Selected items from the unconsolidated financial statements of Mammoth Motors Company and its wholly owned subsidiary, Chattel Credit Corp., are provided below. Mammoth uses the equity method to account for its investment in Chattel, and the investment cost is equal to Chattel’s book value of shareholders’ equity.

Mammoth Chattel Motors Co. Credit Corp.

(Dollars in millions)

Total assets (including investments) $29,000 $18,500 Total liabilities 15,500 17,700 Total shareholders’ equity 13,500 800 Sales 54,000 10,200 Interest expense 4,000 —

Net income 3,000 1,100 Income tax rate 35% 30%

Required

a. Determine how the following items would be valued in Mammoth Motors’

consolidated financial statements:

• Total assets

• Total liabilities

• Shareholders’ equity

• Sales

• Net income

b. Contrast the following financial ratios of Mammoth Motors before and after consolidation with Chattel Credit:

• Debt-to-total assets ratio

• Return on assets ratio

• Return on shareholders’ equity ratio

• Operating income ratio

• Asset turnover ratio