Reference no: EM13776557

Problem Classified Balance Sheet

The following balance sheet items, listed in alphabetical order, are available from the records of

 Ruth Corporation at December 31, 2014:

 Accounts payable $ 18,255 Income taxes payable $ 6,200

 Accounts receivable 23,450 Interest payable 1,500

 Accumulated depreciation-automobiles 22,500

 Inventory 45,730

 Land 250,000

 Accumulated depreciation-buildings 40,000

 Long-term investments 85,000

 Automobiles 112,500

 Notes payable, due June 30, 2015 10,000

 Office supplies 2,340

 Bonds payable, due December 31, 2018 160,000

 Paid-in capital in excess of par value 50,000

 Patents 40,000

 Buildings 200,000 Prepaid rent 1,500

 Capital stock, $10 par value 150,000

Retained earnings 311,095

 Cash 13,230

Salaries and wages payable 4,200

Questions

1. Prepare in good form a classified balance sheet as of December 31, 2014.

2. Compute Ruth's current ratio.

3. On the basis of your answer to (2), does Ruth appear to be liquid? What other information do you need to fully answer that question? 

Problem 2 Single Step Income Statement

The following income statement items, arranged in alphabetical order, are taken from the records of Shaw Corporation for the current year:

 Advertising expense $ 1,500

Interest expense $ 1,400

Commissions expense 2,415

Interest revenue 1,340

 Cost of goods sold 29,200

 Rent revenue 6,700

 Depreciation expense-office building 2,900

 Salaries and wages expense-office 12,560

 Income tax expense 1,540

Sales revenue 48,300

 Insurance expense-salesperson's auto 2,250

Supplies expense-office 890

Questions

 1. Prepare a single-step income statement for the current year.

 2. What weaknesses do you see in this form for the income statement? 

Problem Multiple-Step Income Statement and Profit Margin

Refer to the list of income statement items in Problem 2-6. Assume that Shaw Corporation classifies all operating expenses into two categories: (1) selling and (2) general and administrative.

Questions

 1. Prepare a multiple-step income statement for the current year.

 2. What advantages do you see in this form for the income statement?

 3. Compute Shaw's profit margin.

 4. Comment on Shaw's profitability. What other factors need to be taken into account to assess Shaw's profitability?