The accountant for Pili’s Gadgets Shop prepared the following list of account balances from the entity’s records for the year ended June 30, 2018:

Sales Revenue	$168,000	Cash	$30,000
Accounts Receivable	14,500	Cost of Goods Sold	45,000
Equipment	48,000	Pili, Capital	27,000
Accounts Payable	17,000	Notes Payable	15,000
General & Admin Expense	50,000	Inventory	1,500
Selling Expense	6,000	Accumulated Depreciation	12,000
Income Taxes Payable	5,000	Income Taxes Expense	18,000
Interest Expense	3,000	Land	28,000

Additional Information:

Last year’s ending inventory and accounts receivable balances were $3,500 and $10,000 respectively. Sales are on credit and the credit term is 45 days. Ms. Pili, the owner, praised the shop manager for successfully increased the sales level in the current year.

Calculated ratios and the industry averages ratios in the related period are provided below:

Ratio	Method of calculation
Gross Profit Margin	Gross Profit     x 100    =   x%                                      Sales revenue
Profit Margin	Net Income afterTax     x 100    =   x%                                    Sales revenue
Inventory Turnover	Cost of Goods Sold    =   x times                                     Average Inventory

Required:

a. Present the Assets section of the business’ classified balance sheet. 

b. Prepare a classified Income Statement for the business. 

c. Calculate the business’ Gross Profit Margin, Profit Margin and Inventory Turnover ratios rounded to the nearest whole number.

d. Using the Gross Profit Margin and Profit Margin ratios calculated above, and the additional information provided, comment on the business’ profitability performance and relate that to the efficiency of its operations. 

e. Using the information above, provide your analysis on the shop's inventory turnover ratio; relate your comments to its level of accounts receivable and credit policy. Do you agree with Ms. Pili appraising her sales manager for the successful increase in current year sales? 

Answer rating: 100% (QA)

Ans a Assets section of the business classified balance sheet keeps liqudity of assets ie liquid assets on top and after it investments of business followed by noncurrent assets and ends with intangib... View the full answer