Question

1. Fill in all blanks with ONE letter. I=Increase, D=Decrease, N=Not change

   X Company has the following:

   Current Assets $40

   Total Assets $100

   Current Liabilities $20

   Total Liabilities $60

   Net Income $10

   Record the impact of the following December 31 transactions on the ratios and financials for X Co.

   X Co. issues stock ____ Net income will___ . cash flow will___ . current ratio will____ . ROA will ___. ROE will___

2)

1. I=Increase, D=Decrease, N=Not Change

   X Company has the following:

   Current Assets $40

   Total Assets $100

   Current Liabilities $20

   Total Liabilities $60

   Net Income $10

   Record the impact of the following December 31 transactions on the ratios and financials for X Co.

   Paid a supplier for a previous credit purchase.

   Net income will . Cash flow will . Current ratio will . ROA will . ROE will

3)

1. X Company has the following:

   Current Assets $40

   Total Assets $100

   Current Liabilities $20

   Total Liabilities $60

   Net Income $10

   Record the impact of the following December 31 transactions on the ratios and financials for X Co.  

   I=Increase, D=Decrease, N=Not Change

   Delivered goods to a customer.

   Net Income will . Cash flow will . Current ratio will . ROA will . ROE will .

3)

1. X Company has the following:

   Current Assets $40

   Total Assets $100

   Current Liabilities $20

   Total Liabilities $60

   Net Income $10

   Record the impact of the following December 31 transactions on the ratios and financials for X Co.  

   I=Increase, D=Decrease, N=Not Change. Type only one letter for each answer.

   Received the phone bill.

   Net Income will . Cash flow will . Current ratio will . ROA will . ROE will .

Answer 1

Current ratio = Current Asset / Current Liability

ROA = Net income / Average Total Assets

ROE = Net income / Average Total Stockholders Equity

1- issues stock

Net income will N . Cash flow will I . Current ratio I . ROA will D . ROE will D .

Entry will be :

Debit : Cash Account ( Increase in Current Asset )

Credit : Common stock Account ( Increase in Stockholder Equity )

No affect on income statement.

2- Paid a supplier for a previous credit purchase.

Net income will N . Cash flow will D . Current ratio N . ROA will I . ROE will N .

Entry will be :

Debit : Accounts Payable Account ( Decrease in Current Liability )

Credit : Cash Account ( Decrease in Current Asset )

No affect on income statement and Stock holders equity.

3- Delivered goods to a customer

Net income will I . Cash flow will N . Current ratio I . ROA will I . ROE will I .

Entry will be :

Debit : Accounts Receivable Account ( Increase in Current Asset )

Credit : Sales Account ( Increase in Income Account )

No affect on Current Liability. Income will increase then automatically stock holders equity will increase.

4- Received the Phone bill.

Net income will D . Cash flow will N . Current ratio D . ROA will D . ROE will D .

Entry will be :

Debit : Phone expense Account ( Increase in Expense Account )

Credit : Accounts Payable Account ( Increase in Liability Account )

No affect on Current Asset and Cash flow. Income will decrease then automatically stock holders equity will decrease.