Assignment: Chapter 2 homework

1.

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Missing Income Statement Amounts

For each of the following cases, fill in the blank with the appropriate dollar amount.

Sara's Coffee Shop Amy's Deli Jane's Bagels

Net sales	$32,400 $ $71,300 _________________
Cost of goods sold	23,000 _________________ _________________
Gross profit	6,500 35,300 _________________
Selling expenses	2,800 8,200 _________________
General and administrative expenses	1,400 5,600 _________________
Total operating expenses	17,200 14,600 _________________
Net income	$2,300 $18,100 $21,000

2.

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Statement of Retained Earnings

Landon Corporation was organized on January 2, 2012, with the investment of $100,000 by each of its two stockholders. Net income for its first year of business was $87,220. Net income increased during 2013 to $127,340 and to $148,990 during 2014. Landon paid $21,000 in dividends to each of the two stockholders in each of the three years.

Required:

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Financial Statement Classification

Potential stockholders and lenders are interested in a company's financial statements. Identify the statement balance sheet, income statement, or retained earnings statementon which each of the following items would appear.

Note that some items may be related to more than one financial statement.

Accounts Financial Statement

1. Accounts payable		_________________
2. Accounts receivable		_________________
3. Advertising expense		_________________
4. Bad debt expense		_________________
5. Bonds payable		_________________
6. Buildings		_________________
7. Cash		_________________
8. Common stock		_________________
9. Depreciation expense		_________________
10. Dividends		_________________
11. Land held for future expansion		_________________
	12. Loan payable		_________________
	13. Office supplies		_________________
	14. Patent		_________________
	15. Patent amortization expense		_________________
	16. Prepaid insurance		_________________
	17. Retained earnings		_________________
	18. Sales		_________________
	19. Utilities expense		_________________
	20. Wages payable		_________________

4.

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Classified Balance Sheet

The following balance sheet items, listed in alphabetical order, are available from the records of Ruth Corporation at December 31, 2014:

Accounts payable		$17,940	Income taxes payable	$5,885
Accounts receivable		21,920	Interest payable	1,545
Accumulated depreciation - automobiles		24,630	Inventory	42,190
Accumulated depreciation - buildings		36,160	Land	275,000
Automobiles		123,150	Long-term investments	87,845
Bonds payable, due December 31, 2018		159,000	Notes payable, due June 30, 2015	10,000
Buildings		180,800	Office supplies	2,195
Capital stock, $10 par value		148,000	Paid-in capital in excess of par value	55,000
Cash		13,690	Patents	38,000
			Prepaid rent	1,580
			Retained earnings	323,860
			Salaries and wages payable	4,350

Required:

Compute Ruth's current ratio. Round your answer to two decimal places.

_________________ to 1

On the basis of your answer to (2), does Ruth appear to be liquid? _________________

5.

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Multiple-Step Income Statement and Profit Margin

The following income statement items, arranged in alphabetical order, are taken from the records of Shaw Corporation for the current year:

	Advertising expense		$1,380		Interest expense		$1,273
	Commissions expense		2,592		Interest revenue		1,374
Cost of goods sold		29,251		Rent revenue		6,810
Depreciation expense - office building		2,944		Salaries and wages expenseoffice		11,411
Income tax expense		1,554		Sales revenue		48,216
Insurance expense - salespersons auto		2,151		Supplies expenseoffice		825

Required:

Assume that Shaw Corporation classifies all operating expenses into two categories: (1) selling and (2) general and administrative.

2. Compute Shaw's profit margin. Round your answer to one decimal place. _________________ %

6.

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Statement of Cash Flows

Colorado Corporation was organized at the beginning of the year, with the investment of $250,000 in cash by its stockholders. The company immediately purchased an office building for $300,000, paying $210,000 in cash and signing a three-year promissory note for the balance. Colorado signed a five-year, $60,000 promissory note at a local bank during the year and received cash in the same amount. During its first year, Colorado collected $93,970 from its customers. It paid $65,600 for inventory, $20,400 in salaries and wages, and another $3,100 in taxes. Colorado paid $5,600 in cash dividends.

Required: