Below are summary data for the first two years of operation of an enterprise fund prepared under
Question:
Required
a. For both the modified accrual and accrual accounting data, perform a basic profitability analysis for Year 2 using the "DuPont Analysis" shown below.
b. Which basis of accounting better reflects the profitability of the enterprise fund during Year 2? To what do you attribute the differences?
Modified Accrual Business Accounting Accounting (in thousands) Year 2 Year 1 Year 2 Year 1 Revenues$1,100 $ Expenditures/Expenses4,000 Total assets... $1,000 3,500 300 500) $1,300 1,000 3,550 2,550 $1,150 900 3,050 2,250 320 (3,400) Return on assets Income Average total assets Return on sales Income Sales Total assets turnover Revenue Average total assets X
Step by Step Answer:
a Modified accrual accounting ROA ROS x TATO 2900 2900 x 1100 310 1100 310 935 264 x 354 310 300 32...View the full answer
Advanced Accounting
ISBN: 978-1934319307
2nd edition
Authors: Susan S. Hamlen, Ronald J. Huefner, James A. Largay III
Related Video
The Dupont analysis is an expanded return on equity formula, calculated by multiplying the net profit margin by the asset turnover by the equity multiplier. The DuPont analysis is also known as the DuPont identity or DuPont model.This Video will guide on how to calculate return on Equity and estimate profitability of shareholders using DuPont Analysis.
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