I have attached the excel profile provided to the class, and the assignment.

Intermediate 1 Terry Part #2: Chapter 10 Goal: To practice recording an exchange of PPE and to determine the effects of the exchange on the nancial statements. (See Topic Guides A 21, 24, 37, 38). Information: On December 15th, Terry's management decided to trade in one of their machines for a newer model. After long discussions with their auditors, Terry's management has decided that the change in capacity between the old and new machines makes this an exchange without substance. The old machine originally cost $670,000 and had been fully depreciated to its $50,300 salvage value. The new machine typically sells for $841,000, but the vendor offered Terry a $73,000 trade-in discount on the old machine if the balance is paid in cash. Terry's management was excited about the deal, since they would have been able to sell the old machine for only $50,300 if they had tried to dispose of it on the open market. Although the deal was completed on December 29*, no journal entries have yet been recorded. Terry's management would like to know the effect of the sale on the following ratios: . Asset Turnover (Net Sales / average total assets) . Current Ratio . ROA Assignment: Calculations 1. Calculate each of the three (3) ratios before you make any adjustments. 2. Make the appropriate journal entries, if any, to account for the trade-in (including any necessary changes to income tax expense). 3. Make any necessary changes to the nancial statements. 4. Calculate the three (3) ratios after you make any adjustments. Terry Co. Terry Co. Terry Co. Multi-Step Income Statement Balance Sheet Statement of Cash Flows For the Year Ended December 31, Year 2 As of 12/31/Year 2 For Year Ended 12/31/Year 2 Sales Revenue Year 2 Year 1 Cash Flow from Operations Sales Revenue $29,700,000 Assets Net Income $3,556,882 Less: Sales Discounts $356,400 Current Assets Adjustments: Sales Returns $1,410,750 $1,767, 150 Cash $1,682,000 $1,485,000 Change in A/R $742,500) Net Sales Revenue $27,932,850 A/R $2,673,000 $2,524,500 Change in Inventory $568,400 Allowance for Bad Debts ($148,500) ($742,500) Change in Prepaid Insurance ($47,250) Cost of Goods Sold Inventory $3,589,600 $4, 158,000 Change in Prepaid Rent ($74,250) Cost of Goods Sold $16,208,255 Prepaid Insurance $492, 750 $445,500 Depreciation & Amortization $1,782,000 Gross Profit $11,724,595 Prepaid Rent $371,250 $297,000 Change in A/P ($1,283, 172) Total Current Assets $8,660, 100 $8, 167,500 Change in Income Tax Payable $264,240 Operating Activities Long-term Investments Change in Unearned Revenue $297,000 Selling Expenses Loans to other businesses $1, 188,000 $1, 188,000 Change in Wages Payable ($14,850) $749,618 Advertising Expense $556,875 Expansion Fund $891,000 $891,000 Net Cash Flow from Operations $4,306,500 Miscellaneous Selling Expenses $144,788 Total Long-term Investments $2,079,000 $2,079,000 Sales Force Salaries Expense $408,375 PPE Cash Flow from Investments Selling Commissions Expense $1,485,000 Land $3,267,000 $2,079,000 Purchase of Land ($1, 188,000) Shipping Expense $243, 169 Building $2,376,000 $2,376,000 Purchase of Equipment ($4,455,000) $2,838,207 Equipment $8,316,000 $3,861,000 Net Cash Flow from Investments $5,643,000) Administrative Expenses Accumulated Depreciation ($4,752,000) $2,970,000) Executive Salaries Expense $1,299,375 Total PPE $9,207,000 $5,346,000 Cash Flow from Financing Depreciation Expense $1,782,000 Intangible Assets Repayment of Loans ($148,500) Insurance Expense $256, 163 Patents, net $445,500 $445,500 Issuance of Notes Payable $1,782,000 Miscellaneous Admin. Expenses $14,664 Total Assets $20,391,600 $16,038,000 Payments of Dividends ($100,000) Office Supplies Expense $115,088 Net Cash Flow from Financing $1,533,500 Consulting and Legal Fees $18,563 Liabilities and Stockholders' Equity Utilities Expense $222,750 Current Liabilities Net Increase (Decrease) in Cash $197,000 Total Administrative Expenses $3,708,603 $6,546,810 Accounts Payable $498,828 $1,782,000 Cash, January 1, Year 2 $1,485,000 Income from Operations $5, 177,785 Income Tax Payable $561,240 $297,000 Cash, December 31, Year 2 $1,682,000 Unearned Revenue $742,500 $445,500 Other Gains and Losses Wages Payable $356,400 $371,250 Rent Revenue $92,813 Current Portion of Loan Payable $148,500 $148,500 Interest Expense ($189,338) ($96,525) Total Current Liabilities $2,307,468 $3,044,250 Income from Continuing Operations before Taxes $5,081,260 Long-term Debt Income Tax Expense ($1,524,378) Loan Payable $742,500 $891,000 Net Income $3,556,882 Notes Payable $4, 158,000 $2,376,000 Total Long-term Debt $4,900,500 $3,267,000 EPS $1.05 Total Liabilities $7,207,968 $6,311,250 Stockholders' Equity Common Stock $3,400,000 $3,400,000 ($1 par, 5,000,000 authorized, 3,400,000 outstanding Additional Paid-In Capital $891,000 $891,000 Retained Earnings $8,892,632 $5,435,750 Total Stockholders' Equity $13, 183,632 $9,726,750 Total Liabilities and Stockholder's Equ $20,391,600 $16,038,000