Analyzing the Effects of Transactions Using T-Accounts and Interpreting the Total Asset
Turnover Ratio as a Financial Analyst
Massa Company, which has been operating for three years, provides marketing consulting services worldwide for dot-com companies. You are a financial analyst assigned to report on the Massa management team€™s effectiveness at managing its assets efficiently. At the start of 2012 (its fourth year), Massa€™s T-account balances were as follows. Dollars are in thousands.

Required:
1. Using the data from these T-accounts, amounts for the following on January 1, 2012, were
Assets $ ________ = Liabilities $ ________ + Stockholders€™ Equity $ ________
2. Enter the following 2012 transactions in the T-accounts:
a. Provided $58,000 in services to clients who paid $48,000 in cash and owed the rest on account.
b. Received $5,600 cash from clients on account.
c. Received $400 in cash as income on investments.
d. Paid $36,000 in wages, $12,000 in travel, $7,600 in rent, and $1,600 on accounts payable.
e. Received $1,600 in cash from clients in advance of services Massa will provide next year.
f. Received a utility bill for $800 for 2012 services.
g. Paid $480 in dividends to stockholders.
3. Compute ending balances in the T-accounts to determine amounts for the following on December 31, 2012:
Revenues $ ________ ˆ’ Expenses $ ________ = Net Income $ ________
Assets $ ________ = Liabilities $ ________ + Stockholders€™ Equity $ ________
4. Calculate the total asset turnover ratio for 2012. If the company had an asset turnover ratio of 2.00 in 2011 and 1.80 in 2010, what does your computation suggest to you about Massa Company? What would you say in yourreport?

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Assets Cash Accounts Receivable Long-Term Investments 3,200 8,000 6,400 Llabilities Accounts Payable Long-Term Notes Payable Unearned Revenue 2,400 5,600 1,600 Stockholders' Equity Contributed Capital Retained Earnings 4,800 3,200 Revenues Consulting Feo Ravenue Investment Income Expenses Utilities Expense Wages Expense Travel Expense Rent Expense