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	$	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

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.

SUPERIOR HARDWOOD COMPANY Balance Sheet Assets Current assets Prepaid expenses Total current assets Plant and equipment Building Warehouse equipment Delivery equipment Office equipment Total plant and equipment Total assets Liability and Owner’s Equity Current liabilities Total current liabilities Long-term liabilities Total long term liabilities Total liabilities Owner’s equity Total liabilities and owner's equity

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

	Current ratio to 1

Answer 1

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

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