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 $ 24,100 Petty Cash Fund 500 Notes Receivable, due 2020 11,800 Accounts Receivable 96,000 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 39,000 Interest Payable 580 Mortgage Payable 61,000 Loans Payable, Long-term 17,000 Charles Ronie, Capital (Jan. 1) 462,460 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 Multi-Step Income Statement For the Year Ending December 31, 2019 $1,685,000 $18,200 Sales Less: Sales Returns & Allowances Net Sales Cost of Goods Sold: $1,666,800 Purchases Less: Purchase Returns & Allowances Less: Purchase Discounts Net Purchases Freight In Warehouse Wages Expense Warehouse Supplies Expen Depreciation Expense-Warehouse Equip Cost of Goods Sold $767,000 $8,440 $11,160 $747,400 $13,800 $199,600 $7,100 $5,800 se $973,700 $693,100 [$1,666,800 $973,700] Gross Profit Operating Expenses Selling Expenses Salaries Expense Sales Travel & Entertainment Exp Delivery Wages Expense $269,200 $21,500 $60,330

Dep. Exp. - Delivery Equip Total Selling Expenses $9,800 $360,830 Administrative Expenses: Salaries Expense Office Office Supplies Expense Insurance Expense Utilities Expense Telephone Expense Payroll Taxes Expense Property Taxes Expense Uncollectible Accts. Expense Dep. Expense Building Dep. Expense - Off. Equip Total Administrative Expenses $70,600 $4,000 $6,200 $9,290 $6,520 $59,000 $5,600 $5,800 $9,000 $4,000 180,010 Total Operating Expenses Operating Profit Other Revenues & Expenses: $540,840 $152,260 [S693,100 $540,840] Interest Income Interest Expense Net Other Revenues & Expenses $1,580 $8,200 $6,620 $145,640 Net Income

SUPERIOR HARDWOOD COMPANY Statement of Owner's Equity For the Year Ending December 31, 2019 $462,460 $145,640 [Ref: Income Statement] $10,000 [$234,000 $244,000] $598,100 $127,000 471,100 Charles Ronie, Capital, January 31, 2019 Add: Net Income Less: Income Summary Less: Charles Ronie, Drawings Charles Ronie, Capital, Dec. 31,2019 SUPERIOR HARDWOOD COMPANY Classified Balance Sheet December 31, 2019 Assets Current Assets: $24,100 $500 $11,800 Cash Petty Cash Fund Notes Receivable (Short-Term) Accounts Receivable Allowance for Doubtful Debts Accounts Receivable, Net Merchandise Inventory $96,000 $6,000 $90,000 $234,000