Question

Rowland &Sons Air Transport Service, Inc., has been in operation for three years. The following transactions occurred in February: Feb. 1 Paid $610 for rent of hangar space in February Feb. 4 Received customer payment of 1,630 to ship several items to Philadelphia next month. Feb. 7 Flew cargo from Denver to Dallas; the customer paid in full ($1,830 cash) Feb.10 Incurred and paid $1,300 in pilot wages for flying in February Feb.14 Paid $224 for an advertisement run in the local paper on February 14 Feb.18 Flew cargo for two customers from Dallas to Albuquerque for $2,175; one customer paid $725 cash and the other asked to be billed $1,450 Feb.25 Purchased on account $1,620 in supplies for future use on the planes Required 1. Prepare accrual basis journal entries for each transaction 2. Calculate the company's preliminary net income. 3. Calculate the company's net profit margin expressed as a percent. Complete this question by entering your answers in the tabs below Required 1Required 2 Required 3 Prepare accrual basis journal entries for each transaction. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list

Answer 1

1.

Journal

Date	Account title	Debit	Credit
Feb.1	Rent expense	610
	Cash		610
Feb.4	Cash	1,630
	Unearned service revenue		1,630
Feb. 7	Cash	1,830
	Service revenue		1,830
Feb. 10	Wages expense	1,300
	Cash		1,300
Feb. 14	Advertisement expense	224
	Cash		224
Feb. 18	Cash	725
	Accounts receivable	1,450
	Service revenue		2,175
Feb. 25	Supplies	1,620
	Accounts payable		1,620

2.

Net income = Service revenue - Operating expenses

= (1,830 + 2,175) - (610 + 1,300 + 224)

= $4,005 - 2,134

= $1,871

3.

Net profit margin (%) = Net income/Service revenue

= 1,871/4,005

= 46.72%

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