In Class Activity: Use Northeast Art Supply's Income Statement and Balance Sheet rom your text, I have told you which statement to find the number: KEY: (IS) = Income Statement (BS) = Balance Sheet 1. Measuring a Firm's ability to earn profits Return on Sales Net income after Taxes (IS) =$. Net Sales (IS) $ 2. Meauring a Firm's ability to pay debts Current Ratio = Current Assets (BS)_= $_ Current Liabilities (BS) $ 3. Measuring a well a firm manages inventory times per year Inventory Turnover = Cost of Goods Sold (IS) E S. Average Inventory* (S) $ *Average Inventory - Beginning Inventory + Ending Inventory NORTHEAST ART SUPPLY, INC. Balance Shoot December 31, 2004 ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY Current abilities Accounts payable Nofes payable Salarios payable Taxes payable Total current tabuities $ 35,000 25.675 4.000 5325 $70,000 Current assets Cash $ 59.000 Marketable securities 10,000 Accounts receivable $ 40,000 Less towance for doubtful accounts 2.000 38,000 Notes ovat 32.000 Merchandise inventory 41.000 Prepaid expenses 2.000 Tot current assets Pored assets Dobryum $110.000 Lase accumulated depreciation 20,000 $80,000 Future and store equipment 562.000 Lass accurated depreciation 15,000 47.000 Total food asset $182.000 Long-term abilities Mortgage payable on store oguipment $40.000 Total long-term is $ 40.000 TOTAL LIABILITIES $110.000 137000 Stockholders Common stock 5.000.00 Retained earnings $ 150.000 B0000 Intangible sets Patents Total intangibles TOTAL ASSETS 521.000 21.000 TOTAL OWNERS' EQUITY 1540.000 TOTAL LIABILITIES AND OWNERS' EQUITY 230.000 $340.000 NE NORTHEAST ART SUPPLY, INC. Income Statement for the Year Ended December 31, 20XX Revenues Gross sales Less salse retums and allowances Less sales discounts Net sales $405,000 $ 9,500 4,500 14,000 $451,000 $ 40,000 $345.000 11.000 Cost of goods sold Beginning inventory, January 1, 20XX Purchases Lees purchase discounts Net purchases Cost of goods available for sale Leos ending inventory December 31, 20XX Cost of goods sold Gross profit 335,000 $375,000 41,000 334.000 $117.000 $ 22,000 4.000 2.500 3,000 4.000 1,500 $ 37,000 Operating expenses Selling expenses Sales salaries Advertising Sales promotion Depreciation-store equipment Depreciation-delivery equipment Miscellaneous selling expenses Total selling expenses General expenses Office salaries Rant Depreciation-furniture Utilities expense Insurance expense Miscellaneous expense Total general expense Total operating expenses Not income from operations Less interest expondo NET INCOME BEFORE TAXES Les federe income taxes NET INCOME AFTER TAXES $ 20,500 8,500 1,500 2.500 1.000 500 22.500 79.500 $ 37,500 2,000 $ 35,500 30.175