Question

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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 Debit ustments Adjusted Trial BalanceIncose Stätement Balänce Sheet Debit $27,686.00 430.80 $27,686.80 Accounts Reccivable 430.00 1,580.ee 230.88 Prepaid Advertising s00.0e1,8.ee 1,800.0e 65.00 11,380.80 21,500.00 ies 165.00 Merchandise Inventory Store Equipment Accumulated Depreciotion-Store Equipment Office Equipnent Accumulated Depreciation Office Equipment Notes Payable, due 2026 Accounts Payable Wages Payable Social Security Tax Payable Medicare Tax Payable Unearned Seminar Fees Interest Payable Vincent Arroyo, Copitol Vincent Arroyo, Drawing 11,300-00 14,300.11,300.80 21, 500.e9 21,580.e0 2,300.00 2,950.ee 5,258.8e 5,250.80 4,300.90 4,308.e0 4,300.80 1,430.00 16, 580.80 938.08 2,360.069 16,580.68 2,805.00 16, 500.e8 2,805 ee 5.80 5.80 1,308.00 35,610.00 11,300.00 3,988.e0 2,600.00 35,618.00 35,61.ee 13,41e.ee 14,300,00 13,418.00 13,410.00 14, 308.ee 11,300.00 146,970.80 14, 300.00 .11 , Зее.00 146, 978.88 Sales Sales Discounts Seminar Fee Income 146,978.9e 130.0e 138.88 130.00 2,600.08 2,660.00 2,680.0e 87,580.ee 87,500.00 87,500 .0θ Purchases Returns and Allowances 930.80 Freight In Rent Expense Nages Expense 155.80 12, 508.80 23,300.00 2, 624.08 155.00 12,580.06 23,780.ee 2,654.60 2,950.80 938.80 12,509 , θθ 23,700.a0 2,654. 68 2,950.00 938.88 480 Payroll Taxes Expense Depreciation Expense Store Equipment Depreciation Expense-Office Equipment 30.60 2,950.0e 930.89 Advertising Expense Supplies Expense Interest Expense 165.80 162.50 162.50 5209,645.00 $289,645.00 33,258.1e $33,258.18 $225,338.18 $225,338. 18 $145,647.10 $161, 800.00 $79,691.ee $63.538.18 16,152.90 Net Income $161,800.0a $161, sea.ee $79,691,00 579,691.8 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.

Answer 1

1.

ARTISAN WINES
Income Statement
For the Year Ended December 31, 2019
Operating revenue
Sales			146970.00
Less: Sales discounts			130.00
Net sales			146840.00
Cost of goods sold
Merchandise inventory, January 1, 2019		14300.00
Add: Purchases	87500.00
Freight-in	155.00
Delivered cost of purchases	87655.00
Less: Purchase returns and allowances	930.00
Net delivered cost of purchases		86725.00
Goods available for sale		101025.00
Less: Merchandise inventory, December 31, 2019		11300.00
Cost of goods sold			89725.00
Gross profit			57115.00
Operating expenses
Rent expense		12500.00
Wages expense		23700.00
Payroll taxes expense		2654.60
Depreciation expense-store equipment		2950.00
Depreciation expense-office equipment		930.00
Advertising expense		500.00
Supplies expense		165.00
Total operating expenses			43399.60
Income from operations			13715.40
Other income
Seminar fee income		2600.00
			2600.00
Other expenses
Interest expense		162.50
			162.50
Net nonoperating income			2437.50
Net income			16152.90

2.

ARTISAN WINES
Statement of Owner's Equity
For the Year Ended December 31, 2019
Vincent Arroyo, Capital, January 1, 2019		35610.00
Net income for year	16152.90
Less: Withdrawals for year	13410.00
Increase in capital		2742.90
Vincent Arroyo, Capital, December 31, 2019		38352.90

3.

ARTISAN WINES
Balance Sheet
December 31, 2019
Assets
Current assets:
Cash		27686.00
Accounts receivable		430.00
Prepaid advertising		1000.00
Supplies		65.00
Merchandise inventory		11300.00
Total current assets			40481.00
Plant and equipment:
Store equipment	21500.00
Less:Accumulated depreciation-store equipment	5250.00	16250.00
Office equipment	4300.00
Less: Accumulated depreciation-office equipment	2360.00	1940.00
Total plant and equipment			18190.00
Total assets			58671.00
Liabilities and Owner's Equity
Current liabilities:
Notes payable, due 2020		16500.00
Accounts payable		2005.00
Wages payable		400.00
Social security tax payable		24.80
Medicare tax payable		5.80
Unearned seminar fees		1300.00
Interest payable		82.50
Total current liabilities			20318.10
Owner's equity
Vincent Arroyo, Capital			38352.90
Total liabilities and owner's equity			58671.00

4. Analyze:

Inventory turnover

7.01

times

Inventory turnover = Cost of goods sold/Average inventory = $89725/$12800 = 7.0097 = 7.01

Average inventory = ($14300 + $11300)/2 = $25600/2 = $12800