COMPREHENSIVE EXAMINATION A (Chapters 1 5)

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1 COMPREHENSIVE EXAMINATION A (Chapters 1 5) Problem A - I Multiple Choice 1. A private organization which establishes broad accounting principles as well as specific accounting rules is a. the Securities Commission (provincial). b. the Canada Customs and Revenue Agency. c. the Canadian Institute of Chartered Accountants. d. the Corporate Board of Directors. 2. An increase in an expense a. increases revenues. b. increases assets. c. decreases liabilities. d. decreases owner's equity. 3. A proprietorship business with total owner's equity of $75,000 paid a $10,000 business debt. As a result of this transaction, total owner's equity a. did not change. b. increased by $10,000. c. decreased by $10,000. d. increased to $85, The right side of an account is always a. the debit side. b. the credit side. c. the balance of that account. d. carried forward to the next accounting period. 5. Posting is the process of a. preparing a chart of accounts. b. adding a column of figures. c. transferring journal entries to ledger accounts. d. recording entries in a journal. 6. The purpose of recording amortization on capital assets is to a. reflect the decline in the market value of the assets each period. b. reduce income when the company has an exceptionally profitable year. c. be in conformity with the revenue recognition principle. d. allocate the original cost of capital assets to expense over its useful life. 7. Murray Company debited Prepaid Insurance for $960 on July 1, 2001 for a one-year fire insurance policy. If the company prepares monthly financial statements, failure to make an adjusting entry on July 31, for the amount of insurance that has expired would cause a. assets to be overstated by $960 and expenses to be understated by $960. b. expenses to be overstated by $80 and assets to be understated by $80. c. assets to be overstated by $80 and expenses to be understated by $80. d. expenses to be overstated by $960 and assets to be understated by $ Which one of the following accounts is not closed at the end of an accounting period? a. Owner's Capital account b. Owner's Drawings account c. Service Revenue account d. Insurance Expense account 9. Recording the purchase of equipment to be used in the business requires a debit be made to which of the following accounts? a. Office Supplies b. Accounts Payable c. Cash d. Equipment 10. Gross profit is calculated by a. subtracting total expenses from total revenues. b. subtracting cost of goods sold from net sales. c. taking the beginning inventory + cost of goods purchased - the ending inventory. d. subtracting the ending inventory from cost of goods available for sale.

2 Solutions Comprehensive Examination A Problem A - I Solution 1. c 4. b 7. c 10. b 2. d 5. c 8. a 3. a 6. d 9. d COMPREHENSIVE EXAMINATION B (Chapters 6 9) Problem B - I Multiple Choice 5. A dishonoured note receivable is usually a. written off as soon as possible. b. transferred to an accounts receivable. c. reduced to net realizable value by use of an allowance account. d. none of these. 6. The basis of estimating expected uncollectible accounts that emphasizes the matching of expenses with revenues is the a. percentage of receivables basis. b. percentage of sales basis. c. lower of cost and market basis. d. direct write-off method. 7. A company just starting business purchased three merchandise inventory items at the following prices: first purchase $870; second purchase $840; third purchase $810. If two items were sold during the period and the company used the LIFO costing method, the gross profit for the period would be how much greater or less than if the FIFO costing method had been used? The company uses the periodic inventory system. a. Gross profit would be $60 greater. b. Gross profit would be $60 less. c. Gross profit would be the same. d. Gross profit would be $30 greater. 8. A company uses the periodic inventory system. An error in the physical count of goods on hand at the end of the current period resulted in a $3,000 understatement of the ending inventory. The effect of this error in the current period is to a. overstate cost of goods sold. b. understate cost of goods available for sale. c. overstate gross profit. d. overstate net income. 9. In a period of rising prices, the inventory method that will show the highest net income is a. Average Cost. b. FIFO. c. LIFO. d. Lower of cost and market. 10. Granting of credit to a customer for a sales return is recorded in the a. cash payments journal. b. cash receipts journal. c. general journal. d. sales journal. *Problem B - II Estimating Inventory Complete the requirements specified for each of the following independent situations. 1. A major portion of Mohamud Company s inventory was destroyed by a flood. Accounting records provide the following information: Sales $180,000 Purchases $142,000 Sales Returns and Allowances 30,000 Purchases Returns and Allowances 15,000 Beginning Inventory 25,000 Freight In 8,000 Assuming a gross profit rate of 30% on net sales and that undamaged inventory is appropriately valued at $10,000, calculate the cost of the merchandise destroyed in the flood.

