The accounting department of your company has just delivered a draft of the current year's financial statements
Question:
The accounting department of your company has just delivered a draft of the current year's financial statements to you. The summary is as follows:
| Beginning of the Year | End of the Year |
Total Assets | $550,000 | $590,000 |
Total Liabilities | 210,000 | 220,000 |
Total Equity | 340,000 | 370,000 |
Net Income for the Year | | 81,100 |
Common Shares Outstanding | 21,000 | 21,000 |
You discovered that they have not adjusted for estimated bad debt expenses of $7,100. For each of the following ratios, calculate:
1. The ratio that would have resulted had the error not been discovered (i.e. the incorrect ratio).
2. The correct ratio.
ROA = INCORRECT AND CORRECT
ROE = INCORRECT AND CORRECT
DEBT RATIO = INCORRECT AND CORRECT
EPS = INCORRECT AND CORRECT
Fundamentals of Financial Accounting
ISBN: 978-0078025914
5th edition
Authors: Fred Phillips, Robert Libby, Patricia Libby