The trial balance of the Parton Wholesale Company contained the following accounts at December 31, 2007 the end of the company’s calendar year.

PARTON WHOLESALE COMPANY
Trial Balance
31-Dec-07

Debit	Credit
Cash	$ 34,400 
Accounts Receivable	36,600 
Merchandise Inventory (Beginning)	62,400 
Land	92,000 
Buildings	197,000 
Accumulated Depreciation-Buildings	$ 54,000 
Equipment	83,500 
Accumulated Depreciation-Equipment	42,400 
Notes Payable	50,000 
Accounts Payable	37,500 
Common Stock	200,000 
Retained Earnings	67,800 
Dividends	10,000 
Sales	886,100 
Sales Discounts	4,600 
Purchases	725,100 
Purchase Discounts	16,000 
Freight-in	12,400 
Salaries Expense	69,800 
Utilities Expense	9,400 
Repair Expense	5,900 
Gas and Oil Expense	7,200 
Insurance Expense	3,500 
$ 1,353,800 $ 1,353,800 




Adjustment data:
1.	Depreciation is $10,000 on buildings and $9,000 on equipment. (Both are administrative expenses.)
2.	Interest of $7,000 is unpaid on notes payable at December 31.

Other data:
1.	Merchandise inventory on hand at December 31, 2007 is $90,000.
2.	Salaries are 80% selling and 20% administrative.
3.	Utilities expense, repair expense, and insurance expense are 100% administrative.
4.	$15,000 of the notes payable are payable next year.
5.	Gas and oil expense is a selling expense.
6.	The beginning balance of accounts receivable is $34,750.
7.	The amount of total assets at the beginning of the year is $469,225.

Instructions
1)	Journalize the adjusting entries.
2)	Prepare a multiple-step income statement and a retained earnings statement for the year and a classified balance sheet as of December 31, 2007.
3)	Journalize the closing entries.
4)	Prepare a post-closing trial balance.
5)	Prepare the following ratios and show all support for your computations:

a) Current Ratio
b) Quick Ratio
c) Working Capital 
d) Accounts Receivable Turnover
e) Average Collection Period
f) Inventory Turnover
g) Days in Inventory
h) Debt to Total Assets Ratio
i) Gross Profit Ratio
j) Profit Margin Ratio
k) Return on Assets Ratio
l) Asset Turnover Ratio


6) Based on the ratios computed in 5) above, answer the following questions and use the financial statement ratios to support your answers where appropriate:

•	Do you feel that the company is able to meet its current and long term obligations as they become due?

•	Comment on the profitability of the company with respect to the various profitability ratios that you computed.

•	Would you lend money to this company for the long term? 

•	Comment on the ability of the company to collect its receivables and mange inventory.



2004	2005	2006	Industry Average
Liquidity	
Current	2.39	2.68	2.90	3.12
Quick	1.10	1.16	1.21	1.56
Working Capital	$ 98,750.00 $ 100,450.00 $ 103,000.00 $ 110,000.00 
Leverage	
Debt to Total Assets (%)	20.97%	21.98%	22.89%	20.89%
Times Interest Earned	8.75	9.12	9.56	10.22
Activity	
Inventory Turnover (sales)	8.21	9.91	10.12	10.52
Fixed Asset Turnover	3.43	3.51	3.59	3.64
Total Asset Turnover	2.15	2.20	2.25	2.56
Average Collection Period (days)	14.95	14.69	14.42	14.28
Accounts Receivable Turnover	24.08	24.50	24.97	25.21
Days in Inventory	44.46	36.83	36.07	43.21
Profitability	
Gross Profit Margin (%)	21.10%	22.50%	24.03%	24.56%
Net Profit (%)	6.89%	7.25%	7.89%	8.03%
Return on Total Assets (%)	15.50%	16.10%	16.24%	16.07%
Return on Equity (%)	20.15%	21.89%	22.15%	22.06%
Payout Ratio (%)	15.10%	15.84%	16.09%	16.86%

Project I	


The trial balance of the Parton Wholesale Company contained the following accounts at December 31, 2007 the end of the company’s calendar year.

