Question

A company acquired land by signing a long-term note payable. What is the journal entry? Does...

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.

Homework Answers

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.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A company makes a payment of $5,000 on a long term note payable . The journal...
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...
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...
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...
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...
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...
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...
(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...
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...
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...
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,...