Problem 3-5B Preparing financial statements from the adjusted
Debit Credit
Cash......................................... $ 58,000
Interest receivable.............................. 7,000
Notes receivable (due in 90 days} ................. 210,000
Office supplies................................. 22,000
Trucks........................................134,000
Equipment.................................... 270,000
Accumulated depreciation-Equipment............. 200,000
Land......................................... 100,000
Accounts payable .............................. 134.000
Interest payable................................ 20,000
Salaries payable ............................... 28,000
Unearned delivery fees.......................... 120,000
Long-term notes payable ........................ 200,000
L. Horace, Capital .............................. 125,000
L Horace. Withdrawals.......................... 50,000
Delivery fees earned............................ 611,8O0
Interest earned ................................ 34,000
Depreciation expense—Trucks.................... 29,000
Depreciation expense—Equipment ................ 48,000
Salaries expense............................... 74,000
Wages expense................................ 300,000
Interest expense ............................... 15,000
Office supplies expense ......................... 31,000
Advertising expense ............................ 27,200
Repairs expense—Trucks ........................ 35,600 -
Totals......................................... $1,530,800 $1,530,800
Required
1. Use the information in the adjusted trial balance to prepare (a) the income statement for the year ended December 31; (6) the statement of owner's equity for the year ended December 31 [Note: L. Horace, Capital at Dec. 31 of year was S125:000]; and (c) the
2. Compute the profit margin for the year (use total revenues as the denominator).
Introduction:
Income statement gives a picture of the financial performance of the company during the year and it forms a part of the financial statements.
Owner's equity is a statement which provides the owner's capital balance by determining the amount of investment, income transferred, and drawings.
The balance sheet is the financial statement which helps the investors to know te overall picture of the company showing the summarized assets, liabilities, and equity held by the shareholders during the year.
To Prepare:
The financial statement i.e. income statement, statement of owner's equity and balance sheet as of December, 31.
Answer to Problem 5BPSB
The financial statement refers to the income statement, owner's equity and balance sheet which are drawn here.
Explanation of Solution
Adjusted trial balances are given.
Hence:
(a) Income Statement is as follows:
Speedy Courier | ||
Income Statement | ||
For Year Ended December 31 | ||
Particulars | Amount | Amount |
Revenue: | ||
Delivery fees earned | ||
Interest earned | ||
Total revenues (A) | ||
Expenses: | ||
Depreciation expense-Trucks | ||
Depreciation expense-Equipment | ||
Salaries expense | ||
Wages expense | ||
Interest expense | ||
Office supplies expense | ||
Advertising expense | ||
Repair expense-Automobiles | ||
Total Expenses(B) | ||
Net income (A-B) |
(b) Statement of owner's equity is as follows:
Speedy Courier | |
Statement of Owner's Equity | |
For Year Ended December 31 | |
Particulars | Amount |
Owner's equity, December 31 of the prior year | |
Add: Net Income | |
Less: Withdrawals | |
Owner's equity, December 31 of the current year |
(c) Balance Sheet is as follows:
Speedy Courier | ||
Balance Sheet | ||
as on December 31 | ||
Assets | Amount | Amount |
Cash | ||
Account receivable | ||
Interest receivable | ||
Notes receivable | ||
Office supplies | ||
Automobiles | ||
Accumulated depreciation-Automobiles | ||
Office equipment | ||
Accumulated depreciation-Office equipment | ||
Land | ||
Total assets | ||
Liabilities & Equity | ||
Liabilities | ||
Account payable | ||
Interest payable | ||
Salaries payable | ||
Unearned consulting fees | ||
Long-term notes payable | ||
Total Liabilities | ||
Owner's equity | ||
Total liabilities and equity |
Conclusion:
Thus, these are the income statement, owner's equity statement, and balance sheet of Speedy Courier.
Introduction:
Profit Margin is the ratio which is a useful measure to calculate the company's operating results. In other words, it is a ratio of its net income to its net sales.
To calculate:
The profit margin for the year.
