Natalie and Curtis have comparative balance sheets and income statements for Cookie & Coffee Creations, Inc. They have been told that they can use these financial statements to prepare horizontal and vertical analyses, to calculate financial ratios, to analyze how their business is doing, and to make some decisions they have been considering. Below, you are provided with the balance sheet and income statement of Cookie & Coffee Creations Inc. for its first year of operations; the year ended October 31, 2021. Review the calculations below, and then review the additional case information to calculate the ratios. (REFER TO ATTACHED IMAGE) Review the additional case information below. 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 semi-annual 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. Complete the tasks listed below. Calculate the following ratios: current ratio, accounts receivable turnover, inventory turnover,

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Natalie and Curtis have comparative balance sheets and income statements for Cookie & Coffee Creations, Inc. They have been told that they can use these financial statements to prepare horizontal and vertical analyses, to calculate financial ratios, to analyze how their business is doing, and to make some decisions they have been considering. Below, you are provided with the balance sheet and income statement of Cookie & Coffee Creations Inc. for its first year of operations; the year ended October 31, 2021. Review the calculations below, and then review the additional case information to calculate the ratios.

(REFER TO ATTACHED IMAGE)

Review the additional case information below.
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 semi-annual 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.
Complete the tasks listed below.
  1. Calculate the following ratios:
    1. current ratio,
    2. accounts receivable turnover,
    3. inventory turnover,
COOKIE & COFFEE CREATIONS INC.
Balance Sheet
October 31, 2021
Assets
Current assets
Cash
Accounts receivable
$32,219
3,250
17,897
6.300
Inventory
Prepaid Rent
Property, plant, and equipment
Équipment
Accumulated depreciation-equipment
Total assets
$59,666
$99,700
(9,850)
89,850
$149.516
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable
Income taxes payable
Dividends payable
Salaries and wages payable
Interest payable
Notes payable current portion
Long-term liabilities
Notes payable-long-term portion
Total liabilities
Stockholders' equity
Paid-in capital
Preferred stock, 2,800 shares issued and outstanding
Common stock, 25,930 shares issued, 25,180 outstanding
$5,786
18,500
700
2,250
250
4.000
$31,486
6.000
37,486
$14,000
25.930
Retained earnings
Total paid-in capital and retained earnings
Less: Treasury stock-common (750 shares), at cost
Total stockholders' equity
Total liabilities and stockholders' equity
39,930
72,600
112,530
500
112.030
$149.516
COOKIE & COFFEE CREATIONS INC.
Income Statement
Year Ended October 31, 2021
Sales Revenue
$462,500
231,250
231,250
Cost of goods sold
Gross profit
Operating expenses
Salaries and wages expense
Depreciation expense
Other operating expenses
Income from operations
Other expenses
Interest expense
Income before income tax
$92,500
9,850
35.850
138.200
93,050
550
Income tax expense
Net income
92,500
18.500
$74,000
Transcribed Image Text:COOKIE & COFFEE CREATIONS INC. Balance Sheet October 31, 2021 Assets Current assets Cash Accounts receivable $32,219 3,250 17,897 6.300 Inventory Prepaid Rent Property, plant, and equipment Équipment Accumulated depreciation-equipment Total assets $59,666 $99,700 (9,850) 89,850 $149.516 Liabilities and Stockholders' Equity Current liabilities Accounts payable Income taxes payable Dividends payable Salaries and wages payable Interest payable Notes payable current portion Long-term liabilities Notes payable-long-term portion Total liabilities Stockholders' equity Paid-in capital Preferred stock, 2,800 shares issued and outstanding Common stock, 25,930 shares issued, 25,180 outstanding $5,786 18,500 700 2,250 250 4.000 $31,486 6.000 37,486 $14,000 25.930 Retained earnings Total paid-in capital and retained earnings Less: Treasury stock-common (750 shares), at cost Total stockholders' equity Total liabilities and stockholders' equity 39,930 72,600 112,530 500 112.030 $149.516 COOKIE & COFFEE CREATIONS INC. Income Statement Year Ended October 31, 2021 Sales Revenue $462,500 231,250 231,250 Cost of goods sold Gross profit Operating expenses Salaries and wages expense Depreciation expense Other operating expenses Income from operations Other expenses Interest expense Income before income tax $92,500 9,850 35.850 138.200 93,050 550 Income tax expense Net income 92,500 18.500 $74,000
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