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. ACCOUNTS Debit Credit Cash $ 22,800 Petty Cash Fund 500 Notes Receivable, due 2020 10,500 Accounts Receivable 84,000 Allowance for Doubtful Accounts $ 4,700 Merchandise Inventory 221,000 Warehouse Supplies 2,730 Office Supplies 1,290 Prepaid Insurance 6,300 Land 33,000 Building 165,000 Accumulated Depreciation—Building 46,200 Warehouse Equipment 30,500 Accumulated Depreciation—Warehouse Equipment 13,500 Delivery Equipment 44,500 Accumulated Depreciation—Delivery Equipment 17,000 Office Equipment 18,500 Accumulated Depreciation—Office Equipment 8,100 Notes Payable, due 2020 18,900 Accounts Payable 37,700 Interest Payable 450 Mortgage Payable 54,500 Loans Payable, Long-term 10,500 Charles Ronie, Capital (Jan. 1) 348,260 Charles Ronie, Drawing 125,700 Income Summary 231,000 221,000 Sales 1,691,000 Sales Returns and Allowances 16,900 Interest Income 1,450 Purchases 754,000 Freight In 12,500 Purchases Returns and Allowances 7,140 Purchases Discounts 9,860 Warehouse Wages Expense 186,600 Warehouse Supplies Expense 5,800 Depreciation Expense—Warehouse Equipment 4,500 Salaries Expense—Sales 256,200 Travel and Entertainment Expense 20,200 Delivery Wages Expense 59,030 Depreciation Expense—Delivery Equipment 8,500 Salaries Expense—Office 69,300 Office Supplies Expense 2,700 Insurance Expense 4,900 Utilities Expense 7,990 Telephone Expense 5,220 Payroll Taxes Expense 52,500 Property Taxes Expense 4,300 Uncollectible Accounts Expense 4,500 Depreciation Expense—Building 7,700 Depreciation Expense—Office Equipment 2,700 Interest Expense 6,900 Totals $ 2,490,260 $ 2,490,260 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. Analyze: What is the current ratio for this business?

Answer 1

		Classified income statement for the year ended Dec 31,2019
						$	$	$	$
	Operating revenue
	Sales revenue								1691000
	Less: Sales returns and allowances								16900
	Net sales								1674100
	Cost of goods sold:
	Merchandise inventory,Jan 1,2019							231000
	Purchases						754000
	Freight-in						12500
	Cost of purchases						766500
	Less:
	Purchase returns and allowances					7140
	Purchase discounts					9860	17000
	Net cost of purchases							749500
	Total merchandise available for sale							980500
	Less: Merchandise inventory,Dec 31,2019							221000
	Cost of goods sold								759500
	Gross profit on sales								914600
	Operating expenses:
	Warehouse expenses
	Warehouse wage expense						186600
	Warehouse supplies expense						5800
	Depreciation expense-Warehouse equipment						4500
	Total warehouse expense							196900
	Selling expenses
	Salaries expense-Sales						256200
	Travel and entertainment expense						20200
	Delivery wage expense						59030
	Depreciation expense-Delivery equipment						8500
	Total selling expenses							343930
	General and administrative expenses
	Salaries expense-Office						69300
	Office Supplies Expense						2700
	Insurance Expense						4900
	Utilities Expense						7990
	Telephone Expense						5220
	Payroll Taxes Expense						52500
	Property Taxes Expense						4300
	Uncollectible Accounts Expense						4500
	Depreciation Expense—Building						7700
	Depreciation Expense—Office Equipment						2700
	Total general and administrative expenses							161810
	Total operating expense								702640
	Income from operations								211960
	Other income
	Interest income							1450
	Other expense
	Interst expense							6900
	Net non-operating expenses								-5450
	Net income for year								206510
			Statement of owner's equity
						$	$
	Charles Ronie, Capital (Jan. 1)						348260
	Net income for year					206510
	Less:Charles Ronie, Drawing					125700
	Increase in capital						80810
	Charles Ronie, Capital (Dec. 31)						429070
			classified balance sheet as of December 31, 2019
						$	$	$
	Current assets
	Cash							22800
	Petty Cash Fund							500
	Notes receivable							10500
	Accounts receivable						84000
	Less: Allowance for doubtful accounts						4700	79300
	Merchandise inventory							221000
	Prepaid expense
	Warehouse supplies						2730
	Office supplies						1290
	Prepaid insurance						6300	10320
	Total current assets							344420
	Plant and equipment
	Land						33000
	Building					165000
	Less: Accumulated depreciation					46200	118800
	Warehouse equipment					30500
	Less: Accumulated depreciation					13500	17000
	Delivery equipment					44500
	Less: Accumulated depreciation					17000	27500
	Office equipment					18500
	Less: Accumulated depreciation					8100	10400
	Total plant and equipment							206700
	Total assets							551120
		Liability and Owner’s Equity
	Current liabilities
	Notes payable						18900
	Accounts payable						37700
	Interest payable						450
	Total current liabilities							57050
	Long-term liabilities
	Mortgage payable						54500
	Loans payable						10500
	Total long term liabilities							65000
	Total liabilities							122050
	Owner's equity
	Charles Ronie, Capital (Dec. 31)							429070
	Total liabilities and owner's equity							551120
	Current tatio=Current assets/Current liabilities=344420/57050=6.04