Answer to Problem 5BPSB
The profit margin of Speedy Courier for the year ended on December 31 :
Explanation of Solution
Adjusted trial balances are given
Hence, the ratio of Profit margin is computed as follows:
- Profit Margin = Net Income
Total Revenue
=
=
Conclusion:
Thus, the profit margin of Speedy Courier is
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Chapter 3 Solutions
FUND ACCT PRIN (ACCESS 180 DAY)
- Multiple-step income statement and report form of balance sheet The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 2016: Instructions 1. Prepare a multiple-step income statement. 2. Prepare a statement of owners equity. 3. Prepare a report form of balance sheet, assuming that the current portion of the note payable is 50,000. 4. Briefly explain (a) how multiple-step and single-step income statements differ and (b) how report-form and account-form balance sheets differ.arrow_forwardContinuing Problem 4.Total of Debit column: 40,750 The transactions completed by PS Music during June 20Y5 were described .it the end of Chapter 1. The following transactions were completed during July, the second month of businesss operations: July 1. Peyton Smith made an additional investment k PS Music in exchange for common stock by depositing 5,000 in PS Mu wet checking account. 1.Instead of continuing to share office space with a local real estate agency. Peyton decided to rent office space near a local musk store, Paid rent for July, 1,750. 1.Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft and fire. The policy covers a one year period. 2.Received 1,000 on account 3. On behalf of PS Musk, Peyton signed a contract with a local radio station. KXMD, to provide guest spots for the next three months. The contract requires PS Musk to provide a guest disc jockey for 80 hours per month for a monthly fee of 3,600. Any additional hours beyond 80 will be billed to KXMD at 40 per hour. In accordance with the contract Peyton received 7,200 from KXMD as an advance payment for the first two months. 3.Paid 2SO on account 4.Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5.Purchased office equipment on account from Office Mart. 7,500. 8.Paid for a newspaper advertisement 200. 11.Received 1.000 for serving as a disc jockey for a party. 13.Paid 700 to a local audio electronics store for rental of digital recording equipment 14.Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Pane 2 of the two-column journal: 16.Received 2,000 for serving as a disc jockey for a wedding reception. 18.Purchased supplies on account 850 21.Paid 620 to Upload Musk for use of its current musk demos in making various musk sets. 22.Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23.Served as disc jockey for a party for 2,500 Received 750, with the remainder due August 4.20YS. 27.Paid electric Ml 915. 28.Paid wages of 1,200 to receptionist and part-time assistant. 29.Paid miscellaneous expenses, 540. 30.Served as a disc jockey for a charity ball for 1,500, Received S00 with the remainder due on August 9. 20Y5. 31.Received 3,000 for serving as a disc jockey for a party. 31.Paid 1.400 royalties (musk expense) to National Musk Clearing for use of various artists music during July. 31. Paid dividends, 1,250. PS Musics chart of accounts and the balance of accounts as of July 1, 20Y5 (all normal balances), are as follows: 11 Cash 3,920 12 Accounts Receivable 1,000 14 Supplies 170 15 Prepaid Insurance 17 Office Equipment 21 Accounts Payable 250 23 Unearned Revenue 31 Common Stock 4.000 33 Dividends 500 41 Fees Earned 6,200 50 Wages Expense 400 51 Office Rent Expense 800 52 Equipment Rent Expense 67S 53 Utilities Expense 300 54 Music Expense 1.590 55 Advertising Expense 500 56 Supplies Expense 180 59 Miscellaneous Expense 415 Instructions 1. Enter the July 1, 20Y5, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column, and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance as of July 31, 20Y5.arrow_forwardMultiple-step income statement and balance sheet The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 20Y2: Instructions 1. Prepare a multiple-step income statement. 2. Prepare a statement of stockholders equity. Additional common stock of 75,000 was Issued during the year ended May 31,20Y2 3. Prepare a balance sheet, assuming that the current portion of the note payable is 50,000. 4. Briefly explain how multiple and single-step income statements differ.arrow_forward
- Multiple step income statement and balance sheet The following selected accounts anti their current balances appear in the ledger of Kanpur Co. for the fiscal year ended June 30, 2019: Cash 92,000 Accounts Receivable 450,000 Merchandise Inventory 370,000 Estimated Returns Inventory 5,000 Office Supplies 10,000 Prepaid Insurance 12,000 Office Equipment 220,000 Accumulated DepreciationOffice Equipment 58,000 Store Equipment 650,000 Accumulated DepreciationStore Equipment 87,500 Accounts Payable 38,500 Customer Refunds Payable 10,000 Salaries Payable 4,000 Note Payable (final payment due 2032) 140,000 Gerri Faber. Capital 431,000 Gerri Faber, Drawing 300,000 Sales 8,925,00 Cost of Merchandise Sold 5,620,00 Sales Salaries Expense 850,000 Advertising Expense 420,000 Depreciation Expense Store Equipment 33,000 Miscellaneous Selling Expense 18,000 Office Salaries Expense 540,000 Rent Expense 48,000 Insurance Expense 24,000 Depredation ExpenseOffice Equipment 10,000 Office Supplies Expense 4,000 Miscellaneous Administrative Exp. 6,000 Interest Expense 12,000 Instructions 1.Prepare a multiple-step income statement. 