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 $ 23,600 Petty Cash Fund 600 Notes Receivable, due 2020 11,300 Accounts Receivable 91,000 Allowance for Doubtful Accounts $ 5,500 Merchandise Inventory 229,000 Warehouse Supplies 2,810 Office Supplies 1,370 Prepaid Insurance 8,700 Land 41,000 Building 173,000 Accumulated Depreciation—Building 51,000 Warehouse Equipment 34,500 Accumulated Depreciation—Warehouse Equipment 15,900 Delivery Equipment 48,500 Accumulated Depreciation—Delivery Equipment 18,600 Office Equipment 22,500 Accumulated Depreciation—Office Equipment 10,500 Notes Payable, due 2020 19,700 Accounts Payable 38,500 Interest Payable 530 Mortgage Payable 58,500 Loans Payable, Long-term 14,500 Charles Ronie, Capital (Jan. 1) 430,560 Charles Ronie, Drawing 126,500 Income Summary 239,000 229,000 Sales 1,675,000 Sales Returns and Allowances 17,700 Interest Income 1,530 Purchases 762,000 Freight In 13,300 Purchases Returns and Allowances 7,940 Purchases Discounts 10,660 Warehouse Wages Expense 194,600 Warehouse Supplies Expense 6,600 Depreciation Expense—Warehouse Equipment 5,300 Salaries Expense—Sales 264,200 Travel and Entertainment Expense 21,000 Delivery Wages Expense 59,830 Depreciation Expense—Delivery Equipment 9,300 Salaries Expense—Office 70,100 Office Supplies Expense 3,500 Insurance Expense 5,700 Utilities Expense 8,790 Telephone Expense 6,020 Payroll Taxes Expense 56,500 Property Taxes Expense 5,100 Uncollectible Accounts Expense 5,300 Depreciation Expense—Building 8,500 Depreciation Expense—Office Equipment 3,500 Interest Expense 7,700 Totals $ 2,587,920 $ 2,587,920 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? SUPERIOR HARDWOOD COMPANY Income Statement Operating revenue Net sales Cost of goods sold Merchandise inventory, January 1, 2019 Delivered cost of purchases Net delivered cost of purchases Total merchandise available for sale Gross profit on sales Operating expenses Warehouse expenses Total warehouse expenses Selling expenses Total selling expenses General and administrative expenses Total general and administrative exp. Total operating expenses Income from operations Other income Other expenses Net nonoperating expenses Net income for year Required 1 Required 2

Answer 1

Superior Hardwood Company
Income Statement
For the Month Ended Dec 31, 2019
Sales		1,675,000
Less: Sales Return & Allowances		17,700
Net Sales			1,657,300.00
Less: Cost of Goods Sold
Merchandise Inventory, Beginning		239,000
Purchases	762,000
Less: Purchases Discount	10,660
Less: Purchases Returns & Allowances	7,940
Net Purchases		743,400
Goods Available for Sale		982,400
Add: Freight In		13,300
Net Cost of Goods Purchased		995,700
Less: Merchandise Inventory, Ending		229,000
Cost of Goods Sold			766,700
Gross Margin			890,600.00
Warehouse Expenses
Warehouse Wages Expenses		194,600
Warehouse Supplies Expenses		6,600
Depreciation Exp. - Warehouse Equipment		5,300	206,500
Selling Expenses
Salaries Expenses - Sales		264,200
Travel & Entertainment Exp.		21,000
Delivery Wages Expenses		59,830
Depreciation Exp. - Delivery Equipment		9,300	354,330
General & Administrative Expenses
Salaries Expenses - Office		70,100
Office Supplies Expenses		3,500
Insurance Expenses		5,700
Utilities Expenses		8,790
Telephone Expenses		6,020
Payroll Taxes Expenses		56,500
Property Taxes Expenses		5,100
Uncollectible Account Expenses		5,300
Depreciation Expense - Building		8,500
Depreciation Expense - Office Equipment		3,500	173,010
Net Operating Income			156,760.00
Other Income & Losses
Interest Expense		7,700
Interest Revenue		1,530	6,170
Net Income (Loss)			150,590.00
Owners' Equity Statement
As of Dec 31, 2019
Charles Ronie, Capital - Jan 1, 2019	430,560
Net Income (Loss)	150590
Sub-total	581,150
Less: Chales Ronie, Drawings	-126,500
Ending Balance	454,650
Superior Hardwood Company
Balance Sheet
As of Dec 31, 2019
Assets
Current Assets
Cash		23,600
Petty Cash Fund		600
Notes Receivable due 2020		11,300
Accounts Receivable	91,000
Allowance for Doubtful Accounts	-5,500	85,500
Merchandise Inventory		229,000
Warehouse Supplies		2,810
Office Supplies		1,370
Prepaid Insurance		8,700
Total Current Assets			362,880
Property, Plant & Equipment
Land		41,000
Building	173,000
Accumulated Depreciation - Building	-51,000	122,000
Warehouse Equipment	34,500
Accumulated Depreciation - Warehouse Equip.	-15,900	18,600
Delivery Equipment	48,500
Accumulated Depreciation - Delivery Equip.	-18,600	29,900
Office Equipment	22,500
Accumulated Depreciation - Office Equip.	-10,500	12,000
Total Property, Plant & Equipment			223,500
Total Assets			586,380
Liabilities & Owners' Equity
Liabilities
Current Liabilities
Notes Payable due 2020		19,700
Accounts Payable		38,500
Interest Payable		530
Total Current Liabilities			58,730
Long Term Liabilities
Mortgage Payable		58,500
Loans Payable - Long Term		14,500
Total Long Term Liabilities			73,000
Total Liabilities			131,730
Owners' Equity			454650
Total Laibilities & Owners' Equity			586,380
Current ratio = Current Assets / Current Liabilities
Current ratio = $362,880 / $58730
Current ratio = 6.18 : 1