5. Draw up a comparative profit and loss statement of the Interurban Railway Company for the years ended December 31, 19— and December 31 of the previous year from the information submitted in Problem 4 and the following data for the year ended December 31 of the previous year:
- Operating revenues $181,016.11.
- Other income $526.52.
- Operating expenses $122,143.23.
- Deductions from income:
- Interest on the first mortgage bonds $8,750.
- Interest on notes payable $6,030.
- Taxes $13,634.59.
VII
1. The financial condition of the Subway Seller at the beginning of the year is shown by the following balance sheet:
The Subway Seller
Balance Sheet
January 1, 19—
| Assets | |||||
| Current Assets: | |||||
| Cash | $100,000.00 | ||||
| Notes Receivable | 15,000.00 | ||||
| Accounts Receivable | 225,000.00 | ||||
| Merchandise Inventory | 450,000.00 | ||||
| Liberty Bonds | 50,000.00 | $840,000.00 | |||
| Deferred Charges: | |||||
| Prepaid Insurance | $ 25,000.00 | ||||
| Supplies Inventory | 20,000.00 | 45,000.00 | |||
| Fixed Assets: | |||||
| Furniture and Fixtures | $ 30,000.00 | ||||
| Delivery Equipment | 18,000.00 | ||||
| Buildings | 350,000.00 | ||||
| Land | 200,000.00 | 598,000.00 | $1,483,000.00 | ||
| Liabilities | |||||
| Current Liabilities: | |||||
| Notes Payable | $300,000.00 | ||||
| Accounts Payable | 20,000.00 | ||||
| Accrued Expenses: | |||||
| Salaries | 12,000.00 | ||||
| Taxes | 25,000.00 | ||||
| Interest on Mortgage | 10,500.00 | $367,500.00 | |||
| Fixed Liabilities: | |||||
| Mortgage on Land and Bldg | 350,000.00 | 717,500.00 | |||
| Net Worth | |||||
| Represented by: | |||||
| Capital Stock | $500,000.00 | ||||
| Surplus | 265,500.00 | $ 765,500.00 | |||
At the end of the year the following facts are taken from the books of account:
- The profit and loss records show:
- Sales $2,125,000.
- Sales returns and allowances $15,000.
- Purchases for the year $1,200,000.
- In-freight $15,000.
- Purchase returns and allowances $8,000.
- Advertising $125,000.
- Sales salaries $190,000.
- Delivery expense $50,000.
- Depreciation on furniture and fixtures $3,000,
- and on delivery equipment $2,250.
- Superintendence $50,000.
- Clerical salaries $75,000.
- Repairs and maintenance $20,000.
- Supplies $30,000.
- Insurance $60,000.
- Telephone and telegraph $10,000.
- Bad debts $10,625.
- Depreciation on building $14,000.
- Taxes $30,000.
- Interest on notes payable $15,000.
- Interest on the mortgage $21,000.
- Sales discounts $15,000.
- Interest received on Liberty bonds $2,000.
- Purchase discounts $24,000.
- The balance sheet records show:
- Cash $141,000.
- Notes receivable $15,000.
- Accounts receivable $335,000.
- A reserve for doubtful accounts of $10,625.
- Merchandise inventory $350,000.
- Prepaid insurance $15,000.
- Supplies inventory $30,000.
- Furniture and fixtures $27,000.
- Delivery equipment $15,750.
- Building $336,000.
- Notes payable $300,000.
- Accounts payable $25,000.
- Accrued sales salaries $15,000.
- Accrued taxes $30,000.
- Accrued interest on mortgage $10,500.
- Mortgage on land and building $250,000.
Other figures on the balance sheet of January 1, 19— have remained unchanged excepting surplus, the amount of which you are required to determine.
- From the above information:
- (a) Prepare a comparative balance sheet.
- (b) Prepare a statement of profit and loss.
- (c) Determine the following ratios:
- 1. Current assets to current liabilities
- 2. Working capital turnover
- 3. Merchandise turnover
- 4. Accounts receivable to sales
- (Assume a normal credit period of 60 days)
- 5. Net profit to net worth
- 6. Gross profit to net sales
- 7. Selling expenses to net sales
- 8. Net operating expenses to net sales
- 9. Net profit to net sales