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Debit Credit $ 33.000 $100,000 9.000 11.000 60.000 129.000 11 240 Accounts payable Accounts receivable Accumulated depreciati

1. prepair classified statement of financial position as at December 31, 2017
2. prepair the closing enteries at December 31 , 2017
3. compute the net profit margin ratio and total asset turnover for 2017, and explain the meaning of each ratio. total assets equalled $200,000 at January 1, 2017

Additional information is as follows: Wees.wed to compones totallet $8,000 as at December 31, 2017 The not receivable was obt

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Answer #1

Requirement 1

Classified financial position as at 31st December, 2017      
Particulars   Amount    Amount
Equity and Liabilities      
Shareholders fund      
Contributed capital   60,000   
Retained earnings      
Opening   70,000   
For the year   14,920    1,44,920
      
Current Liabilities      
Accounts payable   33,000   
Deferred revenue   11,240   
Wages outstanding   8,000   
Income taxes payable   7,480   
Dividend payable   15,000    74,720
      
Total Equity and Liabilities       2,19,640
      
      
Assets      
Long term assets      
Equipment   60,000   
(Less): Accumulated depreciation   -12,000    48,000
      
Current assets      
Accounts Receivables   1,00,000   
Cash   11,000   
Marchandise inventory   18,200   
Note Receivables   24,000   
Interest on note receivables   600   
Prepaid income taxes   1,040   
Prepaid rent   16,800    1,71,640
      
Total Assets       2,19,640

Requirement 2

Closing entries at 31st December 2017      
particulars   Amount    Amount
Wages Expenses   8,000   
To Wages expenses outstanding       8,000
Since outstanding wages recorded      
Interest receivables on note receivables   600   
Interest income       600
Since accured interest recorded      
Depreciation epenses   3,000   
To Accumulated depreciation       3,000
Since depreciation recorded      
Dividend    15,000   
To dividend payable       15,000
Since dividend payable recorded      
Income tax expenses   7,480   
To Income tax payable       7,480
Since tax expenses for the year recorded      

Requirement 3

Net profit margin = Net profit after tax/Income   =14,920/3,01,600   4.95%
Net profit margin represent the how much wealth has been added to shareholders fund as compare to total income      

Asset turnover ratio = Total Income/Average assets   =3,01,600/[(2,00,000+2,19,640)/2]   =1.44 times
Asset turnover ration represents how much times assets have been used to generate total income      

Working notes

WN 1 Profit and loss account      
Particulars   Amount    Amount

Income
Sales   3,01,000   
Interest on note receivables   600    3,01,600
      
(Less): Expense      
Cost of sales   -1,29,000   
Other operating expenses   -1,400   
Depreciation expenses   -3,000   
Rent expenses   -11,000   
Wages expenses   -1,19,800    -2,64,200
Net profit before tax       37,400
(Less): Taxes       -7,480
Net profit after taxes       29,920
Dividend declared       -15,000
Closing retained earnings       14,920

WN 2 It is assumed wages expenses in trial balance is excluding outstanding expenses  
WN 3 Notes receivable interest calculation  
   Interest calculation for the preriod for months @ 5%  
   $24,000*5%*1/2=   600
WN 4 Since rent expenses is given in trial balance adjustment for it has been assumed to be done  

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