Superior Hardwood Company distributes hardwood products to small furniture manuf

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.

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?

ACCOUNTS Debit Credit Cash $ 23,800 Petty Cash Fund 500 Notes Receivable, due 2020 11,500 Accounts Receivable 93,000 Allowance for Doubtful Accounts $ 5,700 Merchandise Inventory 231,000 Warehouse Supplies 2,830 Office Supplies 1,390 Prepaid Insurance 9,300 Land 43,000 Building 175,000 Accumulated Depreciation—Building 52,200 Warehouse Equipment 35,500 Accumulated Depreciation—Warehouse Equipment 16,500 Delivery Equipment 49,500 Accumulated Depreciation—Delivery Equipment 19,000 Office Equipment 23,500 Accumulated Depreciation—Office Equipment 11,100 Notes Payable, due 2020 19,900 Accounts Payable 38,700 Interest Payable 550 Mortgage Payable 59,500 Loans Payable, Long-term 15,500 Charles Ronie, Capital (Jan. 1) 443,260 Charles Ronie, Drawing 126,700 Income Summary 241,000 231,000 Sales 1,679,000 Sales Returns and Allowances 17,900 Interest Income 1,550 Purchases 764,000 Freight In 13,500 Purchases Returns and Allowances 8,140 Purchases Discounts 10,860 Warehouse Wages Expense 196,600 Warehouse Supplies Expense 6,800 Depreciation Expense—Warehouse Equipment 5,500 Salaries Expense—Sales 266,200 Travel and Entertainment Expense 21,200 Delivery Wages Expense 60,030 Depreciation Expense—Delivery Equipment 9,500 Salaries Expense—Office 70,300 Office Supplies Expense 3,700 Insurance Expense 5,900 Utilities Expense 8,990 Telephone Expense 6,220 Payroll Taxes Expense 57,500 Property Taxes Expense 5,300 Uncollectible Accounts Expense 5,500 Depreciation Expense—Building 8,700 Depreciation Expense—Office Equipment 3,700 Interest Expense 7,900 Totals $ 2,612,460 $ 2,612,460

Explanation / Answer

Superior Hardwood Company

Classified Income Statement

For the year ended December 31, 2019

Sales revenue;

Sales

$1679000

Less: Sales Return & Allowances

($17900)

Net sales revenue

$1661100

Less: Cost of Goods Sold;

Merchandise Inventory, Beginning

$241000

Purchases

$764000

Less: Purchases Discount

($10860)

Less: Purchases Returns & Allowances

($8140)

Net Purchases

$745000

Goods Available for Sale

$986000

Add: Freight In

$13500

Net Cost of Goods Purchased

$999500

Less: Merchandise Inventory, Ending

($231000)

Cost of Goods Sold

($768500)

Gross Margin

$892600

Warehouse Expenses;

Warehouse Wages Expenses

$196600

Warehouse Supplies Expenses

$6800

Depreciation Exp. - Warehouse Equipment

$5500

Total warehouse Expenses

($208900)

Selling Expenses;

Salaries Expenses – Sales

$266200

Travel & Entertainment Exp.

$21200

Delivery Wages Expenses

$60030

Depreciation Exp. - Delivery Equipment

$9500

Total Selling Expenses

($356930)

General & Administrative Expenses;

Salaries Expenses – Office

$70300

Office Supplies Expenses

$3700

Insurance Expenses

$5900

Utilities Expenses

$8990

Telephone Expenses

$6220

Payroll Taxes Expenses

$57500

Property Taxes Expenses

$5300

Uncollectible Account Expenses

$5500

Depreciation Expense – Building

$8700

Depreciation Expense - Office Equipment

$3700

Total General & Administrative Expenses

($175810)

Net Operating Income

$150960

Other Income & Losses;

Interest Revenue

$1550

Interest Expense

($7900)

Net other income & Losses

($6350)

Net Income (Loss)

$144610

Owners' Equity Statement

As on Dec. 31, 2019

Charles Ronie, Capital

$443260

Add: Net income (Loss)

$144610

Less: Chales Ronie, Drawings

($126700)

Ending balance

$461170

Superior Hardwood Company

Classified Balance Sheey

As on December 31, 2019

Current assets;

Cash

$23800

Petty Cash Fund

$500

Notes Receivable

$11500

Accounts Receivable

$93000

Less: Allowance for Doubtful Accounts

(5700)

Net Accounts Receivable

$87300

Merchandise Inventory

$231000

Warehouse Supplies

$2830

Office Supplies

$1390

Prepaid Insurance

$9300

Total Current Assets

$367620

Property, Plant & Equipment

Land

$43000

Building

$175000

Less: Accumulated Depreciation – Building

($52200)

$122800

Warehouse Equipment

$35500

Less: Accumulated Depreciation - Warehouse Equip.

($16500)

$19000

Delivery Equipment

$49500

Less: Accumulated Depreciation - Delivery Equip.

($19000)

$30500

Office Equipment

$23500

Less: Accumulated Depreciation - Office Equip.

($11100)

$12400

Total Property, Plant & Equipment

$227700

Total Assets

$595320

Liabilities & Owners' Equity;

Liabilities;

Current liabilities;

Notes Payable

$19900

Accounts Payable

$38700

Interest Payable

$550

Total current liabilities

$59150

Non-current liabilities;

Mortgage Payable

$59500

Loans Payable - Long Term

$15500

Total Non-current liabilities

$75000

Total Liabilities

$134150

Owners' Equities (Balance of Owners’ equity)

$461170

Total Laibilities & Owners' Equity

$595320

Current ratio = 6.21 (Approx.)

Explanation;

Formula of current ratio = Current assets / Current liabilities

Current assets = $367620

Current liabilities = $59150

Thus current ratio ($367620 / $59150) = 6.21

Superior Hardwood Company

Classified Income Statement

For the year ended December 31, 2019

Sales revenue;

Sales

$1679000

Less: Sales Return & Allowances

($17900)

Net sales revenue

$1661100

Less: Cost of Goods Sold;

Merchandise Inventory, Beginning

$241000

Purchases

$764000

Less: Purchases Discount

($10860)

Less: Purchases Returns & Allowances

($8140)

Net Purchases

$745000

Goods Available for Sale

$986000

Add: Freight In

$13500

Net Cost of Goods Purchased

$999500

Less: Merchandise Inventory, Ending

($231000)

Cost of Goods Sold

($768500)

Gross Margin

$892600

Warehouse Expenses;

Warehouse Wages Expenses

$196600

Warehouse Supplies Expenses

$6800

Depreciation Exp. - Warehouse Equipment

$5500

Total warehouse Expenses

($208900)

Selling Expenses;

Salaries Expenses – Sales

$266200

Travel & Entertainment Exp.

$21200

Delivery Wages Expenses

$60030

Depreciation Exp. - Delivery Equipment

$9500

Total Selling Expenses

($356930)

General & Administrative Expenses;

Salaries Expenses – Office

$70300

Office Supplies Expenses

$3700

Insurance Expenses

$5900

Utilities Expenses

$8990

Telephone Expenses

$6220

Payroll Taxes Expenses

$57500

Property Taxes Expenses

$5300

Uncollectible Account Expenses

$5500

Depreciation Expense – Building

$8700

Depreciation Expense - Office Equipment

$3700

Total General & Administrative Expenses

($175810)

Net Operating Income

$150960

Other Income & Losses;

Interest Revenue

$1550

Interest Expense

($7900)

Net other income & Losses

($6350)

Net Income (Loss)

$144610

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