Question

Required:

1-Prepare a classified income statement for the year ended December 31, 2019. The company does not classify its operating expenses as selling expenses and general and administrative expenses.

2- Prepare a statement of owner’s equity for the year ended December 31, 2019. No additional investments were made during the year.

3- Prepare a classified balance sheet as of December 31, 2019.

4- Analyze: What is the inventory turnover for Artisan Wines?

The Artisan Wines is a retail store selling vintage wines. On December 31, 2019, the firm’s general ledger contained the accounts and balances below. All account balances are normal.

Artisan Wines Worksheet Year Ended December 31, 2019
		Trial Balance						Adjustments						Adjusted Trial Balance						Income Statement						Balance Sheet
Account Name		Debit			Credit			Debit			Credit			Debit			Credit			Debit			Credit			Debit			Credit
Cash	$	27,886.00											$	27,886.00											$	27,886.00
Accounts Receivable		450.00												450.00												450.00
Prepaid Advertising		1,380.00									460.00			920.00												920.00
Supplies		250.00									175.00			75.00												75.00
Merchandise Inventory		14,500.00						11,500.00			14,500.00			11,500.00												11,500.00
Store Equipment		22,500.00												22,500.00												22,500.00
Accumulated Depreciation—Store Equipment					2,500.00						3,000.00						5,500.00												5,500.00
Office Equipment		4,500.00												4,500.00												4,500.00
Accumulated Depreciation—Office Equipment					1,450.00						950.00						2,400.00												2,400.00
Notes Payable, due 2020					17,500.00												17,500.00												17,500.00
Accounts Payable					2,205.00												2,205.00												2,205.00
Wages Payable											500.00						500.00												500.00
Social Security Tax Payable											31.00						31.00												31.00
Medicare Tax Payable											7.25						7.25												7.25
Unearned Seminar Fees					4,500.00			3,000.00									1,500.00												1,500.00
Interest Payable											87.50						87.50												87.50
Vincent Arroyo, Capital					34,950.00												34,950.00												34,950.00
Vincent Arroyo, Drawing		13,610.00												13,610.00												13,610.00
Income Summary								14,500.00			11,500.00			14,500.00			11,500.00			14,500.00			11,500.00
Sales					148,970.00												148,970.00						148,970.00
Sales Discounts		150.00												150.00						150.00
Seminar Fee Income											3,000.00						3,000.00						3,000.00
Purchases		88,500.00												88,500.00						88,500.00
Purchases Returns and Allowances					950.00												950.00						950.00
Freight In		175.00												175.00						175.00
Rent Expense		12,700.00												12,700.00						12,700.00
Wages Expense		23,500.00						500.00						24,000.00						24,000.00
Payroll Taxes Expense		2,824.00						38.25						2,862.25						2,862.25
Depreciation Expense—Store Equipment								3,000.00						3,000.00						3,000.00
Depreciation Expense—Office Equipment								950.00						950.00						950.00
Advertising Expense								460.00						460.00						460.00
Supplies Expense								175.00						175.00						175.00
Interest Expense		100.00						87.50						187.50						187.50
Totals	$	213,025.00		$	213,025.00		$	34,210.75		$	34,210.75		$	229,100.75		$	229,100.75		$	147,659.75		$	164,420.00		$	81,441.00		$	64,680.75
Net Income																				16,760.25									16,760.25
																			$	164,420.00		$	164,420.00		$	81,441.00		$	81,441.00

Answer 1

• All working forms part of the answer
• Working:

Sales	$                   1,48,970.00
Less: Sales Discount	$                             150.00
Net Sales	$                   1,48,820.00

Beginning Inventory	$                       14,500.00
Add: Purchase	$                       88,500.00
Less: Purchase return & allowances	$                             950.00
Add: Frieght In	$                             175.00
Less: Ending Inventory	$                       11,500.00
Cost of Goods Sold	$                       90,725.00

• Requirement 1: Income Statement

Net Sales	$                   1,48,820.00
Cost of Goods Sold	$                       90,725.00
Gross Profits	$                       58,095.00
Operating Expenses:
Rent Expense	$                       12,700.00
Wages Expense	$                       24,000.00
Payroll Taxes Expense	$                         2,862.25
Depreciation Expense—Store Equipment	$                         3,000.00
Depreciation Expense—Office Equipment	$                             950.00
Advertising Expense	$                             460.00
Supplies Expense	$                             175.00
Total Operating expense	$                       44,147.25
Operating profits	$                       13,947.75
Other revenues & expenses:
Seminar Fee Income	$                         3,000.00
Interest Expense	$                           (187.50)
Net Income	$                       16,760.25

• Requirement 2: Statement of Owner’s Equity

Vincent Arroyo, Capital - Beginning balance	$                         34,950.00
Add: Net Income	$                         16,760.25
Less: Drawings	$                         13,610.00
Vincent Arroyo, Capital - Ending balance	$                         38,100.25

• Requirement 3: Balance Sheet

ASSETS
Current Assets:
Cash	$                         27,886.00
Accounts Receivable	$                               450.00
Prepaid Advertising	$                               920.00
Supplies	$                                  75.00
Merchandise Inventory	$                         11,500.00
Total Current Assets		$                          40,831.00
Property, Plant & Equipment:
Store Equipment	$                         22,500.00
Accumulated Depreciation—Store Equipment	$                         (5,500.00)	$                          17,000.00
Office Equipment	$                            4,500.00
Accumulated Depreciation—Office Equipment	$                         (2,400.00)	$                            2,100.00
Tota Property, Plant & Equipment		$                          19,100.00
Total ASSETS		$                          59,931.00
LIABILITIES & EQUITY
Liabilities:
Notes Payable, due 2020	$                         17,500.00
Accounts Payable	$                            2,205.00
Wages Payable	$                               500.00
Social Security Tax Payable	$                                  31.00
Medicare Tax Payable	$                                    7.25
Unearned Seminar Fees	$                            1,500.00
Interest Payable	$                                  87.50
Total Liabilities		$                          21,830.75
Owner's Equity
Vincent Arroyo, Capital - Ending balance		$                          38,100.25
Total LIABILITIES & EQUITY		$                          59,931.00

• Requirement 4

A	Cost of Goods Sold	$                       90,725.00
B	Beginning Inventory	$                       14,500.00
C	Ending Inventory	$                       11,500.00
D=(B+C)/2	Average Inventory	$ 13,000
E=A/D	Inventory Turnover ratio [90725 / 13000]	6.98 times