PARTON WHOLESALE COMPANY Trial Balance 31-Dec-14 Debit Credit Cash $ 34,400 Acco
ID: 2445559 • Letter: P
Question
PARTON WHOLESALE COMPANY
Trial Balance
31-Dec-14
Debit
Credit
Cash
$ 34,400
Accounts Receivable
36,600
Merchandise Inventory (Beginning)
62,400
Land
92,000
Buildings
197,000
Accumulated Depreciation-Buildings
$ 54,000
Equipment
83,500
Accumulated Depreciation-Equipment
42,400
Notes Payable
50,000
Accounts Payable
37,500
Common Stock
200,000
Retained Earnings
67,800
Dividends
10,000
Sales
886,100
Sales Discounts
4,600
Purchases
725,100
Purchase Discounts
16,000
Freight-in
12,400
Salaries Expense
69,800
Utilities Expense
9,400
Repair Expense
5,900
Gas and Oil Expense
7,200
Insurance Expense
3,500
$ 1,353,800
$ 1,353,800
Adjustment data:
Depreciation is $10,000 on buildings and $9,000 on equipment. (Both are administrative expenses.)
Interest of $7,000 is unpaid on notes payable at December 31.
Other data:
Merchandise inventory on hand at December 31, 2014 is $90,000.
Salaries are 80% selling and 20% administrative.
Utilities expense, repair expense, and insurance expense are 100% administrative.
$15,000 of the notes payable are payable next year.
Gas and oil expense is a selling expense.
The beginning balance of accounts receivable is $34,750.
The amount of total assets at the beginning of the year is $469,225.
Instructions
1)Journalize the adjusting entries.
2)Prepare a classified balance sheet as of December 31, 2014.
3)Prepare the following ratios and show all support for your computations:
a) Current Ratio
b) Quick Ratio
c) Working Capital
d) Accounts Receivable Turnover
e) Average Collection Period
f) Inventory Turnover
g) Days in Inventory
h) Debt to Total Assets Ratio
i) Gross Profit Ratio
j) Profit Margin Ratio
k) Return on Assets Ratio
l) Asset Turnover Ratio
6) Based on the ratios computed in 5) above, answer the following questions and use the financial statement ratios to support your answers where appropriate:
Do you feel that the company is able to meet its current and long term obligations as they become due?
Comment on the profitability of the company with respect to the various profitability ratios that you computed.
Would you lend money to this company for the long term?
Comment on the ability of the company to collect its receivables and mange inventory.
PARTON WHOLESALE COMPANY
Trial Balance
31-Dec-14
Debit
Credit
Cash
$ 34,400
Accounts Receivable
36,600
Merchandise Inventory (Beginning)
62,400
Land
92,000
Buildings
197,000
Accumulated Depreciation-Buildings
$ 54,000
Equipment
83,500
Accumulated Depreciation-Equipment
42,400
Notes Payable
50,000
Accounts Payable
37,500
Common Stock
200,000
Retained Earnings
67,800
Dividends
10,000
Sales
886,100
Sales Discounts
4,600
Purchases
725,100
Purchase Discounts
16,000
Freight-in
12,400
Salaries Expense
69,800
Utilities Expense
9,400
Repair Expense
5,900
Gas and Oil Expense
7,200
Insurance Expense
3,500
$ 1,353,800
$ 1,353,800
Explanation / Answer
Solution:
(1). Adjusting Journal Entries:
(A). Buildings = 1,97,000
Less: Accumulated Dpreci = 54,000
Less: Depreciation = 10,000
Amount = 1,33,000
(B). Equipments = 83,500
Less: Accumulated Deprecia = 42,400
Less: Depreciation = 9,000
Amount = 31,100
(C). Notes Payable = 50,000
Less: Interest =7,000
Amount = 43,00
(D). Salaries = 69,800
80% Selling 69,800 * 80 / 100 = 55,840
20% Adminst 69,800 * 20 / 100 = 13,960
(E). Notes Payable = 43,000
Add: Next Year Payable = 15,000
Amount = 58,000
(1)b. Net Income Caluculation:
Sales 8,86,000
Sales Discounts 4,600
8,81,400
Purchases 7,25,100
Add: Discounts 16,000
= 7,41,100
Fright-in 12,400
Salaries:
80% Selling 55,840
20% Administra 13,960
Utilities Exp 9,400
Repairs Exp 5,900
Insurence Exp 3,500
8,42,100
Net Income = 39,300
(2). Classified Balance Sheet
Assets Amount Liabilities Amount Current Assets Cash 34,400 Acccounts Payable 37,500 Accounts Receivables 71,350 Net Income 31,100 Inventory 90,0000 Land 92,000 Notes Payable 58,000 Buildings 1,33,000 Equipments 31,100 Retained Earnings 67,800 Cmmon Stock 1,00,000 Dividends 10,000 $4,69,225 $ 4,69,225Related Questions
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