Good to Go Auto Products distributes automobile parts to service stations and repair shops. The adjusted
INSTRUCTIONS
- 1. Prepare a classified income statement for the year ended December 31, 2019. The expense accounts represent warehouse expenses, selling expenses, and general and administrative expenses.
- 2. Prepare a statement of owner’s equity for the year ended December 31, 2019. No additional investments were made during the period.
- 3. Prepare a classified
balance sheet as of December 31, 2019. The mortgage payable extends for more than one year.
ACCOUNTS
Analyze: What percentage of total operating expenses is attributable to warehouse expenses?
1.
Show the Classified Income Statement.
Explanation of Solution
Classified Income statement: The classified income statement is a financial statement that shows the revenues, expenses with various classifications and sub-totals. The classified income statement is used for complex income statement as its more easily understandable.
Prepare the classified income statement:
Company GGAP | ||||
Income Statement | ||||
Year Ended December 31, 2019 | ||||
Particulars | Amount ($) | Amount ($) | Amount ($) | Amount ($) |
Operating Revenue | ||||
Sales | $1,110,300 | |||
Less: Sales Returns and Allowances | $8,400 | |||
Net Sales | $1,101,900 | |||
Cost of Goods Sold | ||||
Merchandise Inventory, January 1, 2019 | $131,400 | |||
Purchases | $463,000 | |||
Freight In | $9,800 | |||
Delivered Cost of Purchases | $472,800 | |||
Less: Sales Returns and Allowances | $13,650 | |||
Purchases Discount | $9,240 | $22,890 | ||
Net Delivered Cost of Purchases | $449,910 | |||
Total Merchandise Available for sale | $581,310 | |||
Less: Merchandise Inventory, closing | $128,500 | |||
Cost of Goods Sold | $452,810 | |||
Gross Profit on Sales | $649,090 | |||
Operating Expenses | ||||
Warehouse Expenses | ||||
Warehouse Wages Expense | $108,600 | |||
Warehouse Supplies Expense | $5,800 | |||
Depreciation Expense — Warehouse Equipment | $3,400 | |||
Total Warehouse Expense | $117,800 | |||
Selling Expenses | ||||
Salaries Expense—Sales | $151,700 | |||
Travel Expense | $24,000 | |||
Delivery Expense | $37,425 | |||
Total Selling Expense | $213,125 | |||
General and Administrative Expenses | ||||
Salaries Expense—Office | $85,000 | |||
Office Supplies Expense | $1,220 | |||
Insurance Expense | $9,875 | |||
Utilities Expense | $8,000 | |||
Telephone Expense | $3,280 | |||
Payroll Taxes Expense | $31,600 | |||
Building Repair Expense | $3,700 | |||
Property Taxes Expense | $16,400 | |||
Uncollectible Accounts Expense | $3,580 | |||
Depreciation Expense - Building | $5,600 | |||
Depreciation Expense - Office Equipment | $1,620 | |||
Total General and Admin. Expenses | $169,875 | |||
Total Operating Expenses | $500,800 | |||
Income from Operations | $148,290 | |||
Other Income | ||||
Interest Income | $580 | |||
Other Expense | ||||
Interest Expense | $4,000 | |||
Net Non-operating expenses | $3,420 | |||
Net income for the year | $144,870 |
Table (1)
2.
Show the Statement of Owner's equity.
Explanation of Solution
Statement of owner's’ equity: This statement reports the beginning owner’s equity and all the changes which led to ending owner's’ equity.
Prepare the Statement of owner's’ equity:
Company GGAP | ||
Statement of Owner's Equity | ||
Year Ended December 31, 2019 | ||
Particulars | Amount ($) | Amount ($) |
CB Capital, January 1, 2019 | $326,870 | |
Net income for the year | $144,870 | |
Deduct - Withdrawals | $70,650 | |
Increase in Capital | $74,220 | |
CB Capital, December 31, 2019 | $401,090 |
Table (2)
3.
Show the Classified Balance Sheet and compute the total operating expenses percentage related to the warehouse expenses.
Explanation of Solution
Classified balance sheet: The main elements of balance sheet assets, liabilities, and stockholders’ equity are categorized or classified further into sections, and sub-sections in a classified balance sheet. Assets are further classified as current assets, long-term investments, property, plant, and equipment (PPE), and intangible assets. Liabilities are classified into two sections current and long-term. Stockholders’ equity comprises of common stock and retained earnings. Thus, the classified balance sheet includes all the elements under different sections.
Prepare the classified balance sheet:
Company GGAP | |||
Balance Sheet | |||
December 31, 2019 | |||
Particulars | Amount ($) | Amount ($) | Amount ($) |
Assets | |||
Current Assets | |||
Cash | $99,000 | ||
Petty Cash Fund | $600 | ||
Notes receivable | $15,000 | ||
Accounts receivable | $140,200 | ||
Less: Allowance for Doubtful Debts | $3,800 | $136,400 | |
Merchandise Inventory | $128,500 | ||
Interest Receivable | $150 | ||
Prepaid expenses | |||
Warehouse Supplies | $3,300 | ||
Store Supplies | $700 | ||
Prepaid insurance | $4,640 | $8,640 | |
Total Current Assets | $388,290 | ||
Plant and Equipment | |||
Land | $16,000 | ||
Building | $107,000 | ||
Less: Accumulated Depreciation | $16,700 | $90,300 | |
Warehouse Equipment | $19,800 | ||
Less: Accumulated Depreciation | $9,500 | $10,300 | |
Office Equipment | $9,400 | ||
Less: Accumulated Depreciation | $3,900 | $5,500 | |
Total Plant and Equipment | $122,100 | ||
Total Assets | $510,390 | ||
Liabilities and Owner's Equity | |||
Current Liabilities | |||
Notes Payable | $15,000 | ||
Accounts payable | $56,900 | ||
Interest Payable | $400 | ||
Total Current Liabilities | $72,300 | ||
Long Term Liabilities | |||
Mortgage payable | $20,000 | ||
Loans Payable | $17,000 | ||
Total Long-Term Liabilities | $37,000 | ||
Total Liabilities | $109,300 | ||
Owner's Equity | |||
CR Capital | $401,090 | ||
Total Liabilities and Owner's Equity | $510,390 |
Table (3)
Operating expenses: The expenses which are incurred in day-to-day business activities but not directly allied with the production of goods and service are called operating expenses. They are classified under three big categories: “administrative expenses, selling expenses, and general expenses”. The operating expenses exclude the financing expenses.
Compute the Operating expenses percentage:
The total operating expenses percentage related to the warehouse expenses is 23.52%.
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