3 2. Hudler Company uses the retail inventory method. Given the following information, calculate the ending inventory at cost. Cost Retail Beginning Inventory $ 15,000 $ 20,000 Purchases 125, ,000 Sales 150,000 Sales Returns and Allowances 10,000 Problem B - V Periodic Inventories Singh Company uses the periodic inventory method and had the following inventory information available for the month of November. Date Transaction Units Unit Cost 11/1 Beginning inventory 400 $3 11/5 Purchase No $5 11/12 Sale No /18 Purchase No $6 11/25 Sale No /30 Purchase No $7 A physical count of units on November 30 revealed that 900 units were on hand. Answer the following independent questions and show calculations supporting your answers. 1. Assume that the company uses the average cost method. What is the dollar value of the ending inventory on November 30? 2. Assume that the company uses the FIFO inventory method. The dollar value of the ending inventory on November 30 is: 3. Assume that the company uses the LIFO inventory method. What is the dollar value of the cost of goods sold during November? Problem B - VI Journal Entries Antonio Company uses the allowance method to account for uncollectible accounts and the perpetual inventory method to account for inventories. Prepare the appropriate journal entries to record the following transactions during You may omit journal entry explanations. Jan. 3 Paid freight on goods purchased on December 30, $500, Jan. 5 Sold merchandise, which cost $11,000, to Bob Taborio for $19,000 on account. Credit terms: n/30. Jan. 14 Received balance due from Bob Taborio. June 20 The account of Jeff Short for $1,500 was deemed to be uncollectible and is written off as a bad debt. Dec. 31 Use the following information for year-end adjusting entries: The balance of Accounts Receivable and Allowance for Doubtful Accounts at year end are $131,000 and $3,900, respectively. It is estimated that bad debts will be 5% of accounts receivable. Problem B - VII Correcting Entries An inexperienced accountant for Brennen Company made the following incorrect entries. 1. Notes Receivable... 10,800 Accounts Receivable... 10,000 Interest Revenue Facts: Accepted a $10,000, 1 year, 8% note from John Tan Company for balance due. 2. Accounts Receivable American Express... 35,000 Sales... 35,000 Facts: Accepted American Express credit card for $35,000; the service fee is 4%. 3. Allowance for Doubtful Accounts... 18,450 Notes Receivable... 18,000 Interest Revenue Facts: M. Bailey dishonoured an $18,000, 10%, 3-month note because of bankruptcy. Bailey is expected to pay. No interest had been accrued on the note.

4 Prepare entries to correct Brennen Company's books based on the facts given. Do not reverse out incorrect entries that were recorded above, but rather correct the account balances so that they reflect the proper amounts. Problem B - VIII Notes Receivable Prepare journal entries to record the following events: Jul. 1 Jul. 31 Oct. 1 Oct. 1 Kiner Company accepted a 12%, 3-month, $4,000 note dated July 1 from Fox Company for balance due. Kiner accrued interest on the above note for the month of July. Collected Fox Company note in full. Assume interest was correctly accrued on August 31 and September 30. Assume instead that the note is dishonoured and that no interest has been accrued. Fox Company is expected to eventually pay the amount owed. Problem B - I Solution *Problem B - II Solution Solutions Comprehensive Examination B 7. a 10. c 5. b 8. a 6. b 9. b 1. Net sales ($180,000 $30,000)... $150,000 Less estimated gross profit (30% $150,000)... 45,000 Estimated cost of goods sold... $105,000 Beginning inventory... $ 25,000 Cost of goods purchased ($142,000 $15,000 + $8,000) ,000 Cost of goods available for sale ,000 Less estimated cost of goods sold ,000 Estimated ending inventory... $ 55,000 Estimated ending inventory... $ 55,000 Undamaged inventory... 10,000 Cost of merchandise destroyed by flood... $ 45, At Cost At Retail Beginning inventory... $ 15,000 $ 20,000 Goods purchased , ,000 Goods available for sale... $140, ,000 Net sales ,000 Ending inventory at retail... $ 60,000 Cost to retail ratio ($140,000 $200,000) = 70% Ending inventory at cost ($60,000 70%)... $42,000 Problem B - V Solution 1. Weighted average cost = ($1,200 + $2,500 + $3,000 + $4,200) 2,000 = $5.45 Units available 2,000 Units sold 1,100 Ending inventory 900 $5.45 = $4, Ending inventory 11/30 Purchase 600 units $7 = $4,200 11/18 Purchase 300 units $6 = 1, units $6, Ending inventory Cost of goods sold 11/1 400 units $3 = $1,200 Cost of goods available $10,900 11/5 500 units $5 = 2,500 Less: Ending inventory 3, units $3,700 Cost of goods sold $ 7,200

