Question

Bernoulli Glass Company provides the following information at the end of its current year:

Sales revenue earned during the year	120,000
Cash remaining at end of year	13,200
Salaries owed to employees at end of year	2,000
Accounts receivable from customers	7,700
Loan borrowed from bank that is due in two years	8,800
Cost of equipment purchased in prior years, expected to last four more years	14,000
Salary earned by employees during the year	6,400
Cost of inventory sold during the year	8,500
Inventory purchases that are still unpaid and owed to suppliers at end of year	3,900
Dividends declared and paid during the year	14,900
Capital contributions received from shareholders during prior years	44,000
Capital contributions received from shareholders during the current year	1,000
Cost of delivery van purchased at end of year; expected to last six years	26,200
Cost of research expenditures sustained during the year	17,900
Retained earnings at end of year	?
Cost of rent used up during the year	25,000
Income taxes paid during the year attributable to income earned during the year	15,600
Cost of inventory still on hand at end of year	32,400
Retained earnings at beginning of year	2,100

Required:

• Using this information, prepare (1) a classified income statement and (2) a classified balance sheet, for Bernoulli Glass Company.
• After preparing these reports, calculate Bernoulli Glass Company’s (3) debt-equity ratio and (4) gross profit margin.

Answer 1

SOLUTION;

1. Income statement of Bernoulli Glass Company for the year ending

Sales Revenue 120000

( - ) Cos Of Good Sold 7500

Gross Profit 112500

( - ) Operating expenses

salary paid to employees 6400

cost of delivery van   26200

cost of research expenditure 17900

cost of rent 25000

Income from operation 37000

( - ) other expenses

dividend paid 14900

Income before income tax 22100

( - ) Income Tax 15600

Net Income 6500

2. Balancesheet of Bernoulli Glass Company for the year ended

Liabilities and Equity Amount Amount Assets Amount Amount

Current liabilities Current Assets

Accounts Payable 3900 Cash 14200

Wages outstanding 2000 Inventory 32400

Total curent liabilities 5900 Accounts Receivable 7700

Long term debt Total current assets 54300

Bank loan 8800 Fixed Assets

Long term liablities 8800 Equipement 14000

Total current liabilities and long

term liablities 14700 Total Fixed Assets 14000

Shareholders Equity Total Assets 68300

Capital contribution prior year 44000

Capital contribution this year 1000

Retained Earnings   

begining year 2100

this year 6500

Total shareholders equity 53600

Total liabiities and Shareholders

Equity 68300

Total 68300 68300

3. Debt to equity Ratio is=

toatl current and long term debt/ total equity

14700/53600 = .27 =27%

4. Gross profit margin

gross profit/ total revenue

112500/120000 = .93 = 93%