
1 and 2
Prepare the T- account and enter the transaction into their respective accounts for calculating the ending balance.
1 and 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 | $0 | (b) | $31,000 |
(a) | $60,000 | (g) | $1,240 |
(d) | $13,200 | (h) | $2,700 |
(e) | $2,400 | (j) | $6,000 |
(i) | $10,000 | (k) | $3,600 |
(m) | $500 | ||
Ending balance | $40,560 |
Accounts receivable account | |||
Beginning balance | $0 | (i) | $10,000 |
(h) | $35,260 | ||
Ending balance | $25,260 |
Supplies account:
Supplies account | |||
Beginning balance | $0 | ||
(a) | $12,000 | ||
(f) | $3,810 | ||
Ending balance | $15,810 |
Prepaid insurance account:
Prepaid insurance account | |||
Beginning balance | 0 | ||
(k) | $3,600 | ||
Ending balance | $3,600 |
Land account:
Land account | |||
Beginning balance | $0 | ||
(a) | $90,000 | ||
Ending balance | $90,000 |
Barns account:
Barns account | |||
Beginning balance | $0 | ||
(a) | $100,000 | ||
(b) | $62,000 | ||
Ending balance | $162,000 |
Accounts payable account:
Accounts payable account | |||
Beginning balance | 0 | ||
(f) | $3,810 | ||
(h) | $2,700 | (l) | $1,800 |
Ending balance | $2,910 |
Unearned revenue account:
Unearned revenue account | |||
Beginning balance | $0 | ||
(e) | $2,400 | ||
Ending balance | $2,400 |
Long-term note payable account:
Long-term note payable account | |||
Beginning balance | $0 | ||
(b) | $31,000 | ||
Ending balance | $31,000 |
Common stock account:
Common stock account | |||
Beginning balance | $0 | ||
(a) | $150 | ||
Ending balance | $150 |
Additional paid-in capital account:
Additional paid-in capital account | |||
Beginning balance | $0 | ||
(a) | $261,850 | ||
Ending balance | $261,850 |
Retained earnings account | |||
Beginning balance | $0 | ||
(m) | $500 | ||
Ending balance | $500 |
Animal care service revenue account:
Animal care service revenue account | |||
Beginning balance | 0 | ||
(c) | $35,260 | ||
Ending balance | $35,260 |
Rental revenue account:
Rental revenue account | |||
Beginning balance | 0 | ||
(d) | $13,200 | ||
Ending balance | $13,200 |
Utilities expense account:
Utilities expense account | |||
Beginning balance | 0 | ||
(g) | $1,240 | ||
(l) | $1,800 | ||
Ending balance | $3,040 |
Wages expense account:
Wages expense account | |||
Beginning balance | 0 | ||
(j) | $6,000 | ||
Ending balance | $6,000 |
Thus, the t-accounts are prepared and the ending balances are calculated.
3.
Prepare an income statement for 30th April 2014.
3.

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.
Prepare an income statement:
Incorporation AS | ||
Income statement | ||
For the month ended 30th April 2014 | ||
Particulars | Amount ($) | Amount ($) |
Revenues: | ||
Animal care revenue | 35,260 | |
Rental revenue | 13,200 | |
Total revenues (A) | 48,460 | |
Expenses: | ||
Wages expense | 6,000 | |
Utilities expense | 3,040 | |
Total expenses (B) | 9,040 | |
Net Income | $39,420 |
Table (1)
Hence, the net income of Incorporation AS is $39,420.
4.
Write a memo to stockholders’ regarding the results of operations during the first month of the business.
4.

Explanation of Solution
MEMO
From
XYZ
Incorporation AS
To
Stockholders’ of Incorporation AS
Incorporation AS
30th April 2014
Sub: Results of operation during the first month of the business.
After the evaluation of effects of the transactions of Company KS, one can conclude that the company has earned a profit of $39,420. But, these are based upon unadjusted amounts. There are several expenses such as rent, supplies,
Regards,
XYZ
5.
Compute the net profit margin ratio for each year and explain the reason for promotion to chief financial officer.
5.

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 net sales revenue.
Compute the net profit margin ratio:
Net profit margin ratio for 2016:
Hence, the net profit margin ratio for the year 2016 is 0.111.
Net profit margin ratio for 2015:
Hence, the net profit margin ratio for the year 2015 is 0.0750.
Net profit margin ratio for 2014:
Hence, the net profit margin ratio for the year 2014 is (0.0278).
- By evaluating the net profit margin ratio, it is clear that the profit level of the Company has increased.
- This states that the company is very efficient in generating the revenue from the sales and controlling the expenses.
- Based on the above reason, the company can promote him as the chief financial officer.
Want to see more full solutions like this?
Chapter 3 Solutions
Financial Accounting, 8th Edition
- Duo Corporation is evaluating a project with the following cash flows: Year 0 1 2 3 Cash Flow -$ 30,000 12,200 14,900 16,800 4 5 13,900 -10,400 The company uses an interest rate of 8 percent on all of its projects. a. Calculate the MIRR of the project using the discounting approach. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. Calculate the MIRR of the project using the reinvestment approach. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. c. Calculate the MIRR of the project using the combination approach. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Discounting approach MIRR b. Reinvestment approach MIRR c. Combination approach MIRR % % %arrow_forwardHello tutor please provide this question solution general accountingarrow_forwardGet correct answer accounting questionsarrow_forward
- Consider a four-year project with the following information: Initial fixed asset investment = $555,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $37; variable costs = $25; fixed costs = $230,000; quantity sold = 79,000 units; tax rate = 24 percent. How sensitive is OCF to changes in quantity sold?arrow_forwardLight emitting diodes (LED) light bulbs have become required in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent light bulb costs $.39 and lasts 1,000 hours. A 15-watt LED, which provides the same light, costs $3.10 and lasts for 12,000 hours. A kilowatt-hour of electricity costs $.115. A kilowatt-hour is 1,000 watts for 1 hour. If you require a return of 11 percent and use a light fixture 500 hours per year, what is the equivalent annual cost of each light bulb? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.arrow_forwardRecently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: From an investor standpoint, do you think that the effect of the inventory write-down should be considered when…arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





