Question

Barbara Jones opened Barb's Book Business on February 1. You have been hired to maintain the company's financial records. The following transactions occurred in February, the first month of operations. a. Received shareholders' cash contributions on February 1 totaling $20,000 to form the corporations, issued 1,000 shares of common stock. b. Paid $2,565 cash on February 2 for three months' rent for office space, TIP: For convenience, simply record the full amount of the payment as an asset (Prepaid Rent). At the end of the month, this account will be adjusted to its proper balance c. Purchased and received supplies on February 3 for $625 cash. d. Signed a promissory note on February 4, payable in two years; deposited $19,900 in the company's bank account e. On February 5. paid cash to buy equipment for $7,700 and land for $12,200. Placed an advertisement in the local paper on February 6 for $415 cash. g. Recorded sales on February 7 totaling $2,100; $1650 was in cash and the rest on accounts receivable. h. Collected accounts receivable of $52 from customers on February 8 On February 9, repaired one of the computers for $138 cash. TIP: Most repairs involve costs that do not provide additional future economic benefits. J.Incurred and paid employee wages on February 28 of $675. Requirement General Journal General Ledger Trial Balance Analysis Refer to the revenues and expenses shown on the unadjusted trial balance. Based on this information, calculate preliminary net income and net profit margin (Round your Net Prolet Margin answer to 1 decimal place) Preliminary Net Income Net Prof Margin Determine whether the net profit margin is better or worse than the 15 percent earned by a close competitor < Trial Balance

Answer 1

G H 2100 Debit Credit 9584 20000 -855 Income Statement Sales (-) expenses: Insurance Advertisement Repair wages Profit -415 1710 855 -138 625 -675 7700 17 1 TO calculate net income, lets create a trial balance 2 Particulars 3 Cash (20000-2565-625-7700-415+1650+52-138-675) 4 Common Stocko 5 Prepaid insurance 6 Insurance expense 7 Supplies 8 Bank (19900-12200) 9 Long term note 10 Equipment 11 Land 12 Advertisement expense 13 Sales 14 Accounts receivable (450-52) 15 Repair expenses 16 Wage expense 17 19900 $17 7700 12200 Prelimiary net income Net profit margin (Net profit/Net sales 415 0.81% 2100 398 138 A close competitor has earned 15%, 0.81% is nothing close to what is earned by competitor Business is definitely not doing well 675 42000 42000 18