Presented below are the income statement and balance sheet of Windsor, Inc: Income Statement – 2020

Sales $100

Cost of goods sold 40

Gross profit 60

Operating expense 7

Interest expense 4

Taxes 6

Gain on sale of equipment 4

Loss on sale of investment (1)

Total expenses 20

Net income 40

Balance Sheet 2020 2019

Cash $10 $2

Accounts receivable 12 10

Inventory 14 20

Prepaid rent 6 4

Investments 6 10

Equipment 20 15

Accumulated depreciation (8) (6)

Total assets 60 55

Accounts Payable 4 3

Taxes payable 3 10

Bonds payable 8 4

Common stock 32 28

Retained earnings 13 10

Total 60 55 CONTINUED

Additional Information

Sold investment that cost $4 for $3.
Average shares of stock outstanding was $10.
Market price of a share of common stock was $30.
Equipment costing $5 with accumulated depreciation of $3 was sold for $6.

Required: Prepare a statement of cash flows using the direct method for 2020.

PROBLEM 2: Using the information from Problem 1, calculate the following ratios for 2020:

Current ratio.
Inventory turnover
Average collection period.
Times interest earned.
Debt to equity ratio.
Price earnings ratio.
Return on equity.
PROBLEM 3: Prior Corp. produces chairs. It requires 4 feet of wood per chair. Sales are estimated to be:

2020 Units

Jan. 10,000 units

Feb. 12,000

March 14,000

April 8,000

Chairs on hand at December 31, 2019 were 900 chairs. The corporation wants to maintain an inventory of 10% of the following months’ sales in its ending inventory. Prior Corp. had an inventory of wood at December 31, 2019 of 5,000 feet, and it desires to maintain ending inventories of 5% of the following months production needs. Required: Prepare a materials budget for January and February.