ACC102 Written Assignment 2

1010 WordsApr 24, 20155 Pages
Accounting 102 OL Written Assignment 2 Complete the following end-of-chapter exercises and problem, and submit your answers to your mentor. Chapter 14: - Exercise 14.1, page 662 - Exercise 14.2, page 662 - Problem 14.6A, page 670 Chapter 14: ● (Learning Objective 1)Exercise 14.1, page 662 (Percentage Changes) Selected information taken from the financial statements of Maxum Company for two successive years follows. You are to compute the percentage change from 2010 to 2011 whenever possible. Round all calculations to the nearest whole percentage. 2011 2010 a. Accounts receivable $ 126,000 160,000 b. Marketable securities 0 250,000 c. Retained earnings 80,000 -80,000 d. Notes receivable 120,000 0 e. Notes Payable 870,000 800,000…show more content…
15% Debt ratio – This is not a measure of short term debt paying ability. d. Compute the following ratios (assume that the year-end amounts of total assets and total stockholders’ equity also represent the average amounts throughout the year): 1- Return on assets Solution= 11% Operating Income: Net Sales $1,500,000 Cost of Goods Sold 1,080,000 Operating Expenses 315,000 Operating Income $ 105,000 Total Assets (From balance sheet) $1,000,000 2- Return on equity Solution =5% Net Income (from income statement) $ $ 15,000 Stockholders’ Equity (from balance sheet) 300,000 e. Comment on the company’s performance under these measurements. Explain why the return on assets and return on equity are so different. Solution: 11% return on assets – On page 638 of our text, we are told that at the time of the writing, a “successful” business might be expected to return 15% or more on assets. Downing, Inc.’s 11% is well below. Solution: 5% return on equity- This number is well below the 12% that might be expected from a large financially strong company. The financial statements for Downing are not dated, so we cannot compare the return on equity to the inflation rate. Solution difference between return on assets and return on equity: Solution: The differences between these two measures are in their calculation formulas. Return on assets is

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