The trial balance of the Wall Fashion Center, Inc. contained the following accounts at December 31, 2007 the end of the company’s calendar year. WALL FASHION CENTER, INC. Trial Balance 31-Dec-07 Debit Credit Cash $ 16,700 Accounts Receivable 33,700 Merchandise Inventory (Beginning) 38,000 Store Supplies 5,500 Store Equipment 85,000 Accumulated Depreciation-Store Equipment $ 18,000 Delivery Equipment 48,000 Accumulated Depreciation-Delivery Equipment 6,000 Notes Payable 51,000 Accounts Payable 48,500 Common Stock 80,000 Retained Earnings 30,000 Dividends 12,000 Sales 746,600 Sales Returns and Allowances 4,200 Purchases 503,600 Purchase Returns and Allowances 6,900 Purchase Discounts 3,700 Freight-in 10,800 Salaries Expense 140,000 Advertising Expense 26,400 Utilities Expense 17,000 Repair Expense 9,100 Delivery Expense 16,700 Rent Expense 24,000 $ 990,700 $ 990,700 Adjustment data: Store supplies on hand totaled $3,500. Depreciation is $9,000 on the store equipment and $7,000 on the delivery equipment. Interest of $11,000 is accrued on notes payable at December 31. Other data: Merchandise inventory on hand at December 31, 2007 is $45,000. Salaries expense is 70% selling and 30% administrative. Rent expense and utilities expense are 80% selling and 20% administrative. $30,000 of notes payable are due for payment next year. Repair expense is 100% administrative. The beginning balance of accounts receivable is $31,250. The amount of total assets at the beginning of the year is $199,700. 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 1.09 1.30 1.80 1.42 Quick 0.89 1.08 1.28 1.10 Working Capital $ 10,000.00 $ 13,500.00 $ 18,000.00 $ 20,000.00 Leverage Debt to Total Assets (%) 52.03% 48.52% 43.61% 40.00% Times Interest Earned 1.50 3.50 4.75 5.00 Activity Inventory Turnover (sales) 12.56 13.85 14.02 19.98 Fixed Asset Turnover 9.50 .