Chapter 4, Problem 4PSB

To determine

Concept Introduction:

Income Statement: The financial statement concerned with computation net income during an accounting period is called income statement. Net income is the excess amount of revenue over the expenses of a company and when the expenses are more than the revenue is termed as net loss.

Statement of Owner's Equity: It is a financial statement which shows the portion of owner's fund in the total capital of a company.

Classified Balance Sheet: A classified balance sheet interprets the financial position of a business during particular period under different categories i.e. current assets, current liabilities, non-current assets, long-term liabilities, property, plant and equipment and owner's equity.

Requirement 1:

To Prepare:

Income statement, statement of owner's equity and the classified balance sheet for the year ended December 31, 2019.

To determine

Concept Introduction:

Closing Entries:

The journal entry which closes all the temporary accounts of a business organization is termed as closing entries.

Requirement 2:

Journalize the closing entries at December 31, 2019.

To determine

Concept Introduction:

Return on Asset:

Return on asset is a financial ratio which measures the amount of returns generated by the assets of the company.

Debt Ratio:

Debt ratio determines the proportion of the total assets financed by debt funds. It is key ratio in measuring the company's leverage.

Profit Margin Ratio:

It indicates the percentage of net income compared with total revenue earned during an accounting year.

Current Ratio:

The liquidity ratio which indicates the ability of company to pay off its short-term liabilities by using their current asset is termed as current ratio.

Requirement 3:

Computation of (a) return on assets (b) debt ratio (c) profit margin ratio (d) current ratio