(a) (1)
Annual Report: It is a comprehensive financial report that shows all the business activities that takes place throughout the previous financial year. Its purpose is to provide the complete financial information of a company’s financial activities to its users in order to help them analyze and take well informed decisions.
Financial Ratios: Financial ratios are the metrics used to evaluate the overall financial performance of a company during a specific period of time.
To compute: Return on assets
(a) (1)
Explanation of Solution
Compute the return on assets ratio for Incorporation A, and Incorporation W for the year 2014.
Title: Compute the return on assets ratio | ||
Ratios | Incorporation A | Incorporation W |
|
|
|
Table (1)
Working notes:
Compute the average total assets for Incorporation A.
Beginning total assets =$54,505
Ending total assets =$40,159
Compute the average total assets for Incorporation W.
Beginning total assets =$204,751
Ending total assets =$203,706
For net income, refer Consolidated Statements of Operations for the year 2014 reported in Appendix D for Incorporation A and refer Consolidated Statements of Comprehensive Income: Consolidated net income attributable to Incorporation W for the year 2014 Appendix E for Company VF.
For average total assets, refer Consolidated Balance Sheets for the year 2014 reported in Appendix D for Incorporation A and Appendix E for Incorporation W. The total assets reported at the end of the year 2013, is the beginning total assets for the year 2014.
(a) (2)
To compute: Profit margin ratio
(a) (2)
Explanation of Solution
Compute the profit margin ratio for Incorporation A and Incorporation W for the year 2014.
Title: Compute the profit margin ratio | ||
Ratios | Incorporation A | Incorporation W |
|
|
|
Table (2)
Explanation:
For net income and net sales, refer Consolidated Statements of Operations for the year 2014 reported in Appendix D for Incorporation A, and refer Consolidated Statements of Income for the year 2014 Appendix E for Incorporation W.
(a) (3)
To compute: Assets turnover ratio
(a) (3)
Explanation of Solution
Compute the assets turnover ratio for Incorporation A and Incorporation W for the year 2014.
Title: Compute the assets turnover ratio | ||
Ratios | Incorporation A | Incorporation W |
|
|
|
Table (2)
For net sales, refer Consolidated Statements of Operations for the year 2014 reported in Appendix D for Incorporation A and refer Consolidated Statements of Income for the year 2014 Appendix E for Incorporation W.
For average total assets, refer Consolidated Balance Sheets for the year 2014 reported in Appendix D for Incorporation A and Appendix E for Incorporation W. The total assets reported at the end of the year 2013, is the beginning total assets for the year 2014.
(b)
To conclude: on the management of the plant assets from the findings.
(b)
Explanation of Solution
The assets turnover ratio indicates how efficiently a company utilizes its available assets to maximize its sales. The assets turnover ratio of Incorporation W is higher than Incorporation A. It indicates that Incorporation W has more effectively used its assets, to generate revenue.
Moreover, Incorporation W had been able to earn more profits out of its sales than Incorporation A that is, indicated in the significant difference of the profit margin ratio for both the companies. This resulted in higher return on assets for Incorporation W than Incorporation A.
There, it can be concluded that Incorporation W having more assets turnover, profit margin, and return on assets implies that, it has a more effective, and efficient asset management system than Incorporation A.
Want to see more full solutions like this?
Chapter 9 Solutions
Financial Accounting: Tools for Business Decision Making, 8th Edition
- Review the select information for Bean Superstore and Legumes Plus (industry competitors), and then complete the following. A. Compute the accounts receivable turnover ratios for each company for 2018 and 2019. B. Compute the number of days sales in receivables ratios for each company for 2018 and 2019. C. Determine which company is the better investment and why. Round answers to two decimal places.arrow_forwardThe following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 2019: Instructions 1. Prepare a multiple-step income statement. 2. Prepare a statement of owners equity. 3. Prepare a balance sheet, assuming that the current portion of the note payable is 50,000. 4. Briefly explain how multiple-step and single-step income statements differ.arrow_forwardReview the select information for Liquor Plaza and Beer Buddies (industry competitors) and complete the following. A. Compute the accounts receivable turnover ratios for each company for 2018 and 2019. B. Compute the number of days sales in receivables ratios for each company for 2018 and 2019. C. Determine which company is the better investment and why. Round answers to two decimal places.arrow_forward
- PA10. O 6.6 The following is the adjusted trial balance data for Nino's Pizzeria as of December 31, 2019. NINO'S PIZZERIA Adjusted Trial Balance Year Ended December 31, 2019 Debit Credit $ 775,984 Cash Accounts Receivable Buildings Merchandise Inventory Accounts Payable Common Stock 45,688 200,460 135,624 $437,880 410,542 Sales 555,696 Interest Revenue 84,652 Rent Revenue 86,900 Sales Salaries Expense Office Supplies Expense Sales Discounts Interest Expense Sales Returns and Allowances 24,500 6,270 102,890 4,577 105,854 122,853 Cost of goods sold Rent Expense Depreciation Expense: Office Equipment Insurance Expense Advertising Expense Totals 20,000 10,555 2,780 17,635 $1,575,670 $1,575,670 A. Use the data provided to compute net sales for 2019. B. Compute the gross margin for 2019. C. Compute the gross profit margin ratio (rounded to nearest hundredth). D. Prepare a simple income statement for the year ended December 31, 2019. E. Prepare a multistep income statement for the year ended…arrow_forwardLuxe Mobile Homes reported the following in its financial statements for the year ended