5 Problem B - VI Solution Jan. 3 Inventory Cash Jan. 5 Accounts Receivable Bob Taborio... 19,000 Cost of Goods Sold... 11,000 Sales... 19,000 Inventory... 11,000 Jan. 14 Cash... 19,000 Accounts Receivable Bob Taborio... 19,000 June 20 Allowance for Doubtful Accounts... 1,500 Accounts Receivable Jeff Short... 1,500 Dec. 31 Bad Debts Expense... 2,650 Allowance for Doubtful Accounts... 2,650 [($131,000 5%) $3,900] Problem B - VII Solution 1. Interest Revenue Notes Receivable Service Fee Expense... 1,400 Accounts Receivable American Express... 1, Accounts Receivable M. Bailey... 18,450 Allowance for Doubtful Accounts... 18,450 Problem B - VIII Solution Jul. 1 Notes Receivable... 4,000 Accounts Receivable... 4,000 Jul. 31 Interest Receivable Interest Revenue Oct. 1 Cash... 4,120 Notes Receivable... 4,000 Interest Receivable Oct. 1 Accounts Receivable... 4,120 Notes Receivable... 4,000 Interest Revenue COMPREHENSIVE EXAMINATION C (Chapters 10 13) Problem C - I Multiple Choice 2. A company purchased a delivery truck on January 1, 2001, for $16,000. It is estimated that the delivery truck will have a $4,000 salvage value at the end of its 5-year useful life. If the company recorded amortization expense of $6,400 for the year 2001 on the delivery truck, the amortization method used by the company is a. not determinable. b. the straight-line method. c. the units-of-activity method. d. the double declining-balance method. 5. Partners Flo and Jo have agreed to share profits and losses in an 80:20 ratio respectively, after Flo is allowed a salary allowance of $20,000 and Jo is allowed a salary allowance of $10,000. If the partnership had net income of $20,000 for 2001, Jo's share of the income would be a. $10,000. b. $8,000. c. $12,000. d. $2,000.

6 6. Kool and Joyce are partners who share profits and losses equally and have capital balances of $80,000 and $70,000, respectively. Maggie is admitted into the partnership by investing $70,000 for a 30% capital interest. The account balance of Joyce, Capital after the admission of Maggie would be a. $66,000. b. $68,000. c. $72,000. d. $70, Equipment was purchased for $25,000 and has a net book value of $11,000 and an amortizable cost of $19,000. The estimated salvage value is a. $11,000. b. $14,000. c. $8,000. d. $6, The revenue recognition principle states that revenue should be recognized when earned. If collection is uncertain, the most common approach for recognizing revenue is the a. point of sale method. b. instalment method. c. percentage-of-completion method. d. completed-contract method. Problem C - II Division of Partnership Income (12 points) Rick and Marilyn have a partnership agreement which includes the following provisions regarding sharing net income and net loss: 1. Since Rick will work only part time in the partnership, he will be allocated a salary allowance that is one half the salary allowance allocated to Marilyn. Marilyn's salary allowance will be 10% of sales. 2. Both partners will be given an interest allowance of 10% on their beginning-of-the-year capital account balances. 3. The remaining income and loss is to be divided 40% to Rick and 60% to Marilyn. The capital account balances on January 1, 2001, for Rick and Marilyn were $80,000 and $140,000, respectively. During 2001, the Rick and Marilyn partnership had sales of $700,000, cost of goods sold of $320,000, and operating expenses of $210,000. Prepare a schedule which clearly sets out the division of income or loss to the partners for Problem C - III Capital Asset Disposal Entries Prepare the necessary journal entries to record the following transactions in 2001 for Shula Company July 31 Sold a delivery truck for $25,000 cash. The delivery truck originally cost $57,000 and had accumulated amortization of $19,000 on the date of the sale. Assume amortization on the truck is normally recorded every December 31. Amortization is calculated on a declining-balance basis using a rate of 30%. Aug. 31 Equipment with a 4-year useful life was purchased on January 1, 1999, for $15,000 and was sold for $9,000. The equipment had been amortized using the straight-line method with an estimated salvage value of $3,000. Amortization Expense was last recorded on December 31, Problem C - VI Amortization Methods The following information is available for Richards Company, which has an accounting year end on December 31, A delivery truck was purchased on June 1, 1999, for $40,000. It was estimated to have a $4,000 salvage value after being driven 60,000 kilometres. During 2001, the truck was driven 15,000 kilometres. The units-of-activity method of amortization is used.

