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Chapter 8: 7QS (page 388)

Question: Aneko Company reports the following (\(000s): net sales of \)14,800 for 2017 and \(13,990 for 2016; end of-year total assets of \)19,100 for 2017 and $17,900 for 2016. Compute its total asset turnover for 2017, and assess its level if competitors average a total asset turnover of 2.0 times.

Short Answer

Expert verified

The total asset turnover for 2017 is 0.8. The company isn’t doing well because its asset turnover ratio is less than its competitors.

Step by step solution

01

Asset turnover ratio

The asset turnover ratio is a profitability ratio. It measures hoe efficiently a company uses their assets to generate sales.

02

Formula of asset turnover ratio


03

Solution


The total asset turnover for 2017 is 0.8

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Most popular questions from this chapter

Question: What general procedures are applied in accounting for the acquisition and potential cost allocation of intangible assets?

Question: Does the balance in the accumulated depreciation- machinery account represent funds to replace the machinery when it wears out? If not, what does it represent?

On January 2, 2017, Bering Co. disposes of a machine costing \(44,000 with accumulated depreciation of \)24,625. Prepare the entries to record the disposal under each of the following separate assumptions.

  1. The machine is sold for \(18,250 cash.
  2. The machine is traded in for a newer machine having a \)60,200 cash price. A \(25,000 trade-in allowance is received, and the balance is paid in cash. Assume the asset exchange has commercial substance.
  3. The machine is traded in for a newer machine having a \)60,200 cash price. A $15,000 trade-in allowance is received, and the balance is paid in cash. Assume the asset exchange has commercial substance.

Review the chapter’s opening feature involving Matt Hofmann and his company, Westland Distillery. Assume that the company currently has net sales of \(8,000,000 and that it is planning an expansion that will increase net sales by \)4,000,000. To accomplish this expansion, Westland Distillery must increase its average total assets from \(2,500,000 to \)3,000,000.

Required

  1. Compute the company’s total asset turnover under (a) current conditions and (b) proposed conditions.
  2. Evaluate and comment on the merits of the proposal given your analysis in part 1. Identify any concerns you would express about the proposal.

Question: Identify the following assets a thorough I as reported on the balance sheet as intangible assets (IA), natural resources (NR), or other (O).

  1. Oil well

  2. Trademark

  3. Leasehold

  4. Gold mine

  5. Building

  6. Copyright

  7. Franchise

  8. Timberland

  9. Salt mine
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