Determining the effects of business transactions on selected ratiosFinancial statement data of Modern Traveler’s Magazine include the following items:RequirementsCompute Modern Traveler’s current ratio, debt ratio, and earnings per share. Round all ratios to two decimal places, and use the following format for your answer:Compute the three ratios after evaluating the effect of each transaction that follows. Consider each transaction separately.a. Purchased merchandise inventory of $42,000 on account.b. Borrowed $121,000 on a long-term note payable.c. Issued 5,000 shares of common stock, receiving cash of $103,000.d. Received cash on account, $5,000. Cash$ 19,000Accounts Receivable, Net82,000Merchandise Inventory183,000Total Assets638,000Accounts Payable102,000Accrued Liabilities35,000Short-term Notes PayableLong-term Liabilities50,000221,000Net Income69,000Common Shares Outstanding50,000 shares Current RatioDebt RatioEarnings per Share

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Answered: Cash $ 19,000 Accounts Receivable, Net…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 18MCQ

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Determining the effects of business transactions on selected ratios

Financial statement data of Modern Traveler’s Magazine include the following items:

Requirements

Compute Modern Traveler’s current ratio, debt ratio, and earnings per share. Round all ratios to two decimal places, and use the following format for your answer:
Compute the three ratios after evaluating the effect of each transaction that follows. Consider each transaction separately.

a. Purchased merchandise inventory of $42,000 on account.

b. Borrowed $121,000 on a long-term note payable.

c. Issued 5,000 shares of common stock, receiving cash of $103,000.

d. Received cash on account, $5,000.

Cash
$ 19,000
Accounts Receivable, Net
82,000
Merchandise Inventory
183,000
Total Assets
638,000
Accounts Payable
102,000
Accrued Liabilities
35,000
Short-term Notes Payable
Long-term Liabilities
50,000
221,000
Net Income
69,000
Common Shares Outstanding
50,000 shares

Transcribed Image Text:Current Ratio Debt Ratio Earnings per Share

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