PARTON WHOLESALE COMPANY
Trial Balance
31-Dec-07
			
	Debit		Credit
Cash	 $      34,400 		
Accounts Receivable	         36,600 		
Merchandise Inventory (Beginning)	         62,400 		
Land	         92,000 		
Buildings	       197,000 		
Accumulated Depreciation-Buildings			 $      54,000 
Equipment	         83,500 		
Accumulated Depreciation-Equipment			         42,400 
Notes Payable			         50,000 
Accounts Payable			         37,500 
Common Stock			       200,000 
Retained Earnings			         67,800 
Dividends	         10,000 		
Sales			       886,100 
Sales Discounts	           4,600 		
Purchases	       725,100 		
Purchase Discounts			         16,000 
Freight-in	         12,400 		
Salaries Expense	         69,800 		
Utilities Expense	           9,400 		
Repair Expense	           5,900 		
Gas and Oil Expense	           7,200 		
Insurance Expense	           3,500 		 
	 $  1,353,800 		 $  1,353,800 




Adjustment data:
1.	Depreciation is $10,000 on buildings and $9,000 on equipment. (Both are administrative expenses.)
2.	Interest of $7,000 is unpaid on notes payable at December 31.

Other data:
1.	Merchandise inventory on hand at December 31, 2007 is $90,000.
2.	Salaries are 80% selling and 20% administrative.
3.	Utilities expense, repair expense, and insurance expense are 100% administrative.
4.	$15,000 of the notes payable are payable next year.
5.	Gas and oil expense is a selling expense.
6.	The beginning balance of accounts receivable is $34,750.
7.	The amount of total assets at the beginning of the year is $469,225.

    Instructions
1)	Journalize the adjusting entries.
2)	Prepare a multiple-step income statement and a retained earnings statement for the year and a classified balance sheet as of December 31, 2007.
3)	Journalize the closing entries.
4)	Prepare a post-closing trial balance.
5)	Prepare the following ratios and show all support for your computations:

a) Current Ratio
b) Quick Ratio
c) Working Capital 
d) Accounts Receivable Turnover
e) Average Collection Period
f) Inventory Turnover
g) Days in Inventory
h) Debt to Total Assets Ratio
i) Gross Profit Ratio
j) Profit Margin Ratio
k) Return on Assets Ratio
l) Asset Turnover Ratio


     6) Based on the ratios computed in 5) above, answer the following questions and use the financial statement ratios to support your answers where appropriate:

•	Do you feel that the company is able to meet its current and long term obligations as they become due?

•	Comment on the profitability of the company with respect to the various profitability ratios that you computed.

•	Would you lend money to this company for the long term? 

•	Comment on the ability of the company to collect its receivables and mange inventory.


				
 	2004	2005	2006	Industry Average
Liquidity	 	 	 	 
Current	2.39	2.68	2.90	3.12
Quick	1.10	1.16	1.21	1.56
Working Capital	 $    98,750.00 	 $  100,450.00 	 $  103,000.00 	 $           110,000.00 
Leverage	 	 	 	 
Debt to Total Assets (%)	20.97%	21.98%	22.89%	20.89%
Times Interest Earned	8.75	9.12	9.56	10.22
Activity	 	 	 	 
Inventory Turnover (sales)	8.21	9.91	10.12	10.52
Fixed Asset Turnover	3.43	3.51	3.59	3.64
Total Asset Turnover	2.15	2.20	2.25	2.56
Average Collection Period (days)	14.95	14.69	14.42	14.28
Accounts Receivable Turnover	24.08	24.50	24.97	25.21
Days in Inventory	44.46	36.83	36.07	43.21
Profitability	 	 	 	 
Gross Profit Margin (%)	21.10%	22.50%	24.03%	24.56%
Net Profit (%)	6.89%	7.25%	7.89%	8.03%
Return on Total Assets (%)	15.50%	16.10%	16.24%	16.07%
Return on Equity (%)	20.15%	21.89%	22.15%	22.06%
Payout Ratio (%)	15.10%	15.84%	16.09%	16.86%