CHAPTER 18
Cookie Creations
(Note: This is a continuation of the Cookie Creations from Chapters 1 through 17.)
CC18 The balance sheet and income statement of Cookie & Coffee Creations Inc. for
its first year of operations, the year ended October 31, 2018, follows.
COOKIE & COFFEE CREATIONS INC.
Balance Sheet
October 31, 2018
Assets
Current assets
Cash
$32,219
Accounts receivable
3,250
Inventory
17,897
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable
$5,848
Income taxes payable
18,500
Dividends payable
700
Salaries and wages payable
2,250
Interest payable
188
Notes payable—current portion
Notes payable—long-term portion
Stockholders’ equity
Paid-in capital
Preferred stock, 2,800 shares issued and outstanding
$14,000
Common stock, 25,930 shares issued, 25,180
outstanding
25,930
39,930
Retained earnings
Total paid-in capital and retained earnings
112,530
Less: Treasury stock—common (750 shares), at cost
$149,516
Prepaid Rent
6,300
Property, plant, and equipment
Equipment
$99,700
Accumulated depreciation—equipment
$149,516
COOKIE & COFFEE CREATIONS INC.
Income Statement
Year Ended October 31, 2018
Sales Revenue
$462,500
Cost of goods sold
231,250
Gross profit
231,250
Additional information:
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
Instructions
(a) Calculate the following ratios.
1. Current ratio 6. Gross profit rate
2. Accounts receivable turnover 7. Profit margin
3. Inventory turnover 8. Asset turn
Operating expenses
9,850
138,337
Other expenses
Income before income tax
Income tax expense
Net income