You are an accountant for Donovan Co.
- Prepare (a) a single-step income statement, (b) a statement of owner's equity, and (c) a balance sheet in report form from the following data for Donovan Co., taken from the ledger before adjustment on December 31, 2007 [the end of their fiscal year].Make any necessary Adjusting Entries. You may create AJE's and an Adjusted Trial Balance, but they do not need to be included on your .xls product.
- Also state the (d) Quick Ratio for 2007.The Quick Ratio for 2005 and 2006 were determined to be 1.95 and 1.93 respectively. In 2007 by comparison, is your company Improving or Declining?
- The CFO has bet you that the income he projected last year was exactly correct - a net profit of precisely $97,000. (e) Is he right?
- Note that Donovan Company has traditionally included expenses such as Depreciation Expense and Supplies Expense in an account simply called "Administrative Expenses".
The following unadjusted balances were available:
|
Accounts Payable
|
$ 47,200
|
|
Accounts Receivable
|
64,300
|
|
Accumulated Depreciation - Office Equipment22750
|
22,250
|
|
Accumulated Depreciation - Store Equipment
|
62,100
|
|
Administrative Expenses75500
|
74,000
|
|
Al Donovan, Capital
|
141,750
|
|
Cash
|
39,700
|
|
Cost of Merchandise Sold
|
545,000
|
|
Al Donovan, Drawing
|
42,000
|
|
Interest Expense
|
9,000
|
|
Merchandise Inventory
|
93,250
|
|
Note Payable, Due 2008
|
50,000
|
|
Office Equipment
|
49,750
|
|
Prepaid Insurance
|
6,500
|
|
Rent Revenue
|
7,500
|
|
Salaries Payable
|
3,700
|
|
Sales (net)
|
820,500
|
|
Selling Expenses
|
101,500
|
|
Store Equipment
|
125,000
|
|
Office Supplies on Hand Jan 1, 20074000
|
5,000
|
|
|
|
- Office Equipment was purchased in 2005 and Depreciated $500 in 2007.
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- Store Equipment was bought in 2004 and was Fully Depreciated under Sec 179 in that year.
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- A count of Office Supplies on Dec. 31, 2007 indicated that only $4000 of supplies remained on hand.
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