Selected Information for Uptown Spa Services and Downtown Spa Services

question 60

Essay

Selected information for Uptown Spa Services and Downtown Spa Services follows:
$$\begin{array} { | l | l | l | } \hline \begin{array} { l } \text { Uptown Spa } \\\text { Services }\end{array} && { \begin{array} { l } \text { Downtown Spa } \\\text { Services }\end{array} } & \\\hline\ \text { Total Assets } & \$ 125,000& \text { Total Assets } & \$ 162,000 \\\hline \text { Total Owner's Equity } & \$ 90,000& \text { OTotal Owner's Equity } & \$ 137,000 \\\hline \text { Total Revenues } & \$ 82,000& \text { Total Revenues } & \$ 70,000 \\\hline \text { Net Income } & \$ 12,000 &\text { dNet Income } & \$ 18,000 \\\hline\end{array}$$ The total assets and total owner's equity balances are at December 31,2018.Total revenues and net income are for the year ended December 31,2018.There were no new capital contributions during the year.No owner withdrawals were taken.Average net assets are $128,000 for Uptown and $178,000 for Downtown.
Provide answers for the following questions.Show your work and explain your answer.
1.Which business owes more to creditors?
2.Which business has more owner's equity at the end of the year?
3.Which business had more expenses?
4.What is the ROA for each business? (Show this as a percentage and round to one decimal place)Based on ROA,which company is more profitable?

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Definitions:

Statute Of Frauds

a rule of law mandating that specific agreements must be documented in writing and signed by the individual being held accountable for them to be valid.

Main-Purpose Rule

A principle in suretyship law that a guarantor's promise to pay another's debt is not considered a secondary promise requiring a written agreement if the guarantor's main purpose benefits them.

Parol Evidence Rule

A legal rule in contract law that prevents the admission of external evidence intended to alter or contradict the terms of a written agreement.

Merger Clause

A clause in a written agreement within the statute of frauds which states that the written agreement accurately reflects the final, complete version of the agreement.