7 2. A building was purchased on January 1, 1974, for $6,000,000. It is estimated to have a $60,000 salvage value at the end of its 40-year useful life. The straight-line method of amortization is being used. 3. Store equipment was purchased on January 1, 2000, for $60,000. It was estimated that the store equipment would have a $6,000 salvage value at the end of its 5-year useful life. The double declining-balance method of amortization is being used. Complete the table shown below by filling in the appropriate amounts. Accumulated Amortization Net Book Amortization Expense for Value at Assets 1/1/ /31/01 Delivery truck $ 17,100 $ $ Building $4,009,500 $ $ Store equipment $ 24,000 $ $ Problem C - VII Generally Accepted Accounting Principles Fill in the necessary words to complete the following statements: 1. The going concern assumption assumes that an enterprise will continue in operation long enough to carry out its existing and. 2. Recognizing revenue at the point of sale is an example of the principle. 3. The matching principle dictates that be matched with whenever it is practicable to do so. 4. The principle dictates that circumstances and events that make a difference to financial statement users should be reported. Problem C - I Solution Solutions Comprehensive Examination C 2. d 5. b 6. c 7. d 9. b Problem C - II Solution Income for 2001 = $170,000 ($700,000 $320,000 $210,000) Division of Net Income Rick Marilyn Total Salary allowance ($700,000 10%) $ 70,000 ($70,000 50%) $35,000 Total salary $105,000 Interest allowance ($80,000 10%) 8,000 ($140,000 10%) 14,000 Total interest 22,000 Total salary and interest 127,000 Remaining $43,000 ($170,000 $127,000) Rick ($43,000 40%) 17,200 Marilyn ($43,000 60%) 25,800 Total remainder 43,000 Total division of income $60,200 $109,800 $170,000 Problem C - III Solution July 31 Amortization Expense (($57,000 $19,000) 30% 7/12)... 6,650 Accumulated Amortization... 6,650

8 July 31 Cash... 25,000 Accumulated Amortization Delivery Truck ($19,000 + $5,600) 24,600 Loss on Disposal... 7,400 Delivery Truck... 57,000 Aug. 31 Amortization Expense ($3,000 2/3)... 2,000 Accumulated Amortization... 2,000 Aug. 31 Cash... 9,000 Accumulated Amortization Equipment ($6,000 + $2,000)... 8,000 Equipment... 15,000 Gain on Disposal... 2,000 Problem C - VI Solution Accumulated Amortization Net Book Amortization Expense for Value at Assets 1/1/ /31/01 Delivery truck $ 17,100 $ 9,000 $ 13,900 Building $4,009,500 $148,500 $1,842,000 Store equipment $ 24,000 $ 14,400 $ 21,600 Problem C - VII Solution 1. objectives, commitments 2. revenue recognition 3. expenses, revenues 4. full disclosure COMPREHENSIVE EXAMINATION D (Chapters 14 16) Problem D - I Multiple Choice 7. Ewing Company converts 1,000 preferred shares into 10,000 common shares. The preferred shares had been previously acquired for $24,000. The market value of the preferred shares was $30 per share, and the market value of the common shares was $4 per share on the date of conversion. Common shares should be credited for a. $4,000. b. $24,000. c. $30,000. d. $40, X Company has the following shares: $6 Preferred shares, no par value, cumulative $300,000 Common shares, no par value $600,000 Preferred shares were issued for $100 per share, and common shares were issued for $50 per share. Preferred stock dividends are in arrears for 1999 and If the company declares and pays $45,000 in dividends in 2001, the amount received by the preferred shareholders would be a. $36,000. b. $18,000. c. $54,000. d. $45, Y Company had 2,000 no par $3 noncumulative preferred shares and 150,000 no par common shares issued on December 31, During 2001, the company had net income of $170,000 and paid dividends of $50,000. Earnings per share for 2001 would be a. $1.13. b. $0.80. c. $1.12. d. $1.09.

