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Required
Use the following information to prepare a multistep income statement and a classified balance sheet for Eller Equipment Co. for Year 1. (Hint: Some of the items will not appear on either statement, and ending retained earnings must be calculated.)
| Salaries expense | $72,000 |
| Beginning retained earnings | $134,150 |
| Common stock | $50,000 |
| Warranties payable (short term) | $2,500 |
| Notes receivable (short term) | $10,000 |
| Gain on sale of equipment | $8,500 |
| Allowance for doubtful accounts | $6,500 |
| Operating expenses | $96,000 |
| Accumulated depreciation | $42,300 |
| Cash flow from investing activities | $125,000 |
| Notes payable (long term) | $80,000 |
| Prepaid rent | $14,000 |
| Salvage value of building | $6,000 |
| Land | $70,000 |
| Interest payable (short term) | $1,500 |
| Cash | $26,300 |
| Uncollectible accounts expense | $7,150 |
| Inventory | $110,500 |
| Supplies | $1,800 |
| Accounts payable | $32,000 |
| Equipment | $97,500 |
| Interest expense | $8,600 |
| Sales revenue | $510,000 |
| Unearned revenue | $26,300 |
| Dividends | $11,500 |
| Cost of goods sold | $310,000 |
| Warranty expense | $9,600 |
| Accounts receivable | $56,000 |
| Interest receivable (short term) | $600 |
| Depreciation expense | $1,000 |
The following accounting information exists for Aspen and Willow companies:
| Aspen | Willow | |
|---|---|---|
| Cash | $30,000 | $20,000 |
| Wages payable | $30,000 | $25,000 |
| Merchandise inventory | $65,000 | $35,000 |
| Building | $95,000 | $95,000 |
| Accounts receivable | $35,000 | $40,000 |
| Long-term notes payable | $145,000 | $110,000 |
| Land | $60,000 | $55,000 |
| Accounts payable | $55,000 | $50,000 |
| Sales revenue | $325,000 | $265,000 |
| Expenses | $295,000 | $230,000 |
Required
a. Identify the current assets and current liabilities and compute the current ratio for each company.
b. Assuming that all assets and liabilities are listed here, compute the debt-to-assets ratios for each company.
c. Determine which company has the greater financial risk in both the short term and the long term.
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