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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
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
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
