1.
Identify the amounts for assets, liabilities, and
1.
Explanation of Solution
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 | + | $8,000 |
Table (1)
Note:
- Assets include cash,
accounts receivable , and long-term investments. - Liabilities include accounts payable, unearned revenue, and long-term note payable.
- Stockholders’ equity includes common stock, additional paid-in capital, and
retained earnings .
2.
Prepare the T- account and enter the amount for the given transaction in their respective accounts.
2.
Explanation of Solution
Prepare the T-accounts:
Cash account:
Accounts receivable account:
Long-term investment account:
Accounts payable account:
Unearned revenue account:
Long-term note payable account:
Common stock account:
Additional paid-in capital account:
Retained earnings account:
Consulting fees revenue account:
Interest revenue account:
Wages expense account:
Travel expense account:
Utilities expense account:
Rent expense account:
Thus, the t-accounts are prepared and the ending balances are calculated.
3.
Ascertain the amount for the given equations at the end of the December.
3.
Explanation of Solution
For the equation
For the equation
Working note (1):
Calculate the revenues:
Working note (2):
Calculate the expenses:
Calculate the net income:
Particulars | Amount ($) | Amount ($) |
Revenues |
| |
Less: Expenses |
| |
Net income | $2,00 |
Table (2)
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 2019.
4.
Explanation of Solution
Net profit margin ratio can be calculated by using the following formula:
Calculate the net profit margin ratio for 2019:
Hence, the net profit margin ratio for the year 2019 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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