Problem 9-25A Multistep income statement and classified balance sheet
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 |
Problem 9-26A Using ratios to make comparisons
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.
Dr. Eve Carter PhD, Applied Mathematics
Senior lecturer at University. 12+ years tutoring algebra and calculus..
Senior lecturer at University. 12+ years tutoring algebra and calculus..
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