Mgmt_200_Spring_2008_solutions_1-16-(1,18)

Mgmt_200_Spring_2008_solutions_1-16-(1,18) - Management 200...

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Management 200 – Introductory Financial Accounting– Spring 2008 Krannert School of Management - Purdue University Solutions to class assignment for January 16, 2008 E2–15. 1. Cash Short-Term Note Receivable Land Beg. 0 Beg. 0 Beg. 0 (a) 40,000 2,000 (c) (d) 3,000 (b) 12,000 3,000 (d) 2,000 (e) 36,000 3,000 9,000 Equipment Short-Term Notes Payable Long-Term Notes Payable Beg. 0 0 Beg. 0 Beg. (c) 20,000 12,000 (b) 18,000 (c) (e) 2,000 22,000 12,000 18,000 Contributed Capital 0 Beg. 40,000 (a) 40,000 3. 2008: Financial = Average Total Assets = ($70,000+$90,000) / 2 = $80,000 = 1.78 Leverage Average Stockholders’ Equity ($40,000+$50,000) / 2 $45,000 2009: Financial = Average Total Assets = ($90,000+$120,000) / 2 = $105,000 = 2.10 Leverage Average Stockholders’ Equity ($50,000+$50,000) / 2 $50,000 The financial leverage ratio has increased over the years. This suggests that the company has been taking on additional risk through debt financing. 4. The management of Li Delivery Services has already been financing the company’s
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Mgmt_200_Spring_2008_solutions_1-16-(1,18) - Management 200...

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