2.Prepare a statement of owners equity. 3.Prepare a balance sheet, assuming that the current portion of the note payable is 7,000. 4.Briefly explain how multiple-step and single-step income statements differ.arrow_forwardComprehensive Problem 1 8 Net income. 31,425 Kelly Pitney began her consulting business. Kelly Consulting, on April 1, 20Y8. The accounting cycle for Kelly Consulting for April, including financial statements, was illustrated in this chapter During May, Kelly Consulting entered into the following transactions: May 3.Received cash from clients as an advance payment for services to be provided and recorded it as unearned tree 4,500 5.Received cash from clients on account 2,450. 9.Paid cash for a newspaper advertisement 225. 13.Raid Office Station Co for part of the debt incurred on April , 640. 15.Recorded services provided on account for the period May 1-15, 9,180. 16 Paid part-time receptionist for two weeks salary including the amount owed on April 30, 750. 17.Recorded cash from cash clients for fees earned during the period May 116, 8,360. Record the following transactions on Page 6 of the Journal 20.Purchased support on account 735. 21.Recorded services provided on account for the period May 1620. 4,820 25.Recorded cash from cash clients for fees earned for the period May 1723, 7,900 27.Received cash from clients on account 9,520. 28.Paid part-time receptionist for two weeks salary. 7S0. 30.Raid telephone bill for May. 260 31.Paid electricity bill for May, 810. 31.Recorded cash from cash clients tor lees earned for the period May 2031. 3,300. 31.Recorded services provided on account for the remainder of May, 2,650. 31.Paid dividends 10,500 Instructions 1.The chart of accounts foe Kelly Consulting is shown us Exhibit 9. and the post-closing trial balance as of April 30, 20Y8, is shown in Exhibit 17. for each account in the post-closing trial balance, enter the balance in the appropriate Balance column of a four-column account. Date the balances May 1. 20Y8. and place a check mark () in the Posting Reference column. Journalize each of the May transactions in a two-column journal starting cm Page of the journal and using Kelly Consultings chart of accounts. (Do not insert the account numbers in the journal at this time.) 2.Post the journal to a ledger of four-column accounts. 5.Prepare an unadjusted trial balance. 4.At the end of May, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6). (a)Insurance expired during May is 275. (b)Supplies on hand on May II are 715. (c)Depreciation of office equipment for May is 330. (d)Accrued receptionist salary on May 31 is 325. (e)Rent expired during May is 1600. (f)Unearned fees on May 31 are 3,210 5.(Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet 6.Journalize and post the adjusting entries. Record the adjusting entries on Page 7 of the journal. 7.Prepare an adjusted trial balance. 8.Prepare an income statement, a statement of stockholders equity, and a balance sheet. 9.Prepare and post the closing entries. Record the closing entries on Page 8 of the journal. Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry. 10.Prepare a post-closing trial balance.arrow_forwardRevenue journal; accounts receivable subsidiary and general ledgers Sage learning Centers was established on July 20 to provide educational services. The services provided during the remainder of the month are as follows: July 21. Issued Invoice No. 1 to J. Dunlop for 115 on account. 22. Issued Invoice No. 2 to K. Tisdale for 350 on account. 24. Issued Invoice No. 3 to T. Quinn for 85 on account. 25. Provided educational services, 300, to K. Tisdale in exchange for educational supplies. 27. Issued Invoice No. 4 to F. Mintz, for 225 on account. 30. Issued Invoice No. 5 to L). Chase for 170 on account. 30. Issued Invoice No. 6 to K. Tisdale for 120 on account. 31. Issued Invoice No. 7 to T. Quinn for 105 on account. Instructions 1.Journalize the transactions for July, using a single-column revenue journal and a two-column general journal. Past to the following customer accounts in the accounts receivable ledger and insert the balance immediately after recording each entry: D. Chase; J. Dunlop: F. Mint/; T. Quinn; K Tisdale. 2Post the revenue journal and the general journal to the following accounts in the general ledger, inserting the account balances only after the last postings: 12Accounts Receivable 13Supplies 41Fees Earned a. What is the sum of the balances of the customer accounts in the subsidiary ledger at July 31? b.What is the balance of the accounts receivable controlling account at July 31? 4.Assume Sage Learning Centers began using a computerized accounting system to record the sales transactions on August 1. What are some of the benefits of the computerized system over the manual system?arrow_forward
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