounts payable
$
129,200
$
74,500
$
50,800
Long-term notes payable secured by
mortgages on plant assets
95,500
101,750
81,600
Common stock,...

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