Problem 9-25B Multistep Income Statement and Classified Balance Sheet
Required
Use the following information to prepare a multistep income statement and a classified balance sheet for Brown Company for Year 1. (Hint: Some of the items will not appear on either statement, and ending retained earnings must be calculated.)
| Operating expenses | $45,000 |
| Cash | $46,000 |
| Land | $75,000 |
| Interest receivable (short term) | $1,600 |
| Accumulated depreciation | $46,000 |
| Cash flow from investing activities | ($96,000) |
| Accounts payable | $35,000 |
| Allowance for doubtful accounts | $14,000 |
| Unearned revenue | $27,000 |
| Interest payable (short term) | $6,000 |
| Warranties payable (short term) | $4,500 |
| Sales revenue | $900,000 |
| Equipment | $96,000 |
| Uncollectible accounts expense | $25,000 |
| Notes payable (long term) | $140,000 |
| Interest expense | $16,000 |
| Salvage value of equipment | $10,000 |
| Accounts receivable | $88,000 |
| Dividends | $15,000 |
| Salaries payable | $48,000 |
| Warranty expense | $7,200 |
| Supplies | $4,500 |
| Beginning retained earnings | $41,100 |
| Prepaid rent | $18,000 |
| Interest revenue | $4,200 |
| Common stock | $90,000 |
| Gain on sale of equipment | $7,000 |
| Cost of goods sold | $575,000 |
| Inventory | $126,000 |
| Salaries expense | $102,000 |
| Notes receivable (short term) | $12,500 |
| Building | $110,000 |
Problem 9-26B Using Ratios to Make Comparisons
The following accounting information exists for Collie and Spaniel companies:
| Collie | Spaniel | |
|---|---|---|
| Cash | $12,000 | $15,000 |
| Wages payable | $10,000 | $12,000 |
| Merchandise inventory | $20,000 | $55,000 |
| Building | $90,000 | $80,000 |
| Accounts receivable | $22,000 | $25,000 |
| Long-term notes payable | $80,000 | $100,000 |
| Land | $35,000 | $40,000 |
| Accounts payable | $25,000 | $35,000 |
| Sales revenue | $220,000 | $250,000 |
| Expenses | $190,000 | $230,000 |
Required
a. Identify the current assets and current liabilities, and calculate the current ratio for each company.
b. Assuming all assets and liabilities are listed here, calculate the debt-to-assets ratio for each company.
c. Determine which company has 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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