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	$	23,800
Petty Cash Fund		500
Notes Receivable, due 2020		11,500
Accounts Receivable		93,000
Allowance for Doubtful Accounts				$	5,700
Merchandise Inventory		231,000
Warehouse Supplies		2,830
Office Supplies		1,390
Prepaid Insurance		9,300
Land		43,000
Building		175,000
Accumulated Depreciation—Building					52,200
Warehouse Equipment		35,500
Accumulated Depreciation—Warehouse Equipment					16,500
Delivery Equipment		49,500
Accumulated Depreciation—Delivery Equipment					19,000
Office Equipment		23,500
Accumulated Depreciation—Office Equipment					11,100
Notes Payable, due 2020					19,900
Accounts Payable					38,700
Interest Payable					550
Mortgage Payable					59,500
Loans Payable, Long-term					15,500
Charles Ronie, Capital (Jan. 1)					443,260
Charles Ronie, Drawing		126,700
Income Summary		241,000			231,000
Sales					1,679,000
Sales Returns and Allowances		17,900
Interest Income					1,550
Purchases		764,000
Freight In		13,500
Purchases Returns and Allowances					8,140
Purchases Discounts					10,860
Warehouse Wages Expense		196,600
Warehouse Supplies Expense		6,800
Depreciation Expense—Warehouse Equipment		5,500
Salaries Expense—Sales		266,200
Travel and Entertainment Expense		21,200
Delivery Wages Expense		60,030
Depreciation Expense—Delivery Equipment		9,500
Salaries Expense—Office		70,300
Office Supplies Expense		3,700
Insurance Expense		5,900
Utilities Expense		8,990
Telephone Expense		6,220
Payroll Taxes Expense		57,500
Property Taxes Expense		5,300
Uncollectible Accounts Expense		5,500
Depreciation Expense—Building		8,700
Depreciation Expense—Office Equipment		3,700
Interest Expense		7,900
Totals	$	2,612,460		$	2,612,460

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

Superior Hardwood Company
Classified Income Statement
For the year ended December 31, 2019
Sales revenue;
Sales		$1679000
Less: Sales Return & Allowances		($17900)
Net sales revenue			$1661100
Less: Cost of Goods Sold;
Merchandise Inventory, Beginning		$241000
Purchases	$764000
Less: Purchases Discount	($10860)
Less: Purchases Returns & Allowances	($8140)
Net Purchases		$745000
Goods Available for Sale		$986000
Add: Freight In		$13500
Net Cost of Goods Purchased		$999500
Less: Merchandise Inventory, Ending		($231000)
Cost of Goods Sold			($768500)
Gross Margin			$892600
Warehouse Expenses;
Warehouse Wages Expenses		$196600
Warehouse Supplies Expenses		$6800
Depreciation Exp. - Warehouse Equipment		$5500
Total warehouse Expenses			($208900)
Selling Expenses;
Salaries Expenses – Sales		$266200
Travel & Entertainment Exp.		$21200
Delivery Wages Expenses		$60030
Depreciation Exp. - Delivery Equipment		$9500
Total Selling Expenses			($356930)
General & Administrative Expenses;
Salaries Expenses – Office		$70300
Office Supplies Expenses		$3700
Insurance Expenses		$5900
Utilities Expenses		$8990
Telephone Expenses		$6220
Payroll Taxes Expenses		$57500
Property Taxes Expenses		$5300
Uncollectible Account Expenses		$5500
Depreciation Expense – Building		$8700
Depreciation Expense - Office Equipment		$3700
Total General & Administrative Expenses			($175810)
Net Operating Income			$150960
Other Income & Losses;
Interest Revenue		$1550
Interest Expense		($7900)
Net other income & Losses			($6350)
Net Income (Loss)			$144610

Owners' Equity Statement
As on Dec. 31, 2019
Charles Ronie, Capital	$443260
Add: Net income (Loss)	$144610
Less: Chales Ronie, Drawings	($126700)
Ending balance	$461170

Superior Hardwood Company
Classified Balance Sheey
As on December 31, 2019
Current assets;
Cash		$23800
Petty Cash Fund		$500
Notes Receivable		$11500
Accounts Receivable	$93000
Less: Allowance for Doubtful Accounts	(5700)
Net Accounts Receivable		$87300
Merchandise Inventory		$231000
Warehouse Supplies		$2830
Office Supplies		$1390
Prepaid Insurance		$9300
Total Current Assets			$367620
Property, Plant & Equipment
Land		$43000
Building	$175000
Less: Accumulated Depreciation – Building	($52200)	$122800
Warehouse Equipment	$35500
Less: Accumulated Depreciation - Warehouse Equip.	($16500)	$19000
Delivery Equipment	$49500
Less: Accumulated Depreciation - Delivery Equip.	($19000)	$30500
Office Equipment	$23500
Less: Accumulated Depreciation - Office Equip.	($11100)	$12400
Total Property, Plant & Equipment			$227700
Total Assets			$595320
Liabilities & Owners' Equity;
Liabilities;
Current liabilities;
Notes Payable		$19900
Accounts Payable		$38700
Interest Payable		$550
Total current liabilities			$59150
Non-current liabilities;
Mortgage Payable		$59500
Loans Payable - Long Term		$15500
Total Non-current liabilities			$75000
Total Liabilities			$134150
Owners' Equities (Balance of Owners’ equity)			$461170
Total Laibilities & Owners' Equity			$595320

Current ratio = 6.21 (Approx.)

Explanation;

Formula of current ratio = Current assets / Current liabilities

Current assets = $367620

Current liabilities = $59150

Thus current ratio ($367620 / $59150) = 6.21