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You are given the two financial statements (the photo below). The owner, Mr. Howell, has asked you to give recommendations as to how he can improve the working capital of the shop. Enumerate what he can do to improve his operations. State the basis of your claim and any supporting computation.

You are given the two financial statements (the photo below). The owner, Mr. Howell, has asked you to give recommendations as to how he can improve the working capital of the shop. Enumerate what he can do to improve his operations. State the basis of your claim and any supporting computation.

Financial Accounting: The Impact on Decision Makers
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter2: Financial Statements And The Annual Report
Section: Chapter Questions
Problem 2.5E: Classification of Assets and Liabilities Indicate the appropriate classification of each of the...
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You are given the two financial statements (the photo below). The owner, Mr. Howell, has asked you to give recommendations as to how he can improve the working capital of the shop. Enumerate what he can do to improve his operations. State the basis of your claim and any supporting computation.

Assets Current assets Cash Accounts receivable Inventory Total Current assets Long-term assets Furniture, equipment, net of depreciation Total Assets Liabilities and Owner's equity Current liabilities Accounts payable Long-term liabilities Loan Total Liabilities Owner's equity Total Liabilities and Owner's equity The College Shop Comparative Balance Sheet As of December 31, 20x7 and 20×6 Sales Less Cost of goods sold Gross profit Less Operating expenses Operating income Less Interest Less Income taxes Net income 12/31/20X7 $76,000 92,000 110,000 278,000 90,000 368,000 $70,000 100,000 170,000 198,000 The College Shop Comparative Income Statement Years Ended December 31, 20×7 and 20×6 12/31/20X7 $600,000 387,000 213,000 $368,000 180,000 33,000 10,000 5,000 $18,000 12/31/20X6 $70,000 90,000 80,000 240,000 120,000 $360,000 80,000 100,000 180,000 180,000 $360,000 12/31/20X6 $500,000 275,000 225,000 175,000 50,000 10,000 10,000 $30,000
Transcribed Image Text:Assets Current assets Cash Accounts receivable Inventory Total Current assets Long-term assets Furniture, equipment, net of depreciation Total Assets Liabilities and Owner's equity Current liabilities Accounts payable Long-term liabilities Loan Total Liabilities Owner's equity Total Liabilities and Owner's equity The College Shop Comparative Balance Sheet As of December 31, 20x7 and 20×6 Sales Less Cost of goods sold Gross profit Less Operating expenses Operating income Less Interest Less Income taxes Net income 12/31/20X7 $76,000 92,000 110,000 278,000 90,000 368,000 $70,000 100,000 170,000 198,000 The College Shop Comparative Income Statement Years Ended December 31, 20×7 and 20×6 12/31/20X7 $600,000 387,000 213,000 $368,000 180,000 33,000 10,000 5,000 $18,000 12/31/20X6 $70,000 90,000 80,000 240,000 120,000 $360,000 80,000 100,000 180,000 180,000 $360,000 12/31/20X6 $500,000 275,000 225,000 175,000 50,000 10,000 10,000 $30,000
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