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You've been asked to tutor Gavin, a finance student who doesn't feel comfortable about his understanding of the relationship between a company's business activities, its
You've been asked to tutor Gavin, a finance student who doesn't feel comfortable about his understanding of the relationship between a company's business activities, its financial accounts, and the company's financial ratios. To better appreciate these relationships, you've created the following exercises for Gavin to complete. The purpose of these exercises is to help Gavin (1) understand the effect of business transactions on financial statement-such has balance sheet and income statement-accounts and (z) how these changes in the numerators and denominators of financial ratios affect the ratios' values. However, before using these exercises in Your tutoring session later today, you1 want to run the calculations on the following two business transactions, to verify the accuracy of your answers. To provide a consistent frame of reference for the company's financial statements and ratios, assume that the following balance sheet and statement reflect the company's retranslation condition and performance.^1cost of goods sold equals 40% of sales^2Interest expense equals 6% of the combined notes payable and debt balances.^3The average federal and state tax rate is 35%. Indicate any of the listed financial statement accounts is affected by the following business transactions and whether the listed ratios will increase decrease, or remain unchanged as a result of the transaction Universal Computer Corp. (UCC) incurs and pays $150,000 of additional operating using a check
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