9 Problem D - III Corporation Entries Russell Corporation shareholders' equity consisted of the following on January 1, 2001: Shareholders' Equity Share capital $8 Preferred shares, no par value, cumulative, 50,000 shares authorized, 30,000 shares issued $ 3,000,000 Common shares, no par value, 1,000,000 shares authorized, 400,000 shares issued 10,000,000 Total share capital 13,000,000 Retained earnings (Note A) 4,100,000 Total shareholders' equity $17,100,000 Note A: Preferred dividends are in arrears for Prepare the appropriate journal entries, if any, for the following transactions in You may omit journal entry explanations but you should show calculations. 1/25/01 Issued 60,000 common shares for $40 per share. 2/18/01 The Board of Directors declared a cash dividend on preferred and common shares totalling $700,000, payable on March 15, to shareholders of record on February 28. (Record dividends payable on preferred and common shares in separate accounts.) 2/28/01 Date of record for cash dividends on preferred and common shares. 3/15/01 Paid the cash dividend to preferred and common shareholders. 5/20/01 Declared a 10% stock dividend on the common shares, payable on June 15, to shareholders of record on May 31. The market value of Russell Corporation's common shares was $45 per share. 6/15/01 Distributed stock dividend to common shareholders. 7/10/01 Converted 1,000 preferred shares to 2,000 common shares. On the day of the conversion, the preferred shares were trading for $110 per share, and the common shares were trading for $100 per share. 8/13/01 Issued 25,000 common shares for land. The asking price of the land was $700,000; the fair market value was $750,000. 9/30/01 The Board of Directors declared and issued immediately a 2-for-1 stock split on all the common shares. The market value of the common shares was $30 per share. 11/12/01 Sold 20,000 common shares for equipment valued at $600,000. Problem D - VI Calculate Earnings Per Share At December 31, 2001, Oliver Company had $500,000 of no par value $9 preferred shares issued at $100 per share, and $1,000,000 of no par value common shares issued at $5 per share. Net income for the year was $933,000. Calculate the earnings per share under the following independent assumptions: (a) The dividend on preferred shares was not declared, and the preferred shares are noncumulative. (b) The dividend on preferred shares was not declared, and the preferred shares are cumulative. The common shares remained unchanged during the year. Problem D - I Solution Solutions Comprehensive Examination D 7. b 8. d 9. d Problem D - III Solution 1/25/01 Cash... 2,400,000 Common Shares (60,000 $40)... 2,400,000

10 2/18/01 Cash Dividends Preferred ,000 Cash Dividends Common ,000 Dividends Payable Preferred ,000* Dividends Payable Common ,000 ($700,000 $480,000) *Dividends in arrears, $8 30,000 = $240,000 Dividends for 2001, $8 30,000 = 240,000 Total dividends $480,000 2/28/01 No entry required. 3/15/01 Dividends Payable Preferred ,000 Dividends Payable Common ,000 Cash ,000 5/20/01 Stock Dividends Common (46,000 $45)... 2,070,000 Common Stock Dividends Distributable... 2,070,000 6/15/01 Common Stock Dividends Distributable... 2,070,000 Common Shares... 2,070,000 7/10/01 Preferred Shares ,000 Common Shares (1,000 $100) ,000 8/13/01 Land ,000 Common Shares ,000 9/30/01 No formal entry required. 11/12/01 Equipment ,000 Common Shares ,000 Problem D - VI Solution (a) 5,000 $9 = $45,000 $933,000 = $ ,000 (b) $933,000 $45,000 = $ ,000 COMPREHENSIVE EXAMINATION E (Chapters 17 19) Problem E - I Multiple Choice Circle the one best answer. 1. The inventory turnover ratio is calculated by dividing the average inventories into a. net sales. b. total assets. c. cost of goods sold. d. shareholders' equity. 4. Barber Company reported net income of $30,000 for the year ended December 31, During the year, inventories decreased by $7,000, accounts payable decreased by $8,000, amortization expense was $10,000 and a gain on disposal of equipment of $6,500 was recorded. Net cash provided by operating activities in 2001 using the indirect method was a. $61,500. b. $20,500. c. $48,500. d. $32,500.

