Question

CDE Company Adjusted Trial Balance Problem # 2 Debit Credit Cash $ 3,500 Accounts receivable 8,000 Prepaid Insurance 3,600 Equipment 80,000 Accumulated depreciation $12,000 Accounts payable 600 Common Stock 35,000 Retained earnings 14,200 Cash Dividènds 7,500 Service fees earned 102,200 Miscellaneous Incom come 4,200 Salaries Expense 42,800 Rent expense 13,000 Insurance expense 1,800 Depreciation expense 8,000 Income Tax expense 8,800 Income Tax Payable 8,800 Totals $177,000 $177,000 Required: Prepare an Income Statement, a statement of Retained Earnings and a Balance Sheet. Also, calculate profit margin, current ratio, working capital, assets turnover and debt ratio.

Answer 1

INCOME STATEMENT
Revenues:
Service Fees	$      1,02,200
Miscellaneous Income	$           4,200
Total revenue		$   1,06,400
Operating expenses:
Salaries Expense	$         42,800
Rent Expense	$         13,000
Insurance Expense	$           1,800
Depreciation Expense-Equipment	$           8,000
Total operating expenses		$           65,600
Income before taxes		$           40,800
Income tax expense		$             8,800
Net income		$           32,000
STATEMENT OF RETAINED EARNINGS
Beginning balance		$           14,200
Add: Net income for the year	$              32,000
Less: Dividends paid	$                 7,500
Net addition during the year		$           24,500
Ending balance		$           38,700
BALANCE SHEET
ASSETS
Current Assets:
Cash	$                 3,500
Accounts receivable	$                 8,000
Prepaid insurance	$                 3,600
Total current assets		$           15,100
Non-Current Assets:
Equipment	$              80,000
Accumulated depreciation-Equipment	$              12,000
Total non-current assets		$           68,000
Total assets		$           83,100
TOTAL LIABILITIES & OWNER'S EQUITY
Current liabilities:
Accounts Payable	$              600
Income tax payable	$           8,800
Total current liabilities		$              9,400
Long term liabilities		$                     -
Total liabilities		$              9,400
Stockholders' equity:
Common stock	$              35,000
Retained earnings	$              38,700
Stockholders' equity		$           73,700
Total liabilities and owner's equity		$           83,100
RATIOS:
Profit margin = Net income/Total revenue = 32000/106400 =	30.08%
Current ratio = Current assets/Current liabilities = 15100/9400 =	1.61
Working capital = Current assets-Current liabilities = 15100-9400 =	$                 5,700
Assets turnover = Total revenue/Total assets = 106400/83100 =	1.28
Debt ratio = Total liabilities/Total assets = 9400/83100 =	0.11