Question

financial accounting 10th

2. Where, if at all, would each transaction be reported on the statement of cash flows? Use O for operat- ing activities, I for investing activities, F for financing activities, and NE if the transaction would not be included on the statement. Analyzing the Effects of Transactions Using T-Accounts, Preparing an Income Statement, and Evaluating the Net Profit Margin Ratio as a Manager (AP3-4) Kaylee James, a connoisseur of fine chocolate, opened Kaylee's Sweets in Collegetown on February 1. The shop specializes in a selection of gourmet chocolate candies and a line of gourmet ice cream. You have been hired as manager. Your duties include maintaining the store's financial records. The following transactions occurred in February, the first month of operations. a. Received four shareholders' contributions totaling $30,200 cash to form the corporation; issued 400 shares of $0.10 par value common stock. b. Paid three months' rent for the store at $1,750 per month (recorded as prepaid expenses). c. Purchased and received candy for $6,000 on account, due in 60 days. d. Purchased supplies for $1,560 cash. e. Negotiated and signed a two-year $11,000 loan at the bank, receiving cash at the time. 1. Used the money from (e) to purchase a computer for $2,750 (for recordkeeping and inventory track ing): used the balance for furniture and fixtures for the store. g. Placed a grand opening advertisement in the local paper for $400 cash; the ad ran in the current month. h. Made sales on Valentine's Day totaling $3,500; $2,675 was in cash and the rest on accounts receivable. The cost of the candy sold was $1,600. 1. Made a $550 payment on accounts payable. J. Incurred and paid employee wages of $1,300. k. Collected accounts receivable of $600 from customers. Made a repair to one of the display cases for $400 cash. m. Made cash sales of $1,200 during the rest of the month. The cost of the candy sold was $600.

Answer 1

4. During the first month of operations, Net profit is $ 400, which is just 8.5% of sales of $4700. The major expense is of Cost of Goods sold of $2200 and wages of $1300. Wages expense should be reduced if possible, to increase profitability.

Also around 75% of sales i.e $3500 was only on one day of Valentine's Day. Sales in normal days is very low, which should be increased by more advertisements and promotions.

5.

	2021	2020	2019
Net Income	22000	11000	4400
Net Sales Revenue	93500	82500	55000
Net Profit Margin Ratio	0.24	0.13	0.08
(Net Income/sales)

Thus, Net Profit Margin Ratio has increased over three years. So the manager should be promoted.