Determine the Effect of the Following Transactions on the Identified

question 33

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 paid for research and development costs incurred to develop a patent.
Net income _____
Property,plant,and equipment _____
Stockholders' equity _____
Net profit margin ratio _____
Transaction 2: Inventory was purchased on account.
Net income _____
Current assets _____
Current liabilities _____
Return on assets ratio _____

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Definitions:

Call Option

A financial contract giving the buyer the right, but not the obligation, to buy an asset at a specified price within a specified time.

Capital Gain

The profit from the sale of a capital asset for more than its purchase price.

Strike Price

The fixed price at which the holder of an option can buy (call option) or sell (put option) the underlying security or commodity.

Call Options

Financial contracts that give the buyer the right, but not the obligation, to buy an underlying asset at a specified price within a certain time period.