Calculate the two components of eregons return on

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Unformatted text preview: net income of $10,000. Calculate the two components of Eregon’s Return on Assets (ROA) for 2012. What do these ratios tell you about Eregon’s performance in 2012? Flashback quiz--CH 7 • Eregon purchases a patent for $100,000 cash. Eregon estimates the patent has a 2-year service life with no residual value. Eregon uses the straight-line cost allocation assumption for all intangible assets, and directly reduces the intangible asset’s value when recognizing depreciation expense (rather than using accumulated amortization). Record the purchase of the patent at the beginning of year 1, and any journal entries that Eregon will record at the end of years 1 and 2. Today’s Topics (Ch 8) CURRENT LIABILITIES -What are current liabilities? -Accounting for current liabilities? CONTINGENCIES -What is a “contingent” liability? -Accounting for contingent liabilities? ANALYZING CURRENT LIABILITIES -Working capital -Liquidity ratios --Current ratio --Acid-test ratio CURRENT RATIO WILL BE COVERED (Not Acid-test ratio) Current liabilities Re vi e w • What is a liability? - A present obligation to sacrifice assets in the future due to a transaction or...
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