Solution:
1) Preparing the Journal Entries by using the above Transactions:
Date | Account Title and Explanation | Debit | Credit |
1-May-13 | Prepaid insurance | 2750 | |
Cash | 2750 | ||
(To Record the Payment in Advance) | |||
4-May-13 | No entry is required | ||
7-May-13 | Accounts Receivable | 775 | |
Service Revenue | 775 | ||
(To Record Providing Service on Credit) | |||
10-May-13 | Supplies | 820 | |
Accounts Payable | 820 | ||
(To Record the Purchase on Credit) | |||
13-May-13 | Advertisement expense | 40 | |
Cash | 40 | ||
(To Record the Payment Advertisement Cost in Cash) | |||
16-May-13 | Accounts Payable | 205 | |
Cash | 205 | ||
(To Record the Payment of One Quarter) ($820/4) | |||
19-May-13 | Cash | 1450 | |
Unearned Revenue | 1450 | ||
(To Record the Issue of Gift Certificate not Redeemed) | |||
20-May-15 | Cash | 5200 | |
Notes Payable | 5200 | ||
(To Record the Taking Loan from Bank Through 2-Year Note) | |||
22-May-13 | Massage Tables | 450 | |
Cash | 450 | ||
(To Record Receiving 2 Massage Table at Cash) | |||
25-May-13 | Utility Expense | 450 | |
Cash | 450 | ||
(To Record Payment of Utility Bill) |
2)
Revenues: | |
Service Revenue | 775 |
Total Revenues | 775 |
Expenses: | |
Utility Expense | 450 |
Advertising Expense | 40 |
Total Expenses | 490 |
Net Income | 285 |
Net Profit Margin = (Net Income/ Revenue)*100
= ($285/$775)*100
= 36.77%
Therefore, the NGS's Preliminary Net Income is $285 and Net Profit Margin for the month is 36.77%.
.
3) Which of the following best describes the adjustment(s) that will have to be made before the income statement is finalized:
Right Option is All of the Above.
Recording the Supplies Expense during the Month and Income Taxes of the Earning of the Month Should be Adjusted beofre finalizing the Income statement of the Month.
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