December 31, 2024: (Click the icon to view the financial statements) Read the requirements. Requirement 1. Compute the collections from customers. Collections from customers are $ 24.444 Requirement 2. Compute payments for merchandise inventory. Payments for merchandise inventory are $ 18,560 Requirement 3. Compute payments of other operating expenses. Payments of other operating expenses are S 4.324 Requirement 4. Compute acquisitions of property, plant, and equipment (no sales of property during 2024). Acquisitions of property, plant, and equipment are Help me solve this Demodocs example Get more help - f4 f5 # +3 $ 4 do % 5 6 O & 7 Data table M Income Statement Net Sales Revenue Cost of Goods Sold Depreciation Expense Other Operating Expenses Income Tax Expense Net Income Balance Sheet Cash Accounts Receivable Merchandise Inventory Property, Plant, and Equipment, net Accounts Payable Accrued…arrow_forwardPurchase-related transactions The following selected transactions were completed by Epic Co. during August of the current year: Illustrate the effects of each of the transactions on the accounts and financial statements of Epic Co. Identify each transaction by date. If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases, cash outflows, and the income statement effects that reduce net income as negative amounts. Aug. 3. Purchased merchandise on account for $33,400, terms FOB destination, 2/10, n/30. Aug. 9. Issued debit memorandum for $2,500 ($2,450 net of 2% discount) for merchandise from the August 3 purchase that was damaged in shipment. Aug. 10. Purchased merchandise on account, $25,000, terms FOB shipping point, n/eom. Paid $600 cash to the freight company for delivery of the merchandise. Aug. 13. Paid for invoice of August 3, less debit memorandum of August 9. Aug 31. Paid for…arrow_forward
- how do i prepare the journal entry ? Assume that Sunland Company received the balance due from Culver Co. on January 2 of the following year instead of December 13. Prepare the journal entry to record the receipt of payment on January 2 Presented below are transactions related to Sunland Company. 1. On December 3, Sunland Company sold $650,000 of merchandise on account to Culver Co., terms 2/10, n/30, FOB destination. Sunland paid $300 for freight charges. The cost of the merchandise sold was $353,600. 2. On December 8, Culver Co. was granted an allowance of $29,500 for merchandise purchased on December 3. 3. On December 13, Sunland Company received the balance due from Culver Co.arrow_forwardhe questions displayed below.] The following data were provided by Mystery Incorporated for the year ended December 31: applies to th Cost of Goods Sold Income Tax Expense Merchandise Sales (gross revenue) for Cash Merchandise Sales (gross revenue) on Credit Office Expense Sales Returns and Allowances Salaries and Wages Expense E6-17 (Algo) Part 1 Required: 1. Prepare a multistep income statement for external reporting purposes. MYSTERY INCORPORATED Income Statementarrow_forwardes Required information [The following information applies to the questions displayed below.] The following data were provided by Mystery Incorporated for the year ended December 31: Cost of Goods Sold Income Tax Expense Merchandise Sales (gross revenue) for Cash Merchandise Sales (gross revenue) on Credit Office Expense Sales Returns and Allowances Salaries and Wages Expense Required: 1. Prepare a multistep income statement for external reporting purposes. MYSTERY INCORPORATED Income Statement 0 0 0 $ 165,000 17,600 240,000 42,000 19,000 7,000 40,200arrow_forward
- Hi, the question is looking for : 1) Statement of Comprehensive Income of Happy-go-Lucky Stores for the mostrecent accounting period.2) Statement of Financial Position of Happy-go-Lucky Stores on 30 June 2018 Extracted from the books of Happy-go Lucky Stores for the year ended 30arrow_forwardRecording Revenue and Receivables Under a Consignment Arrangement On March 15, 2020, Drexel Corp. provides goods to a retailer through consignment where Drexel Corp. retains ownership of the goods until the goods are sold to the retailer’s customer. Sale to the final customer is documented when the goods are scanned at the cash register of the retailer. Drexel Corp. receives a daily report on the number of units sold by the retailer to the end customer. Any unsold product can be returned to Drexel Corp. at anytime. Drexel Corp. has the right through the contract to recall any goods shipped and to transfer the goods to another retailer as a way to increase the rate of sales to the final customer. After the sale of the products to the final customer, the retailer cannot return the items to Drexel Corp. During March of 2020, Drexel Corp. transferred 2,400 units to the retailer, and the retailer sold 2,000 units. The product cost Drexel Corp. $80 per unit and the product was sold for $115…arrow_forwardRecording Revenue and Receivables Under a Consignment Arrangement On March 15, 2020, Drexel Corp. provides goods to a retailer through consignment where Drexel Corp. retains ownership of the goods until the goods are sold to the retailer’s customer. Sale to the final customer is documented when the goods are scanned at the cash register of the retailer. Drexel Corp. receives a daily report on the number of units sold by the retailer to the end customer. Any unsold product can be returned to Drexel Corp. at anytime. Drexel Corp. has the right through the contract to recall any goods shipped and to transfer the goods to another retailer as a way to increase the rate of sales to the final customer. After the sale of the products to the final customer, the retailer cannot return the items to Drexel Corp. During March of 2020, Drexel Corp. transferred 720 units to the retailer, and the retailer sold 600 units. The product cost Drexel Corp. $80 per unit and the product was sold for $115 per…arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningFinancial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:CengageIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning