Statement of earnings, a statement of retained earnings
Use the reading on preparing financial statements provided in the course pack, the course text chapter examples to prepare these statements.
Various balance sheet and statements of earnings accounts for Home Restoration Outlet Ltd. are listed below in random order. You will have to determine which account goes in which statement to solve the questions.
The balance sheet accounts are as of December 31, 2005, except as noted. The statement of earnings amounts are for the year January 1 to December 31, 2005. All accounts are shown in thousands of dollars.
1) Prepare a statement of earnings, a statement of retained earnings, and a balance sheet.
2) Explain the relationship between financial statements and why it is useful for managers to understand all three.
3) Perform a “current ratio” analysis for the company and explain the company’s liquidity position.
