Using the data from E7-3, indicate the effects of purchasing the land on the liquidity metric free cash flow and profitability metric asset turnover. Assume all costs were paid in cash and cash was received for the salvaged materials.

E7-3

Village Delivery Company purchased a lot to construct a new warehouse for $287,500, paying $100,000 in cash and giving a short-term note for the remainder. Legal fees paid in connection with the purchase were $3,000, delinquent taxes assumed were $2,050, and fees paid to remove an old building from the land were $7,750. Materials salvaged from the demolition of the building were sold for $1,300. A contractor was paid $450,000 to construct a new warehouse.