Question

1. An asset turnover ratio of 1.87 for a company indicates that:

a.the company has $1.87 of long-term debt for each dollar of operating revenue earned.

b.the company is generating $1.87 of sales revenue for each dollar of long-term operating assets invested.

c.the company is generating $1.87 of net income for each dollar of retained earnings.

d.the company has $1.87 of current assets for each dollar of fixed assets invested.

2. The following information is available for Amanda Co. for the current year.

Common shares outstanding	150,000
Preferred stock dividend declared and paid	$90,000
Net income	$300,000

Calculate the company's earnings per share.

a.$2.60

b.$1.40

c.$1.10

d.$2.00

3. On July 1, George Co. issued $3,000,000 of 10-year, 8% bonds at par. Interest on the bonds is payable semiannually on December 31 and June 30. As a result of this transaction, net assets of the company:

a.is not effected.

b.decrease by $120,000.

c.increase by $3,000,000.

d.decrease by $240,000.

Answer 1

1)	Formula for asset turnover ratio = Sales / Long term assets
	Therefore correct option would be.
	b.the company is generating $1.87 of sales revenue for each dollar of long-term operating assets invested.
2)	Earnng per share = (net income - preferred dividend )/ Number of shares outstanding
		=($300000-90000)/150000
		=$1.4
	Correct option:b
3)	Journal Entry
			Debit	Credit
	Cash …..		$       3,00,000
	Notes payable			$       3,00,000
	Cash = is an asset
	Notes payable = is a liability
	Net Assets = Assets- Liabilities
	=$300000-300000
	=0
	Correct Option :a