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	$	34,100
Petty Cash Fund		500
Notes Receivable, due 2020		11,800
Accounts Receivable		86,000
Allowance for Doubtful Accounts				$	6,000
Merchandise Inventory		234,000
Warehouse Supplies		2,860
Office Supplies		1,420
Prepaid Insurance		10,200
Land		46,000
Building		178,000
Accumulated Depreciation—Building					54,000
Warehouse Equipment		37,000
Accumulated Depreciation—Warehouse Equipment					17,400
Delivery Equipment		51,000
Accumulated Depreciation—Delivery Equipment					19,600
Office Equipment		25,000
Accumulated Depreciation—Office Equipment					12,000
Notes Payable, due 2020					20,200
Accounts Payable					49,000
Interest Payable					580
Mortgage Payable					61,000
Loans Payable, Long-term					17,000
Charles Ronie, Capital (Jan. 1)					452,460
Charles Ronie, Drawing		127,000
Income Summary		244,000			234,000
Sales					1,685,000
Sales Returns and Allowances		18,200
Interest Income					1,580
Purchases		767,000
Freight In		13,800
Purchases Returns and Allowances					8,440
Purchases Discounts					11,160
Warehouse Wages Expense		199,600
Warehouse Supplies Expense		7,100
Depreciation Expense—Warehouse Equipment		5,800
Salaries Expense—Sales		269,200
Travel and Entertainment Expense		21,500
Delivery Wages Expense		60,330
Depreciation Expense—Delivery Equipment		9,800
Salaries Expense—Office		70,600
Office Supplies Expense		4,000
Insurance Expense		6,200
Utilities Expense		9,290
Telephone Expense		6,520
Payroll Taxes Expense		59,000
Property Taxes Expense		5,600
Uncollectible Accounts Expense		5,800
Depreciation Expense—Building		9,000
Depreciation Expense—Office Equipment		4,000
Interest Expense		8,200
Totals	$	2,649,420		$	2,649,420

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
Income Statement
For the Month Ended Dec 31, 2019
Sales		1,685,000.00
Less: Sales Return & Allowances		18,200.00
Net Sales			1,666,800.00
Less: Cost of Goods Sold
Merchandise Inventory, Beginning		244,000.00
Purchases	767,000.00
Less: Purchases Discount	11,160.00
Less: Purchases Returns & Allowances	8,440.00
Net Purchases		747,400.00
Goods Available for Sale		991,400.00
Add: Freight In		13,800.00
Net Cost of Goods Purchased		1,005,200.00
Less: Merchandise Inventory, Ending		234,000.00
Cost of Goods Sold			771,200.00
Gross Margin			895,600.00
Warehouse Expenses
Warehouse Wages Expenses		199,600.00
Warehouse Supplies Expenses		7,100.00
Depreciation Exp. - Warehouse Equipment		5,800.00	212,500.00
Selling Expenses
Salaries Expenses - Sales		269,200.00
Travel & Entertainment Exp.		21,500.00
Delivery Wages Expenses		60,330.00
Depreciation Exp. - Delivery Equipment		9,800.00	360,830.00
General & Administrative Expenses
Salaries Expenses - Office		70,600.00
Office Supplies Expenses		4,000.00
Insurance Expenses		6,200.00
Utilities Expenses		9,290.00
Telephone Expenses		6,520.00
Payroll Taxes Expenses		59,000.00
Property Taxes Expenses		5,600.00
Uncollectible Account Expenses		5,800.00
Depreciation Expense - Building		9,000.00
Depreciation Expense - Office Equipment		4,000.00	180,010.00
Net Operating Income			142,260.00
Other Income & Losses
Interest Expense		8,200.00
Interest Revenue		1,580.00	6,620.00
Net Income (Loss)			135,640.00

Owners' Equity Statement
As of Dec 31, 2019
Charles Ronie, Capital - Jan 1, 2019	452,460.00
Net Income (Loss)	135,640.00
Sub-total	588,100.00
Less: Chales Ronie, Drawings	(127,000.00)
Ending Balance	461,100.00

Superior Hardwood Company
Balance Sheet
As of Dec 31, 2019
Assets
Current Assets
Cash		34,100.00
Petty Cash Fund		500.00
Notes Receivable due 2020		11,800.00
Accounts Receivable	86,000.00
Allowance for Doubtful Accounts	(6,000.00)	80,000.00
Merchandise Inventory		234,000.00
Warehouse Supplies		2,860.00
Office Supplies		1,420.00
Prepaid Insurance		10,200.00
Total Current Assets			374,880.00
Property, Plant & Equipment
Land		46,000.00
Building	178,000.00
Accumulated Depreciation - Building	(54,000.00)	124,000.00
Warehouse Equipment	37,000.00
Accumulated Depreciation - Warehouse Equip.	(17,400.00)	19,600.00
Delivery Equipment	51,000.00
Accumulated Depreciation - Delivery Equip.	(19,600.00)	31,400.00
Office Equipment	25,000.00
Accumulated Depreciation - Office Equip.	(12,000.00)	13,000.00
Total Property, Plant & Equipment			234,000.00
Total Assets			608,880.00
Liabilities & Owners' Equity
Liabilities
Current Liabilities
Notes Payable due 2020		20,200.00
Accounts Payable		49,000.00
Interest Payable		580.00
Total Current Liabilities			69,780.00
Long Term Liabilities
Mortgage Payable		61,000.00
Loans Payable - Long Term		17,000.00
Total Long Term Liabilities			78,000.00
Total Liabilities			147,780.00
Owners' Equity			461,100.00
Total Laibilities & Owners' Equity			608,880.00

Current ratio = Current Assets / Current Liabilities

Current ratio = $374,880 / $69,780

Current ratio = 5.37 : 1