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Chapter 9: Q14SE (page 528)

Computing the asset turnover ratio Biagas, Inc. had net sales of \(55,600,000 for the year ended May 31, 2018. Its beginning and ending total assets were \)52,800,000 and $98,500,000, respectively. Determine Biagas鈥檚 asset turnover ratio for year ended May 31, 2018.

Short Answer

Expert verified

Asset turnover ratio is 0.7349.

Step by step solution

01

Step 1 Meaning of Asset Turnover Ratio

Asset Turnover ratio defines as its measures the amount of net sales generated for each average dollar with the amount of total assets which have been invested.

02

Calculation of Asset turnover ratio for year ended May 31st, 2018

Assetturnoverratio=NetsalesrevenueAveragetotalassets=$55,600,000$52,800,000+$98,500,0002=$55,600,000$75,650,000=0.7349

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Most popular questions from this chapter

Dylan worked for a propane gas distributor as an accounting clerk in a small Midwestern

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extra entry. Months went by, and Dylan repeated the process until an auditor ran across

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Requirements

1. What can a business like this do to prevent team member fraud of this kind?

2. What effect would Dylan鈥檚 actions have on the balance sheet? The income statement?

3. How much discretion does a business have about accommodating

hardship situations?

Define property, plant, and equipment. Provide some examples.

Accounting for depletion of natural resources Ajax Petroleum holds huge reserves of oil assets. Assume that at the end of 2018, Ajax Petroleum鈥檚 cost of oil reserves totaled $27,000,000, representing 3,000,000 barrels of oil.

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  1. Which method does Ajax Petroleum use to compute depletion?
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Making a lump-sum purchase of assets Maplewood Properties bought three lots in a subdivision for a lump-sum price. An independent appraiser valued the lots as follows:

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Question:Jim Reed manages a fleet of utility trucks for a rural county government. He鈥檚 been in his job for 30 years, and he knows where the angles are. He makes sure that when new trucks are purchased, the residual value is set as low as possible. Then, when they become fully depreciated, they are sold off by the county at residual value. Jim makes sure his buddies in the construction business are first in line for the bargain sales, and they make sure he gets a little something back. Recently, a new county commissioner was elected with vows to cut expenses for the taxpayers. Unlike other commissioners, this man has a business degree, and he is coming to visit Jim tomorrow.

Requirements

1. When a business sells a fully depreciated asset for its residual value, is a gain or loss recognized?

2. How do businesses determine what residual values to use for their various assets? Are there 鈥渉ard and fast鈥� rules for residual values?

3. How would an organization prevent the kind of fraud depicted here?
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