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 Cash Petty Cash Fund Notes Receivable, due 2020 Accounts Receivable Allowance for Doubtful Accounts Merchandise Inventory Warehouse Supplies Office Supplies Prepaid Insurance Land Building Accumulated Depreciation-Building Warehouse Equipment Accumulated Depreciation-Warehouse Equipment Delivery Equipment Accumulated Depreciation-Delivery Equipment Office Equipment Accumulated Depreciation Office Equipment Notes Payable, due 2020 Accounts Payable Interest Payable Mortgage Payable Loans Payable, Long-term Charles Ronie, Capital (Jan. 1) Charles Ronie, Drawing Income Summary Sales Sales Returns and Allowances Interest Income Purchases Freight In Purchases Returns and Allowances Purchases Discounts Warehouse Wages Expense Warehouse Supplies Expense Depreciation Expense-Warehouse Equipment Salaries Expense-Sales Travel and Entertainment Expense Delivery Wages Expense Depreciation Expense-Delivery Equipment Salaries Expense-Office Office Supplies Expense Insurance Expense Utilities Expense Telephone Expense Payroll Taxes Expense Property Taxes Expense Uncollectible Accounts Expense Depreciation Expense-Building Depreciation Expense-Office Equipment Interest Expense Totals Debit Credit $ 24,100 500 11,800 96,000 6,000 234,000 2,860 1,420 10, 200 46,000 178,000 54,000 37,000 17,400 51,000 19,600 25,000 12,000 20, 200 39,000 580 61,000 17,000 462,460 127,000 244,000 234,000 1,685,000 18,200 1,580 767,000 13,800 8,440 11,160 199,600 7,100 5,800 269, 200 21,500 60,330 9,800 70,600 4,000 6,200 9,290 6,520 59,000 5,600 5,800 9,000 4,000 8,200 $2,649,420 $2,649, 420

Required:

1. 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.
2. Prepare a statement of owner’s equity for the year ended December 31, 2019. No additional investments were made during the period.
3. 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 1685000 -18200 1666800 244000 767000 13800 780800 8440 11160 19600 761200 1005200 234000 771200 895600 199600 7100 5800 212500 Income Statement For the year ended December 31, 2019 Operating revenue Sales Less: Sales returns and allowances Net sales Cost of goods sold Merchandise inventory, January 1, 2019 Purchases Freight in Delivered cost of purchases Purchases returns and allowances Purchases discounts Net delivered cost of purchases Total merchandise available for sale Less: Merchandise inventory, December 31, 2019 Cost of goods sold Gross profit on sales Operating expenses Warehouse expenses Warehouse wages expense Warehouse supplies expense Depreciation expense-Warehouse equipment Total warehouse expenses Selling expenses Salaries expense-Sales Travel and entertainment expense Delivery wages expense Depreciation expense-Delivery equipment Total selling expenses General and administrative expenses Salaries expense-Office Office supplies expense Insurance expense Utilities expense Telephone expense Payroll taxes expense Property taxes expense Uncollectible accounts expense Depreciation expense-Building Depreciation expense-Office equipment Total general and administrative exp. Total operating expenses Income from operations Other income Interest income Other expenses Interest expense Net nonoperating expenses Net income for year 269200 21500 60330 9800 360830 70600 4000 6200 9290 6520 59000 5600 5800 9000 4000 180010 753340 142260 1580 8200 -6620 135640

462460 Statement of Owner's Equity For the year ended December 31, 2019 Charles Ronie, Capital, January 1, 2019 Net income for year Less: Withdrawals for year Increase in capital Charles Ronie, Capital, December 31, 2019 135640 -127000 8640 471100 Current Ratio = Current Assets / Current Liabilities = 374880 / 59780 = 6.27 24100 500 11800 96000 -6000 90000 234000 2860 1420 10200 14480 374880 46000 124000 Balance Sheet As at 31.12.2019 Assets Current assets Cash Petty cash fund Notes receivable Accounts receivable Less: Allowance for doubtful accounts Merchandise inventory Prepaid expenses Warehouse supplies Office supplies Prepaid insurance Total current assets Plant and equipment Land Building Less: Accumulated depreciation Warehouse equipment Less: Accumulated depreciation Delivery equipment Less: Accumulated depreciation Office equipment Less: Accumulated depreciation Total plant and equipment Total assets Liability and Owner's Equity Current liabilities Notes payable Accounts payable Interest payable Total current liabilities Long-term liabilities Mortgage payable Loans payable Total long term liabilities Total liabilities Owner's equity Charles Ronie, Capital, Total liabilities and owner's equity 19600 178000 -54000 37000 - 17400 51000 -19600 25000 - 12000 31400 13000 234000 608880 20200 39000 580 59780 61000 17000 78000 137780 471100 608880