Question

Good to Go Auto Products distributes automobile parts to service stations and repair shops. The adjusted trial balance data that follows is from the firm’s worksheet for the year ended December 31, 2019.

Accounts	Debit			Credit
Cash	$	97,400
Petty Cash Fund		600
Notes Receivable, due 2020		18,000
Accounts Receivable		138,600
Allowance for Doubtful Accounts				$	2,200
Interest Receivable		180
Merchandise Inventory		126,900
Warehouse Supplies		1,700
Office Supplies		540
Prepaid Insurance		3,040
Land		14,400
Building		99,000
Accumulated Depreciation—Building					15,900
Warehouse Equipment		18,200
Accumulated Depreciation—Warehouse Equipment					8,700
Office Equipment		7,800
Accumulated Depreciation—Office Equipment					3,100
Notes Payable, due 2020					13,400
Accounts Payable					55,300
Interest Payable					240
Loans Payable—Long-Term					9,000
Mortgage Payable					12,000
Colin O’Brien, Capital (Jan. 1)					322,380
Colin O’Brien, Drawing		69,050
Income Summary		129,800			126,900
Sales					1,078,300
Sales Returns and Allowances		6,800
Interest Income					420
Purchases		447,000
Freight In		8,200
Purchases Returns and Allowances					12,050
Purchases Discounts					7,640
Warehouse Wages Expense		107,000
Warehouse Supplies Expense		4,200
Depreciation Expense—Warehouse Equipment		1,800
Salaries Expense—Sales		150,100
Travel Expense		22,400
Delivery Expense		35,825
Salaries Expense—Office		83,400
Office Supplies Expense		1,060
Insurance Expense		8,275
Utilities Expense		6,400
Telephone Expense		3,120
Payroll Taxes Expense		30,000
Building Repairs Expense		2,100
Property Taxes Expense		14,800
Uncollectible Accounts Expense		1,980
Depreciation Expense—Building		4,000
Depreciation Expense—Office Equipment		1,460
Interest Expense		2,400
Totals	$	1,667,530		$	1,667,530

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 one year.

Analyze:
What percentage of total operating expenses is attributable to warehouse expenses?

Answer 1

GOOD TO GO AUTO PRODUCTS
Income Statement
For the Year Ended December 31, 2019
Operating revenue
Sales				1078300
Less: Sales returns and allowances				6800
Net sales				1071500
Cost of goods sold
Merchandise inventory, January 1, 2019			129800
Add: Purchases		447000
Freight in		8200
Delivered cost of purchases		455200
Less: Purchase returns and allowances	12050
Purchase discounts	7640	19690
Net delivered cost of purchases			435510
Total merchandise available for sale			565310
Less: Merchandise inventory, December 31, 2019			126900
Cost of goods sold				438410
Gross profit on sales				633090
Operating expenses
Warehouse expenses
Wages expense		107000
Supplies expense		4200
Depreciation expense-warehouse equipment		1800
Total warehouse expenses			113000
Selling expenses
Salaries expense-sales		150100
Travel expense		22400
Delivery expense		35825
Total selling expenses			208325
General and administrative expenses
Salaries expense-office		83400
Office supplies expense		1060
Insurance expense		8275
Utilities expense		6400
Telephone expense		3120
Payroll taxes expense		30000
Building repairs expense		2100
Property taxes expense		14800
Uncollectible accounts expense		1980
Depreciation expense-building		4000
Depreciation expense-office equipment		1460
Total general and administrative expenses			156595
Total operating expenses				477920
Income from operations				155170
Other income
Interest income			420
Other expenses
Interest expense			-2400
Net nonoperating expenses				-1980
Net income for year				153190

GOOD TO GO AUTO PRODUCTS
Statement of Owner's Equity
For the Year Ended December 31, 2019
Capital, January 1, 2019		322380
Net income for year	153190
Drawings	-69050
Net change in capital		84140
Capital, December 31, 2019		406520

GOOD TO GO AUTO PRODUCTS
Balance Sheet
Decemebr 31, 2019
Assets
Current assets:
Cash			97400
Petty cash fund			600
Notes receivable, due 2020			18000
Accounts receivable		138600
Allowance for doubtful accounts		-2200	136400
Interest receivable			180
Merchandise inventory			126900
Prepaid expenses
Warehouse supplies		1700
Office supplies		540
Prepaid insurance		3040
			5280
Total current assets
Plant and equipment
Land		14400
Building	99000
Accumulated depreciation-building	-15900	83100
Warehouse equipment	18200
Accumulated depreciation-warehouse equipment	-8700	9500
Office equipment	7800
Accumulated depreciation-office equipment	-3100	4700
Total plant and equipment			111700
Total assets			496460
Liability and Owner's Equity
Current liabilities
Notes payable, due 2020		13400
Accounts payable		55300
Interest payable		240
Total current liabilities			68940
Long-term liabilities
Loans payable		9000
Mortgage payable		12000
Total long-term liabilities			21000
Total liabilities			89940
Owner's equity
Colin O'Brien, Capital			406520
Total liabilities and owner's equity			496460

Analyze:

The percentage of total operating expenses attributable to warehouse expense is 23.64%.

$113000/$477920 = 23.64%