Superior Hardwood Company distributes hardwood products to small furniture manuf

Question

Superior Hardwood Company distributes hardwood products to small furniture manufacturers. The adjusted trial balance data given below is from the firm’s worksheet for the year ended December 31, 2019.

Required:

Prepare a classified income statement for the year ended December 31, 2019. The expense accounts represent warehouse expenses, selling expenses, and general and administrative expenses.

Prepare a statement of owner’s equity for the year ended December 31, 2019. No additional investments were made during the period.

Prepare a classified balance sheet as of December 31, 2019. The mortgage payable extends for more than a year.

Prepare a classified balance sheet as of December 31, 2019. The mortgage payable extends for more than a year.

What is the current ratio for this business? (Round your answer to 2 decimal places.)

ACCOUNTS Debit Credit Cash $ 23,500 Petty Cash Fund 500 Notes Receivable, due 2020 11,200 Accounts Receivable 90,000 Allowance for Doubtful Accounts $ 5,400 Merchandise Inventory 228,000 Warehouse Supplies 2,800 Office Supplies 1,360 Prepaid Insurance 8,400 Land 40,000 Building 172,000 Accumulated Depreciation—Building 50,400 Warehouse Equipment 34,000 Accumulated Depreciation—Warehouse Equipment 15,600 Delivery Equipment 48,000 Accumulated Depreciation—Delivery Equipment 18,400 Office Equipment 22,000 Accumulated Depreciation—Office Equipment 10,200 Notes Payable, due 2020 19,600 Accounts Payable 38,400 Interest Payable 520 Mortgage Payable 58,000 Loans Payable, Long-term 14,000 Charles Ronie, Capital (Jan. 1) 424,060 Charles Ronie, Drawing 126,400 Income Summary 238,000 228,000 Sales 1,673,000 Sales Returns and Allowances 17,600 Interest Income 1,520 Purchases 761,000 Freight In 13,200 Purchases Returns and Allowances 7,840 Purchases Discounts 10,560 Warehouse Wages Expense 193,600 Warehouse Supplies Expense 6,500 Depreciation Expense—Warehouse Equipment 5,200 Salaries Expense—Sales 263,200 Travel and Entertainment Expense 20,900 Delivery Wages Expense 59,730 Depreciation Expense—Delivery Equipment 9,200 Salaries Expense—Office 70,000 Office Supplies Expense 3,400 Insurance Expense 5,600 Utilities Expense 8,690 Telephone Expense 5,920 Payroll Taxes Expense 56,000 Property Taxes Expense 5,000 Uncollectible Accounts Expense 5,200 Depreciation Expense—Building 8,400 Depreciation Expense—Office Equipment 3,400 Interest Expense 7,600 Totals $ 2,575,500 $ 2,575,500

Explanation / Answer

In the lack of information about beginning inventory, it is assumed that beginning inventory is equal to ending inventory and calculations are made accordingly.

Current Ratio = Current Assets/Current Liabilities

=$360360/58520

= 6.16

Income Statement For the year ended December 31, 2019 Sales $1,673,000 Less: Sales returns and allowances ($17,600) $1,655,400 Cost of Goods gold Beginning Inventory $228,000 Purchases $761,000 Freight in $13,200 Less: Purchase returns and allowances ($7,840)            Purchase discounts ($10,560) Total Purchases $755,800 Less: Ending Inventory $228,000 $755,800 Gross Profit $899,600 Operating expenses Warehouse expenses Warehouse wage expenses $193,600 Warehouse supplies expense $6,500 Depreciation expense-Warehouse equipment $5,200 $205,300 Selling Expenses Salaries expense-Sales $263,200 Travel and entertainment expense $20,900 Delivery wages expense $59,730 Depreciation expense-Delivery equipment $9,200 $353,030 General and Administrative expenses Salaries expense-Office $70,000 Office supplies expense $3,400 Insurance expense $5,600 Utilities expense $8,690 Telephone expense $5,920 Payroll taxes expense $56,000 Property taxes expense $5,000 Uncollectible account expense $5,200 Depreciation expense-Building $8,400 Depreciation expense-Office Equipment $3,400 $171,610 Total Operating expenses $729,940 Operating Profit $169,660 Non-operating income and expenses Interest income $1,520 Interest expense $7,600 $6,080 Net Profit $163,580 Statement of Owner's Equity For the year ended December 31, 2019 Charles Ronie Capital (Jan 1) $424,060 Charles Ronie, Drawing ($126,400) Income summary ($10,000) Net Profit for the year $163,580 Owner's Equity $451,240 Balance Sheet as of December 31, 2019 Assets Amount Current Assets Cash $23,500 Petty Cash Fund $500 Notes receivable, due 2020 $11,200 Accounts receivable $90,000 Allowance for doubtfil debts $5,400 $84,600 Merchandise Inventory $228,000 Warehouse supplies $2,800 Office supplies $1,360 Prepaid Insurance $8,400 Total Current Assets $360,360 Fixed Assets Land $40,000 Building $172,000 Accumulated Depreciation-Building $50,400 $121,600 Warehouse Equipment $34,000 Accumulated Depreciation-Warehouse equipment $15,600 $18,400 Delivery Equipment $48,000 Accumulated Depreciation-Delivery Equipment $18,400 $29,600 Office Equipment $22,000 Accumulated Depreciation-Office equipment $10,200 $11,800 Total Fixed Assets $221,400 Total Assets $581,760 Liabilities Current Liabilities Notes Payable, due 2020 $19,600 Accounts Payable $38,400 Interest Payable $520 Total Current Liabilities $58,520 Long term Liabilities Mortgage Payable $58,000 Loans Payable $14,000 Total Long term Liabilities $72,000 Owners' Equity Charles Ronie, Capital $424,060 Charles Ronie, Drawings $126,400 Retained Earnings $153,580 $451,240 Total Liabilities and Owner's Equity $581,760

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