Question

Internet Marketing Inc. (IMI), which has been operating for three years, provides marketing consulting services worldwide for online companies. You are a financial analyst assigned to report on the effectiveness of IMI’s management team at managing its assets. At the start of 2014 (its fourth year), IMI’s T- account balances were as follows. Amounts are in thousands of dollars.
Required
1. Using the data from these T- accounts, complete the accounting equation on January 1, 2014. Assets, $ __________ = Liabilities, $__________ + Shareholders’ Equity, $ __________
2. Enter the following 2014 transactions in the T- accounts:
a. Provided $ 58,000 in services to clients; received $ 48,000 in cash and 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 for wages, $ 12,000 for travel, $ 7,600 in rent, and $ 1,600 on trade payables.
e. Received $ 1,600 in cash from clients in advance of services that IMI will provide next year.
f. Received a utility bill for $ 800 for services used in 2014.
g. Paid $ 480 in dividends to shareholders.
3. Compute ending balances in the T- accounts to determine the missing amounts on December 31, 2014: Revenues, $ _____ – Expenses, $ _____ = Net earnings, $ _____ Assets, $ _____ = Liabilities, $ _____ + Shareholders’ Equity, $ _____
4. Calculate the total asset turnover ratio for 2014. If the company had a total asset turnover ratio of 2.00 in 2013 and of 1.80 in 2012, what does your computation suggest to you about IMI? What would you state in your report?


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  • CreatedAugust 04, 2015
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