Determine the Effect of the Following Transactions on the Identified

question 74

Essay

Determine the effect of the following transactions on the identified financial statement components and ratios. Code your answers as follows:
A: If the transaction results in an increase in the financial statement component or ratio.
B: If the transaction results in a decrease in the financial statement component or ratio.
C. If the transaction does not affect the financial statement component or ratio.
Transaction 1: A company acquired land by signing a long-term note payable.
Property, plant, and equipment_____
Asset turnover ratio_____
Net profit margin ratio_____
Return on assets ratio_____
Transaction 2: Cash was used to pay a current liability.
Net income_____
Asset turnover ratio_____
Net profit margin ratio_____
Return on assets ratio_____

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Definitions:

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within a year's time, such as cash, inventory, and receivables.

Current Liabilities

Short-term financial obligations that a company owes and is expected to pay within one year or its operational cycle, whichever is longer.

Compensating Balance

A minimum bank account balance that a borrower must maintain as a condition for obtaining a loan.

Interest Charges

The cost paid by a borrower for the use of borrowed money, or paid on a deposit or investment.