1.
Identify the amounts for assets, liabilities, and
1.
Explanation of Solution
Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below:
Identify the amount:
Assets | = | Liabilities | + | Stockholders’ Equity |
3,200 | 2,400 | 800 | ||
8,000 | 5,600 | 4,000 | ||
6,400 | 1,600 | 3,200 | ||
$17,600 | $9,600 | $ 8,000 |
Table (1)
Note:
Assets include cash,
Liabilities include accounts payable, unearned revenue, and long-term note payable.
Stockholders’ equity includes common stock, additional paid-in capital, and
2.
Prepare the T- account and enter the amount for the given transaction in their respective accounts.
2.
Explanation of Solution
T-account:
T-account is the form of the ledger account, where the
The components of the T-account are as follows:
a) The title of the account
b) The left or debit side
c) The right or credit side
Prepare the T-accounts:
Cash account:
Cash account | |||
Beginning balance | $3,200 | (d) | $57,200 |
(a) | $48,000 | (g) | $480 |
(b) | $5,600 | ||
(c) | $400 | ||
(e) | $1,600 | ||
Ending balance | $1,120 |
Accounts receivable account:
Accounts receivable account | |||
Beginning balance | $8,000 | (b) | $5,600 |
(a) | $10,000 | ||
Ending balance | $12,400 |
Long-term investment account:
Long-term investment account | |||
Beginning balance | $6,400 | ||
Ending balance | $6,400 |
Accounts payable account:
Accounts payable account | |||
Beginning balance | $2,400 | ||
(d) | $1,600 | (f) | $800 |
Ending balance | $1,600 |
Unearned revenue account:
Unearned revenue account | |||
Beginning balance | $5,600 | ||
(e) | $1,600 | ||
Ending balance | $7,200 |
Long-term note payable account:
Long-term note payable account | |||
Beginning balance | $1,600 | ||
Ending balance | $1,600 |
Common stock account:
Common stock account | |||
Beginning balance | $800 | ||
Ending balance | $800 |
Additional paid-in capital account:
Additional paid-in capital account | |||
Beginning balance | $4,000 | ||
Ending balance | $4,000 |
Retained earnings account:
Retained earnings account | |||
Beginning balance | $3,200 | ||
(g) | $480 | ||
Ending balance | $2,720 |
Consulting fees revenue account:
Consulting fees revenue account | |||
Beginning balance | 0 | ||
(a) | $58,000 | ||
Ending balance | $58,000 |
Interest revenue account:
Interest revenue account | |||
Beginning balance | 0 | ||
(c) | $400 | ||
Ending balance | $400 |
Wages expense account:
Wages expense account | |||
Beginning balance | 0 | ||
(d) | $36,000 | ||
Ending balance | $36,000 |
Travel expense account:
Travel expense account | |||
Beginning balance | 0 | ||
(d) | $12,000 | ||
Ending balance | $12,000 |
Utilities expense account:
Utilities expense account | |||
Beginning balance | 0 | ||
(f) | $800 | ||
Ending balance | $800 |
Rent expense account:
Rent expense account | |||
Beginning balance | 0 | ||
(d) | $7,600 | ||
Ending balance | $7,600 |
Thus, the t-accounts are prepared and the ending balances are calculated.
3.
Ascertain the amount for the given equations at the end of the December.
3.
Answer to Problem 3.18E
For the equation
For the equation
Explanation of Solution
Income statement:
The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.
Working note:
Calculate the revenues:
Calculate the expenses:
Calculate the net income:
Particulars | Amount($) | Amount ($) |
Revenues | (1)58,400 | |
Less: Expenses | (2)56,400 | |
Net income | $2,00 |
Table (2)
Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below:
Calculate the amount for the accounting equation:
Assets | = | Liabilities | + | Stockholders’ Equity |
$1,120 | $1,600 | $800 | ||
$12,400 | $7,200 | $4,000 | ||
$6,400 | $1,600 | $2,720 | ||
$2,000 | ||||
$19,920 | = | $10,400 | + | $9,250 |
Table (3)
4.
Calculate the net profit margin ratio for 2016.
4.
Explanation of Solution
Net profit margin ratio:
Net profit is the financial ratio that shows the relationship between the net profit and net sales (Operating revenue). Net profit is the difference between total operating revenue and total operating expenses. It can be calculated by dividing net profit and operating revenue.
Net profit margin ratio can be calculated by using the following formula:
Calculate the net profit margin ratio for 2016:
Hence, the net profit margin ratio for the year 2016 is 3.45%.
- By computing the net profit margin ratio, Company KK net profit margin ratio is 3.45%. This indicates that there is an increase in the net profit margin ratio.
- Company KK has become effective in managing its sales and the expenses.
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Chapter 3 Solutions
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