Wu Corporation sells outdoor sports equipment. At the December 31, 20x6, year end, the following financial information was available from the income statement: administrative expenses, $161,600; cost of goods sold,

$700,840; income taxes, $14,000; interest expense, $45,280; interest income, $5,600; net sales, $1,428,780; and selling expenses, $440,400.

The following information was available from the balance sheet (after closing entries were made): accounts payable, $65,200; accounts receivable, $209,600; accumulated depreciation–delivery equipment, $34,200;

accumulated depreciation–store fixtures, $84,440; cash, $56,800; common stock, $1 par value, 20,000 shares authorized, issued, and outstanding,

$20,000; delivery equipment, $177,000; inventory, $273,080; investment in securities (long-term), $112,000; investment in U.S. government securities

(short-term), $79,200; long-term notes payable, $200,000; paid-in capital in excess of par value, $180,000; retained earnings, $518,600 (ending balance); notes payable (short-term), $100,000; prepaid expenses (shortterm), $11,520; and store fixtures, $283,240.

Total assets and total stockholders’ equity at December 31, 20x5, were

$1,048,800 and $766,340, respectively, and dividends for the year were

$120,000.

Required 1. From the information above, prepare

(a) an income statement in singlestep form,

(b) a statement of retained earnings, and

(c) a classified balance sheet.

2. User Insight: From the statements you have prepared, compute the following measures:

(a) working capital and current ratio (for liquidity); and

(b) profit margin, asset turnover, return on assets, debt to equity ratio, and return on equity (for profitability).

3. User Insight: Using the industry averages for the auto and home supply business in Figures 4 through 9 in this chapter, determine whether Wu Corporation needs to improve its liquidity or its profitability. Explain your answer, making recommendations as to specific areas on which Wu Corporation should concentrate.