Statement of earnings, a statement of retained earnings
The balance sheet ( attached )
Use the reading on preparing financial statements provided in the course pack, the course text chapter examples to prepare these statements.
Various balance sheet and statements of earnings accounts for Home Restoration Outlet Ltd. are listed below in random order. You will have to determine which account goes in which statement to solve the questions.
The balance sheet accounts are as of December 31, 2005, except as noted. The statement of earnings amounts are for the year January 1 to December 31, 2005. All accounts are shown in thousands of dollars.
1) Prepare a statement of earnings, a statement of retained earnings, and a balance sheet.
2) Explain the relationship between financial statements and why it is useful for managers to understand all three.
3) Perform a “current ratio” analysis for the company and explain the company’s liquidity position.
Balance sheet and statement of earnings accounts
Retained earnings, Dec 31, 2004 $255
Inventory, Dec 31, 2004 $425
Note payable, due Feb 2006 $25
Selling expenses $482
Accounts payable $85
Accounts receivable $104
Income tax rate 50%
Building and equipment, cost $150
Total Long term loan, due June 2015 $110
– 2006 portion $10 ($10 of the $110)
Income tax payable $25
Marketable securities $30
Depreciation expense, building and equipment $23
General and administrative expenses $215
Cost of goods sold $1,419
Other expenses, interest $20
Prepaid expenses $42
Common stock $130
“Accumulated depreciation, build. & equip. Dec 31, 2004” $53
Explain the relationship between financial statements and why it is useful for managers to understand all three.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more