Wu Company sells outdoor sports equipment. At the December 31, 2010, year end, the following financial information was available from the income statement: administrative expenses, $161,600; cost of goods sold, $700,840; 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; 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; Y. Wu, Capital, $718,600 (ending balance); notes payable (short-term), $100,000; prepaid expenses (short-term), $11,520; and store fixtures, $283,240. Total assets and total owner’s equity at December 31, 2009, were $1,048,800 and $752,340, respectively, and owner’s withdrawals for the year were $120,000. The owner did not make any additional investments in the company during the year.

Required

1. From the information above, prepare

(a) An income statement in single-step form,

(b) A statement of owner’s equity, and

(c) A classified balance sheet.

2. 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. Using the industry averages for the auto and home supply business in Figure through in this chapter, determine whether Wu Company needs to improve its liquidity or its profitability. Explain you answer, making recommendations as to specific areas on which Wu Company should concentrate.