Question

Constructing Statements from Ratio Data
The following are the financial statements for Timber Company, with almost all dollar amounts missing:

TIMBER COMPANY Balance Sheet December 31, 2012
Cash	?		Current liabilities	?
Accounts receivable (net)	?		10% Bonds payable	144,000
Inventory	?		Common stock	?
Equipment (net)	?		Retained earnings	48,000
			Total Liabilities and
Total Assets	$676,000		Stockholders' Equity	$676,000

TIMBER COMPANY Income Statement For the Year Ended December 31, 2013
Sales revenue	?
Cost of goods sold	?
Gross profit	?
Selling and administrative expenses	?
Income before interest expense and income taxes
Interest expense	?
Income before income taxes	?
Income tax expense (35%)	?
Net income	$85,200

The following information is available about Timber Company's financial statements:
1. Quick ratio, 1.65.
2. Current ratio, 3.15.
3. Return on sales,7.5 percent.
4. Return on common stockholders' equity (common stockholders' equity at January 1 was $342,000), 20 percent.
5. Gross profit percentage, 30 percent.
6. Accounts receivable turnover (accounts receivable (net) at January 1 were $97,200), 10 times.
7. The interest expense relates to the bonds payable that were outstanding all year.

Required

Compute the missing amounts, and complete the financial statements of Timber Company. (Hint: Complete the income statement first.)

TIMBER COMPANY Balance Sheet December 31, 2012
Cash	$Answer		Current liabilities	$Answer
Accounts receivable (net)	Answer		8% Bonds payable	144,000
Inventory	Answer		Common stock	Answer
Equipment (net)	Answer		Retained earnings	48,000
			Total Liabilities and
Total Assets	$676,000		Stockholders' Equity	$676,000

TIMBER COMPANY Income Statement For the Year Ended December 31, 2012
Sales revenue	$Answer
Cost of goods sold	Answer
Gross profit	Answer
Selling and administrative expenses	Answer
Income before interest expense and income taxes	Answer
Interest expense	Answer
Income before income taxes	Answer
Income tax expense (35%)	Answer
Net income	$75,000

Answer 1

For the Year Ended December 31, 2012
Sales revenue	1,000,000.00
Cost of goods sold	700,000.00
Gross profit	300,000.00
Selling and administrative expenses	173,095.38
Income before interest expense and income taxes	126,904.62
Interest expense	11,520.00
Income before income taxes	115,384.62
Income tax expense (35%)	40,384.62
Net income	75,000.00

Balance Sheet
Cash	156,250.00	Current liabilities	157,000.00
Accounts receivable (net)	102,800.00	8% Bonds payable	144,000.00
Inventory	235,500.00	Common stock	327,000.00
Equipment (net)	181,450.00	Retained earnings	48,000.00
		Total Liabilities and
Total Assets	676,000.00	Stockholders' Equity	676,000.00

1	Return on Sales	Net Income/Sales
	7.50%	75000/Sales
	Sales	1,000,000.00
2	Gross Profit %	Gross Profit/Sales*100
	Gross Profit	300,000.00
3	Accounts Receivable turnover	Sales/Average Debtors
	Beginning Receivables+ Ending Receivables	1000000*2/10
	97200+ Ending Receivables	200,000.00
	Ending Receivables	102,800.00
4	Interest on Bond	144000*8%
	Interest on Bond	11,520.00
5	Return on Stock Holder's Equity	Profit available for Equity/ Stock Holders Equity
	Stock Holder's Equity	75000/20%
	Stock Holder's Equity	375,000.00
6	Common Stock	375000-48000
	Common Stock	327,000.00
7	Quick Ratio	(Current Assets - Inventory)/Current Liability
	Current Assets - Inventory	157000*1.65
Equation 1	(Accounts Receivable+Inventory+Cash )-Inventory	259,050.00
	Current Ratio	Current Assets/Current Liabilities
	3.15	(Accounts Receivable+Inventory+Cash)/157000
	102800+Inventory+ Cash	494,550.00
Equation 2	Inventory+ Cash	391,750.00
Equation 1	(Accounts Receivable+Inventory+Cash )-Inventory	259,050.00
	102800+391750-Inventory	259,050.00
	Inventory	102800+391750-259050
	Inventory	235,500.00
8	Cash	391750-235500
	Cash	156,250.00

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