The accounting department of your company has just delivered a draft of the current year's financial statements toyou. The summary is as follows:Total AssetsTotal LiabilitiesTotal EquityBeginning of the Year$550,000210,000340,000End of the Year$616,000211,000405,000Net Income for the YearCommon Shares Outstanding119,000121,00021,000You discovered that they have not adjusted for estimated bad debt expenses of $8.200. For each of the followingratios, calculate1. The ratio that would have resulted had the error not been discovered (i.e. the incorrect ratio).2. The correct ratio.Incorrect:Correct:2 ROA3 ROE4 Debt Ratio5 EPS

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Asked Jan 31, 2019
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I need to gain understanding for an exam. Can you please provide me with ALL the steps for completing this problem. I know the ROA is net income / total assets however, I am getting it wrong.. Please help.

The accounting department of your company has just delivered a draft of the current year's financial statements to
you. The summary is as follows:
Total Assets
Total Liabilities
Total Equity
Beginning of the Year
$550,000
210,000
340,000
End of the Year
$616,000
211,000
405,000
Net Income for the Year
Common Shares Outstanding
119,000
121,000
21,000
You discovered that they have not adjusted for estimated bad debt expenses of $8.200. For each of the following
ratios, calculate
1. The ratio that would have resulted had the error not been discovered (i.e. the incorrect ratio).
2. The correct ratio.
Incorrect:
Correct:
2 ROA
3 ROE
4 Debt Ratio
5 EPS
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The accounting department of your company has just delivered a draft of the current year's financial statements to you. The summary is as follows: Total Assets Total Liabilities Total Equity Beginning of the Year $550,000 210,000 340,000 End of the Year $616,000 211,000 405,000 Net Income for the Year Common Shares Outstanding 119,000 121,000 21,000 You discovered that they have not adjusted for estimated bad debt expenses of $8.200. For each of the following ratios, calculate 1. The ratio that would have resulted had the error not been discovered (i.e. the incorrect ratio). 2. The correct ratio. Incorrect: Correct: 2 ROA 3 ROE 4 Debt Ratio 5 EPS

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Expert Answer

Step 1

1.

Calculate the ratio that would have resulted had ther error not been discovered (Incorrect ratio) as shown below:

 

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Step 2

2.

Calcualte the Correct ratio (after adjsting estimated bad debt expe...

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