50.1K

Verified Solution

Link Copied!

CC18The balance sheet and income statement of Cookie & Coffee Creations Inc. for its first year of operations, the year ended October 31, 2024, follows.

COOKIE & COFFEE CREATIONS INC.

Balance Sheet

October 31, 2024

Assets
Current assets
Cash		$28,355
Accounts receivable		2,860
Inventory		15,750
Prepaid rent		5544	$52,509
Property, plant, and equipment
Equipment		$87,736
Accumulated depreciationequipment		(8,668)	79,068
Total assets			$131,577
Liabilities and Stockholders Equity
Current liabilities
Accounts payable		$5,093
Income taxes payable		16280
Dividends payable		616
Salaries and wages payable		1,980
Interest payable		220
Notes payablecurrent portion		3,520	$27,709
Long-term liabilities
Notes payablelong-term portion			5,280
Total liabilities			32,989
Stockholders equity
Paid-in capital
Preferred stock, 2,464 shares issued and outstanding	$12320
Common stock, 22,820 shares issued, 25,160 outstanding	22,820	35,140
Retained earnings		63,888
Total paid-in capital and retained earnings		99,028
Less: Treasury stockcommon (750 shares), at cost		(440)
Total stockholders equity		98,588
Total liabilities and stockholders equity			$131,577

COOKIE & COFFEE CREATIONS INC. Income Statement Year Ended October 31, 2024
Sales revenue		$407,000
Cost of goods sold		203,500
Gross profit		203,500
Operating expenses
Salaries and wages expense	$81,400
Depreciation expense	8,668
Other operating expenses	31,548	121,616
Income from operations		81,884
Other expenses
Interest expense		484
Income before income tax		81,400
Income tax expense		16,280
Net income		$65,120

Natalie and Curtis are thinking about borrowing an additional $20,000 to buy more equipment. The loan would be repaid over a 4-year period. The terms of the loan provide for equal semiannual installment payments of $2,500 on May 1 and November 1 of each year, plus interest of 5% on the outstanding balance. Dividends on preferred stock were $1,400. Since this is the first year of operations and the beginning balances are zero, use the ending balance as the average balance where appropriate.

(a) Calculate the following ratios.

1. Current ratio 6. Gross profit rate

2. Accounts receivable turnover 7. Profit margin

3. Inventory turnover 8. Asset turnover

4. Debt to assets ratio 9. Return on assets

5. Times interest earned 10. Return on common stockholders' equity

Answer & Explanation Solved by verified expert

See Answer