On Dec. 14th, apple management was approached by a vendor offering them a chance to purchase a specialized set of assets for only $814,000. The set includes two machines, one that retails for $353,000 and one that retails for $365,000, a custom conveyor belt that the vendor estimates has a retail value of $34,000, and a small storage facility with an estimated market value of $388,000. The vendor has offered apple management this deal because the company that ordered the units (one of apple's competitors) has declared bankruptcy.To make room for the new equipment, apple and his team have decided to sell off an old piece of equipment that will be replaced by the new machines. The old equipment was originally purchased for $265,000 and has been fully depreciated to its estimated salvage value of $27,825. Apple's sales department was able to sell the old machine for $25,295, a pretty good deal considering the change in production methods and the improvements in technology. Although the deal was completed on December 29th, no journal entries have yet been recorded. Apple's management would like to know the effect of the sale on the following ratios.

1) Asset Turnover (net sales/average total assets)

2) ROA

3)Current Ratio

Please round all percentages used for assigning values to assets to 3 decimal places.

To Do:

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 expenses).

3)make any necessary changes needed to the financial statements

4) Calculate the three ratios again after you make any adjustments

Year 1 $2,658,316 Multi-Step Income Statement For the Year Ended December 31, Year 2 Sales Revenue Sales Revenue Less: Sales Discounts $271,200 Sales Returns $1,073,500 Net Sales Revenue $22,600,000 $1,344,700 $21,255,300 Statement of Cash Flows For Year Ended 12/31/Year 2 Cash Flow from Operations Net Income Adjustments: Change in AR ($565,000) Change in Inventory $432,200 Change in Prepaid Insurance ($10,500) Change in Prepaid Rent ($56,500) Depreciation & Amortization $1,356,000 Change in AP ($912,056) Change in Income Tax Payable $159,840 Change in Uneamed Revenue $226,000 Change in Wages Payable ($11.300) Net Cash Flow from Operations Cost of Goods Sold Cost of Goods Sold Gross Profit $1,130,000 $1,921,000 ($565,000) $3,164,000 $339,000 $226,000 $6,215,000 $12,402.508 $8,852,792 $904,000 $678,000 $1,582,000 Cash Flow from Investments Purchase of Land Purchase of Equipment Net Cash Flow from Investments $423,750 $110,175 $310.750 $1,130.000 $185,038 ($904.000) ($3,390,000) $2,159,713 Operating Activities $618,684 Selling Expenses $3,277,000 Advertising Expense Miscellaneous Selling Expenses Sales Force Salaries Expense Selling Commissions Expense Shipping Expense ($4,294,000) ) Administrative Expenses Executive Salaries Expense Depreciation Expense Insurance Expense Miscellaneous Admin. Expenses $913,000 Office Supplies Expense Consulting and Legal Fees ($104,000) Utilities Expense $1,130.000 Total Administrative Expenses $1,026,000 Income from Operations $1,582,000 $1,800,000 $2,938,000 ($2,260,000) $4,068,000 Cash Flow from Financing Repayment of Loans Issuance of Notes Payable Payments of Dividends Net Cash Flow from Financing ($113,000) $1,356,000 ($330,000) Balance Sheet As of 12/31/Year 2 Year 2 Assets Ourrent Assets Cash $1,026,000 A/R $2.034.000 Allowance for Bad Debts ($113,000) Inventory $2,731,800 Prepaid Insurance $349,500 Prepaid Rent $282,500 Total Current Assets $6,310,800 Long-term Investments Loans to other businesses $904,000 Expansion Fund $678,000 Total Long-term Investments $1,582.000 PPE Land $2,486,000 Building $1,808,000 Equipment $6,328,000 Accumulated Depreciation ($3,616,000) Total PPE $7,006,000 Intangible Assets Patents, net $339,000 Total Assets $15.237,800 Liabilities and Stockholders' Equity Current Liabilities Accounts Payable $443,944 Income Tax Payable $385,840 Unearned Revenue $565,000 Wages Payable $271,200 Current Portion of Loan Payable $113,000 Total Current Liabilities $1,778,984 Long-term Debt Loan Payable $565,000 Notes Payable $3,164,000 Total Long-term Debt $3,729,000 Total Liabilities $5,507,984 Stockholders' Equity Common Stock $2,600,000 ($1 par, 5,000,000 authorized, 2.600.000 outstanding) Additional Paid-In Capital $678,000 Retained Earnings $6,451,816 Total Stockholders' Equity $9.729,816 Total Liabilities and Stockholder's Equity $15,237,800 $988,750 $1,356,000 $194.925 $11,150 $87,575 $14, 125 $169,500 $339,000 $12.204,000 Net Increase (Decrease) in Cash Cash, January 1, Year 2 Cash, December 31. Year 2 $2.822.034 $4.981.747 $3.871.045 $1,356,000 $226,000 $339,000 $282,500 $113,000 $2,316,500 $70.625 ($144,075) Other Gains and Losses Rent Revenue Interest Expense Income from Continuing Operations before Taxes Income Tax Expense Net Income ($73,450) $3,797,595 ($1,139,279) $2,658 316 $678,000 $1,808,000 $2,486,000 $4,802.500 EPS $1.02 $2,600,000 $678,000 $4,123,500 $7,401,500 $12,204.000