Accounting Problems

E6: The following data pertain to a sole proprietorship:

Sales, $405,000
Cost of Goods Sold, $220,000
Selling Expenses, $90,000
General and Administrative Expenses, $60,000
Interest Expense, $4,000
Interest Income, $3,000

1. Prepare a condensed single-step income statement.
2. Prepare a condensed multistep income statement.

E7: A condensed single-step income statement for Harrington Housewares Company appears below. Present the information in a condensed multistep income statement, and tell what insights can be obtained from the multistep form as opposed to the single-step form.

Harrington Housewares Company
Income Statement
For the Year Ended June 30, 20xx

Revenues
Net sales $1,197,132
Interest income 5,720
Total revenues $1,202,852

Cost and expenses
Cost of goods sold $777,080
Selling expenses 203,740
General and administrative expenses 100,688
Interest expense 13,560
Total costs and expenses
1,095,068
Net income 107,784

E8: The following accounts and balances are from the general ledger of Swan Company.
--Compute the (1) working capital and (2) current ratio.

Accounts Payable $49,800
Accounts Receivable 30,600
Cash 4,500
Current Portion of long-Term Debt, 30,000
Long-Term Investments 31,200
Marketable Securities 37,800
Merchandise Inventory 76,200
Notes Payable- 90 days 45,000
Notes Payable- 2 years 60,000
Notes Receivable- 90 days 78,000
Notes Receivable- 2 years 30,000
Prepaid Insurance 1,200
Property, Plant, and Equipment 180,000
C. Swan, Capital 84,900
Salaries Payable 2,550
Supplies 1,050
Property Taxes Payable 3,750
Unearned Revenue 2,250

E9: The following end-of-year amounts are from the financial statements of Laliberte Company:

Total assets, $852,000; Total liabilities, $344,000; Owner's equity, $508,000; Net sales, $1,564,000; Cost of goods sold, $972,000; Operating expenses, $404,000; and Withdrawals, $80,000. During the past year, total assets increased by $150,000. Total owner's equity was affected only by net income and withdrawals.

--Compute (1) profit margin, (2) asset turnover, (3) return on assets, (4) debt to equity ratio, and (5) return on equity.

E10: A simplified balance sheet and income statement for a sole proprietorship appear below. Total assets and owner's equity at the beginning of 20xx were $360,000 and $280,000, respectively.

1. Compute the following liquidity measures: (a) working capital and (b) current ratio.
2. Compute the following profitability measures: (a) profit margin, (b) asset turnover, (c) return on assets, (d) debt to equity ratio, and (e) return on equity.

Balance Sheet
December 31, 20xx

Assets
Liabilities
Current assets $100,000
Investments 20,000
Property, plant, and equipment
293,000
Intangible assets 27,000

Total assets

$440,000
Current liabilities $40,000
Long-term liabilities 60,000
Total liabilities $100,000

Owner's Equity
P. Cavafy, Capital $340,000
Total liabilities and owner's equity
$440,000

Income Statement
For the Year Ended December 31, 20xx

Net sales
Cost of goods sold
Gross margin
Operating expenses
Net income $820,000
500,000
320,000
270,000
50,000