11 7. Seifert Company had a balance in the Merchandise Inventory account of $260,000 at the beginning of the year and a balance of $340,000 at the end of the year. The inventory turnover ratio for 2001 was 4 times. If gross profit as a percentage of sales was 40%, the amount of sales for 2001 was a. $2,000,000. b. $1,200,000. c. $3,000,000. d. $ 750, Baxter Company reported net income of $140,000 for The income statement also indicates that interest expense for 2001 was $40,000. Assuming an income tax rate of 30%, the interest coverage ratio for 2001 was a. 5 times. b. 6 times. c. 4.5 times. d. 3.5 times. 9. During 2001, Simms Company had an asset turnover ratio of 4 times with sales totalling $1,000,000. If net income was $50,000, Simms Company's return on assets in 2001 was a. 5%. b. 20%. c. 25%. d. 50%. 10. The purchase of office equipment for $15,000 cash a. is a cash outflow from financing activities. b. is a cash outflow from operating activities. c. is a cash outflow from investing activities. d. does not affect cash flows. Problem E - III Cash Flow Statement The comparative balance sheet for Madden Company appears below: MADDEN COMPANY Comparative Balance Sheet Dec. 31, 2002 Dec. 31, 2001 Assets Cash... $53,000 $12,000 Accounts receivable... 6,000 8,000 Inventory... 11,000 7,000 Prepaid expenses... 2,000 3,000 Building... 20,000 20,000 Accumulated amortization equipment... (3,000) (2,000) Total assets... $89,000 $48,000 Liabilities and Shareholders' Equity Accounts payable... $ 1,000 $ 4,000 Long-term note payable... 13,000 14,000 Common shares... 38,000 18,000 Retained earnings... 37,000 12,000 Total liabilities and shareholders' equity... $89,000 $48,000 The income statement for the year is as follows: MADDEN COMPANY Income Statement For the Year Ended December 31, 2002 Sales (all on credit)... $280,000 Expenses and losses Cost of goods sold... $192,000 Operating expenses, exclusive of amortization... 42,300 Amortization expense... 1,000 Interest expense... 1,200 Loss on sale of land... 2,500 Income taxes... 9,000 Total expenses and loss ,000 Net income... $ 32,000

12 Cash dividends of $7,000 were paid during the year. Land costing $20,000 was acquired by the issue of common shares. The property was subsequently sold for $17,500 cash. Prepare a cash flow statement for the year ended December 31, Problem E - IV Calculation of Ratios The financial information below was taken from the annual financial statements of Harris Company Current assets $240,000 $170,000 Current liabilities 80,000 90,000 Total assets 520, ,000 Sales 400, ,000 Cost of goods sold 525, ,000 Inventory 100, ,000 Receivables (net) 100,000 60,000 Net income 50,000 48,000 Net cash provided by operating activities 100,000 70,000 Calculate four of the following ratios for Harris Company for Current ratio 2. Collection period 3. Return on assets 4. Profit margin 5. Cash return on sales Problem E - I Solution 1. c 4. d 7. a 8. b 9. b 10. c Solutions Comprehensive Examination E Problem E - III Solution MADDEN COMPANY Cash Flow Statement For the Year Ended December 31, 2002 Cash flows from operating activities Net income... $32,000 Adjustments to reconcile net income to net cash provided by operating activities: Amortization expense... $1,000 Decrease in accounts receivable... 2,000 Increase in inventory... (4,000) Decrease in prepaid expenses... 1,000 Decrease in accounts payable... (3,000) Loss on sale of land... 2,500 (500) Net cash provided by operating activities... 31,500 Cash flows from investing activities Proceeds from sale of land... 17,500 Cash flows from financing activities Payment of cash dividends... (7,000) Payment of long-term note... (1,000) Net cash used by financing activities... (8,000) Net increase in cash... 41,000 Cash at beginning of period... 12,000 Cash at end of period... $53,000 Note: Noncash financing and investing activities: Acquired land through issue of common shares... $20,000

13 Problem E - IV Solution 1. Current ratio: $240,000 $80,000 = 3:1. 2. Collection period: $400,000 = 5 (100,000 + $60,000) = 73 days. $50, Return on assets: = 10%. ($520,000 + $480,000) 2 4. Profit margin: $50,000 $400,000 = 12.5%. 5. Cash return on sales: $100,000 $400,000 = 25%