The Following Items Are Taken from the Financial Statements of Tracy

question 71

Essay

The following items are taken from the financial statements of Tracy Company for 2014: $$\begin{array} { l r } \text { Accounts payable } & 10,000 \\\text { Accounts receivable } & 11,000 \\\text { Accumulated depreciation-equipment } & 38,000 \\\text { Advertising expense } & 21,000 \\\text { Cash } & 14,000 \\\text { Common stock } & 90,000 \\\text { Depreciation expense } & 12,000 \\\text { Dividends } & 15,000 \\\text { Equipment } & 210,000 \\\text { Insurance expense } & 3,000 \\\text { Notespayable (due 2017) } & 70,000 \\\text { Prepaid insurance } & 6,000 \\\text { Rent expense } & 17,000 \\\text { Retained earnings (beginning) } & 12,000 \\\text { Salaries and wages expense } & 34,000 \\\text { Salaries and wages payable } & 3,000 \\\text { Service revenue } & 130,000 \\\text { Supplies } & 4,000 \\\text { Supplies expense } & 6,000\end{array}$$ Instructions
(a) Calculate the net income.
(b) Calculate the retained earnings balance that would appear on a balance sheet at December 31, 2014
(c) Prepare a classified balance sheet for Tracy Company at December 31, 2014 assuming the note payable is a long-term liability.
(d) Compute the current ratio, debt to assets ratio, and earnings per share value. The average number of shares outstanding for 2014 was 10,000.

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Definitions:

Stock Investments Account

A financial account holding shares of stocks that represents ownership in companies.

Equity Method

An accounting technique used to record investments in associate companies, reflecting the investor's proportional share of the investee's net income or losses.

Cost Method

An accounting method in which the investment in common stock is recorded at cost, and revenue is recognized only when cash dividends are received.

Debt Securities

Debt securities are financial instruments representing a loan made by an investor to a borrower, typically offering regular interest payments and the return of principal at maturity.