Ratio Computations and Effect of Transactions Presented below is

Ratio Computations and Effect of Transactions Presented below is information related to Leland Inc.

(a) Compute the following ratios or relationships of Leland Inc. Assume that the ending account balances are representative unless the information provided indicates differently.

(1) Current ratio.

(2) Inventory turnover.

(3) Receivables turnover.

(4) Earnings per share.

(5) Profit margin on sales.

(6) Rate of return on assets on December 31, 2010.

(b) Indicate for each of the following transactions whether the transaction would improve, weaken, or have no effect on the current ratio of Leland Inc. at December 31, 2010.

(1) Write off an uncollectible account receivable, $2,200.

(2) Repurchase capital stock for cash.

(3) Pay $40,000 on notes payable (short-term).

(4) Collect $23,000 on accounts receivable.

(5) Buy equipment on account.

(6) Give an existing creditor a short-term note in settlement ofaccount.


LELAND INCC. BALANCE SHEET DECEMBER 31, 2010 $ 45,000 $ 50,000 Cash Notes payable (short-term) Accounts payable Accrued

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