Comparative Analysis — BTN C-2
1. Apple’s return on total assets
Current Year: $37,037 / [($207,000 + $176,064) / 2] = 19.3%
One Year Prior: $41,733 / [($176,064 + $116,371) / 2] = 28.5%
Google’s return on total assets
2. Return on total assets = Profit margin x Total asset turnover
—— Returns in part 2 can differ from those in part 1 due to rounding ——
Current Year
19.3% = $37,037/$170,910 x $170,910/[($207,000 + $176,064)/ 2]
19.3% = 21.7% x 0.89
Google’s component analysis of return on total assets*
Current Year
12.5% = $12,920/$59,825 x $59,825 / [($110,920 + $93,798)/ 2]
12.5% = 21.6% x 0.58
Comparative Analysis (Concluded)
3. Current Year Analysis: Apple has the higher return on total assets
(19.3%) compared to Google (12.6%), the higher profit margin (21.7% vs.
One Year Prior Analysis: Apple has the higher return on total assets
(28.5%) compared to Google (12.9%), the higher profit margin (26.7% vs.
Ethics Challenge — BTN C-3
1. Kasey’s bonus is not contingent on the classification of available-for-
sale versus held-to-maturity. Designation of the bonds as available-for-
sale debt securities will require that an entry be made to recognize the
2. Generally, Kasey must classify its debt securities as either short or long
term and as available-for-sale or held-to-maturity. Since the bonds are
5-year bonds they should be classified as long-term investments unless
3. The company’s auditors (internal and external) and/or its board of
Communicating in Practice — BTN C-4
TO: Mary Jolee
FROM: (Your Name)
SUBJECT: Sale of Kemper Common Stock
The $6,000 loss on the sale of Kemper common stock is correctly stated.
Jolee Company owned 40% of the outstanding shares, and therefore
accounts for the investment according to the equity method. Under the
equity method, investments are reported at the investor’s cost plus its
share in the undistributed earnings accumulated by the investee since the
stock was purchased. At sale, the book value of the investment is
compared to the net proceeds to determine gain or loss.
During year 2014, the income statement showed earnings from all
investments of $126,000. This amount included $81,000 from the
investment in Kemper (Kemper’s 2014 net income of $202,500 x 40%),
which was debited to the Long-Term Investments—Kemper account. This
increased the book value of the investment to $581,000. When sold, the net
proceeds of $575,000 was compared to the book value of $581,000 and the
result was the $6,000 loss.
Please call me if you have any questions.
Taking It to the Net — BTN C-5
($ millions for Parts 1 through 4)
1. At June 30, 2013 (total cost-basis)………….……………..….……….………$85,077
2. Mutual funds; Commercial paper; Certificates of deposit; U.S.
3. Unrealized gains = $3,249; and Unrealized losses = $(460).
Teamwork in Action — BTN C-6
There is no specific solution to this activity. The instructor should serve as
a facilitator during this learning reinforcement activity.
Entrepreneurial Decision — BTN C-7
1.
2015
Jan. 1 Internet Rights………………………….…….……….… 106,920
2.
Mar. 31 Accounts Payable*………………….….….……….…. 26,730
Loss from Currency Translation..……….…….... 60
June 30 Accounts Payable…………….………………..…….... 26,730
Loss from Currency Translation..……….…….... 300
Sept. 30 Accounts Payable…………….………………..…….... 26,730
Loss from Currency Translation..……….…….... 330
3. Since all of the company’s payments are to be in yen, the company can
buy yen in advance to “lock in” the payment amount.
Hitting the Road— BTN C-8A
Exchange rates can be found at businesses that specialize in foreign currency
exchange. Also, American Express offices abroad exchange currencies for
Global Decision— BTN C-9
1. Samsung ( in millions)₩
Return on total assets = Net Income / Average Total Assets
Current Year: 30,474,764 / [(214,075,018 + 181,071,570)/2] = 15.4%
Return on total assets = Profit margin x Total asset turnover
Current Year
15.4% = 30,474,764/228,692,667 x 228,692,667/[(214,075,018 + 181,071,570)/2]
15.4% = 13.3% x 1.16
One Year Prior
2. (a) Current Year Analysis: Samsung vs Apple vs Google
Return on total assets = Profit margin x Total asset turnover
Company Return on total assets* Profit margin Total asset turnover
Apple 19.3% 21.7% 0.89
In the current year, Apple has the highest return on total assets followed
by Samsung, and then Google. Apple also has the highest profit margin
Global Decision (Concluded)
2. (b) Prior Year Analysis: Samsung vs Apple vs Google
Return on total assets = Profit margin x Total asset turnover
Company Return on total assets* Profit margin Total asset turnover
Apple 28.6% 26.7% 1.07
In the prior year, Apple has the highest return on total assets followed
by Samsung, and then Google. Apple also has the highest profit margin