FINANCIAL ACCOUNTING W/CONNECT PKG
FINANCIAL ACCOUNTING W/CONNECT PKG
10th Edition
ISBN: 9781264094639
Author: Libby
Publisher: MCG
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Chapter 3, Problem 6AP

1.

To determine

Journalize the given transactions.

1.

Expert Solution
Check Mark

Explanation of Solution

Journalize the given transactions:

DateAccount Title and ExplanationDebit ($)Credit ($)
aProperty and equipment (+A)$1,610  
Long-term notes payable (+L) $1,610
 (To record the long-term notes payable)  
 
bCash (+A)$3,100  
Accounts receivable (-A) $3,100
 (To record the receivables collected)  
 
 c Utilities expense (+E) (-SE)$3  
Cash (-A) $3
 (To record the expenses paid)  
 
dAccounts receivable (+A)$39,780  
Sales Revenue (+SE, +R) $39,780
 (To record the expenses paid)  
 
 Cost of Sales (+E) (-SE)$5,984  
 Inventory (-A) $5,984
 (To record the cost involved in sales)  
 
eWages (+E) (-SE)$1,238  
Cash (-A) $1,238
 (To record the wages paid)  
 
fIncome tax payable (-L)$9,545  
Cash (-A) $9,545
 (To record the income taxes paid)  
 
gInventory (+A) $23  
Accounts payable (+L) $23
 (To record the inventory purchased on account)  
 
hPrepaid expenses (+A) $82  
Cash (-A) $82
 (To record the expenses paid in advance)  
 
iOther long-term debt (-L)$10  
Interest expense$1  
Cash (-A) $11
 (To record the debt paid off)  
 
jOther assets and intangibles (+A) $6  
Cash (-A) $6
 (To record the purchase of other assets and intangibles)  

Table (1)

2

To determine

Prepare the T- account and enter the transaction into their respective accounts for calculating the ending balance.

2

Expert Solution
Check Mark

Explanation of Solution

Prepare the T-accounts:

Cash account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  1

Short-term investments account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  2

Accounts receivables account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  3

Inventories account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  4

Prepaid expenses account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  5

Other current assets account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  6

Long-term investments account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  7

Other assets and intangibles account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  8

Property and equipment account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  9

Short-term notes payable account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  10

Accounts payable account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  11

Income taxes payable account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  12

Long-term note payable account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  13

Other long-term debt account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  14

Common stock account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  15

Retained earnings account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  16

Sales revenue account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  17

Cost of sales account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  18

Utilities expense account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  19

Interest expense account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  20

Wage expense account:

FINANCIAL ACCOUNTING W/CONNECT PKG, Chapter 3, Problem 6AP , additional homework tip  21

Thus, the t-accounts are prepared and the ending balances are calculated.

3.

To determine

Prepare an income statement for the month of January.

3.

Expert Solution
Check Mark

Explanation of Solution

Prepare an income statement:

Corporation EM
Income statement
For the month ended 31st January
ParticularsAmount ($)Amount ($)
Revenues:  
Sales revenue 39,780
Expenses:  
Cost of sales5,984 
Wage expense1,238 
Utilities expense3 
Total costs and expenses 7,225
Operating income 32,555
Less: Other expense  
Interest expense 1
Net Income $32,554

Table (2)

Hence, the net income of Company E is $32,554.

4.

To determine

Compute the net profit margin ratio and based on the result give suggestion to the company.

4.

Expert Solution
Check Mark

Explanation of Solution

Compute the net profit margin ratio:

Net profit margin ratio=Net incomeNet sales revenue=$32,554$39,780=0.8184

Hence, the net profit margin ratio is 0.82.

  • By evaluating the net profit margin ratio, the company has earned $0.82 in net income for every $ 1 in the sales revenue.
  • To know the better result about the company, net profit margin ratio should be calculated to identify the way in which the management is generating its revenue and controlling the various expenses.

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Chapter 3 Solutions

FINANCIAL ACCOUNTING W/CONNECT PKG

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