On December 31,2014,Barbie Bank Securitized $3,000,000 of Notes Receivable Using

On December 31,2014,Barbie Bank securitized $3,000,000 of notes receivable using a securitization entity it had established.The cash received from the securitization entity was exactly $3,000,000,so it recognized no gain or loss on the transaction.Barbie Bank has the following account balances at December 31,2014 before the securitization was recorded:
$\begin{array}{lr}\text { Assets }\\\text { Notes receivable } & \$ 5,000,000 \\\text { All other assets } & 15,000,000 \\\text { Total assets }&\$20,000,000\\\text { Liabilities and equity } & \\\text { Liabilities } & \$ 14,000,000 \\\text { Equity } & 6,000,000\\\text { Total liabilities and equity }&\$20,000,000\\\text { Net income for the year ended December } 31,2014&\$1,600,000\end{array}$
Required:
a.Compute Barbie Bank's return-on-assets ratio and debt-to-equity ratio after completing this transaction assuming that the transaction was viewed as a sale under authoritative literature.
b.Compute Barbie Bank's return-on-assets ratio and debt-to-equity ratio after completing this transaction assuming that the transaction was viewed as a collateralized borrowing under authoritative literature.
The following table contains the data needed to compute the required ratios.

Correct Answer:

Verified

a.Return-on-assets ratio = $1,600,000 ÷...

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