The Following Items Are Taken from the Financial Statements of Grove

question 221

Essay

The following items are taken from the financial statements of Grove Company for 2014: $$\begin{array} { l r } \text { Accounts payable } & \$ 18,500 \\\text { Accounts receivable } & 8,000 \\\text { Accumulated depreciation-equipment } & 4,800 \\\text { Bonds payable } & 18,000 \\\text { Cash } & 24,000 \\\text { Common stock } & 25,000 \\\text { Cost of goods sold } & 27,000 \\\text { Depreciation expense } & 4,800 \\\text { Dividends } & 5,300 \\\text { Equipment } & 44,000 \\\text { Interest expense } & 2,500 \\\text { Patents } & 7,500 \\\text { Retained earnings, January 1 } & 16,000 \\\text { Salaries and wages expense } & 5,200 \\\text { Sales revenue } & 50,500 \\\text { Supplies } & 4,500\end{array}$$ Instructions
(a) Prepare an income statement and a classified balance sheet for Grove Company.
(b) Compute the following ratios and values:
1. Current ratio
2. Debt to assets ratio
3. Working capital
4. Earnings per share (Grove's average number of shares outstanding during the year was 5,000.)

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Definitions:

Disconfirming Instances

Instances or examples that challenge or falsify a hypothesis or theory.

Confirmation Bias

The inclination to seek out, understand, prefer, and remember information in a manner that corroborates an individual's existing beliefs or theories.

Generalization

A principle, statement, or idea having general application.

Generalization

The process of forming conclusions based on a limited set of observations or examples.