Finance Accounting Homework

Project I

The trial balance of the Wall Fashion Center, Inc. contained the following accounts at December 31, 2017 the end of the company’s calendar year.

Adjustment data:

1. Store supplies on hand totaled $3,500.

2. Depreciation is $9,000 on the store equipment and $7,000 on the delivery equipment.

3. Interest of $11,000 is accrued on notes payable at December 31.

Other data:

1. Merchandise inventory on hand at December 31, 2017 is $45,000.

2. Salaries expense is 70% selling and 30% administrative.

3. Rent expense and utilities expense are 80% selling and 20% administrative.

4. $30,000 of notes payable are due for payment next year.

5. Repair expense is 100% administrative.

6. The beginning balance of accounts receivable is $31,250.

7. The amount of total assets at the beginning of the year is $199,700.

1. 1. Journalize the adjusting entries.

   2. Prepare a multiple-step income statement and a retained earnings statement for the year and a classified balance sheet as of December 31, 2017.

   3. Journalize the closing entries.

   4. Prepare a post-closing trial balance.

   5. Prepare the following ratios and show all support for your computations:

a) Current Ratio

b) Quick Ratio

c) Working Capital

d) Accounts Receivable Turnover

e) Average Collection Period

f) Inventory Turnover

g) Days in Inventory

h) Debt to Total Assets Ratio

i) Gross Profit Ratio

j) Profit Margin Ratio

k) Return on Assets Ratio

l) Asset Turnover Ratio

6) Based on the ratios computed in 5) above, answer the following questions and use the financial statement ratios to support your answers where appropriate:

• Do you feel that the company is able to meet its current and long term obligations as they become due?

• Comment on the profitability of the company with respect to the various profitability ratios that you computed.

• Would you lend money to this company for the long term?

• Comment on the ability of the company to collect its receivables and mange inventory.