Question

The adjusted trial balance for Tybalt Construction as of December 31, 2017, follows.

TYBALT CONSTRUCTION Adjusted Trial Balance December 31, 2017
No.	Account Title	Debit				Credit
101	Cash	$	7,500
104	Short-term investments		22,000
126	Supplies		8,700
128	Prepaid insurance		8,800
167	Equipment		45,000
168	Accumulated depreciation—Equipment					$	22,500
173	Building		168,000
174	Accumulated depreciation—Building						56,000
183	Land		65,530
201	Accounts payable						16,500
203	Interest payable						2,600
208	Rent payable						3,700
210	Wages payable						2,900
213	Property taxes payable						1,300
233	Unearned professional fees						7,200
251	Long-term notes payable						69,500
307	Common stock						7,500
318	Retained earnings						123,200
319	Dividends		10,700
401	Professional fees earned						100,000
406	Rent earned						16,500
407	Dividends earned						2,500
409	Interest earned						2,300
606	Depreciation expense—Building		12,320
612	Depreciation expense—Equipment		6,750
623	Wages expense		29,000
633	Interest expense		4,700
637	Insurance expense		7,000
640	Rent expense		12,600
652	Supplies expense		6,200
682	Postage expense		2,600
683	Property taxes expense		3,200
684	Repairs expense		7,100
688	Telephone expense		2,600
690	Utilities expense		3,900
	Totals	$	434,200			$	434,200

The December 31, 2016, credit balance of the Retained Earnings account was $123,200. Tybalt Construction is required to make a $8,500 payment on its long-term notes payable during 2018.

Required:
1a. Prepare the income statement for the calendar-year 2017.
1b. Prepare the statement of retained earnings for the calendar-year 2017.
1c. Prepare the classified balance sheet at December 31, 2017.
2. Prepare the necessary closing entries at December 31, 2017.
3. Use the information in the financial statements to compute the following ratios:

(a) Return on assets (total assets at December 31, 2016, was $200,000) Numerator: / Denominator: = Return on total assets / = Return on total assets 0 (b) Debt ratio Numerator: / Denominator: = Debt ratio / = Debt ratio 0 (c) Profit margin ratio (use total revenues as the denominator) Numerator: / Denominator: = Profit margin / = Profit margin 0 % (d) Current ratio Numerator: / Denominator: = Current ratio / = Current ratio 0

Answer 1

TYBALT CONSTRUCTION Income Statement For Year Ended December 31, 2017 Revenues Professional fees earned Rent earned Dividends earned Interest earned Total revenues 100,000 16,500 2,500 2,300 121,300 Expenses Depreciation expense-building Depreciation expense-equipment Wages expense Interest expense Insurance expense Rent expense Supplies expense Postage expense Property taxes expense Repairs expense Telephone Utilties expense Total expenses Net Income 12,320 6,750 29,000 4,700 7,000 12,600 6,200 2,600 3,200 7,100 2,600 3,900 expense 97,970 23,330

5 1b. Prepare the statement of retained earnings for the calendar-year 2017. TYBALT CONSTRUCTION Statement of Retained Earnings For Year Ended December 31, 2017 Beginning Balance of Retained Earnings Add Net Income Less Dividend Paid Ending Balance of Retained Earnings 123,200 23,330 (10,700) 12,630 135,830 6 1c. Prepare the classified balance sheet at December 31, 2017. TYBALT CONSTRUCTION Balance Sheet For Year Ended December 31, 2017 Assets Current assets Cash Short-term investments Supplies Prepaid insurance Total current assets 7,500 22,000 8,700 8,800 47,000

Fixed assets Equipment Accumulated depreciation-Equipment Building Accumulated depreciafion-building Land Total Fixed assets Total assets 45,000 22,500 168,000 56,000 22,500 112,000 65,530 200,030 247,030 Liabilities Current liabilities Accounts payable Interest payable Rent payable Wages payable Property taxes payable Unearned professional fees Current portion of long-term note payable Total current liabilities Long-term liabilities Long-term notes payable (69500-8500) Total liabilities Owner's Equity Common stock Retained earnings Total liabilities & Owner's Equity 16,500 2,600 3,700 2,900 1,300 7,200 8,500 42,700 61,000 103,700 7,500 135,830 143,330 247,030

7 2. Prepare the necessary closing entries at December 31, 2017. 9 0 Date 31-Dec Professional fees earned General Journal Debit Credit Rent earned Dividends earned Interest earned 100,000 16,500 2,500 2,300 4 Income summary 121,300 6 31-Dec Income summary 97,970 Depreciation expense-building Depreciation expense-equipment Wages expense Interest expense Insurance expense Rent expense Supplies expense Postage expense Property taxes expense Repairs expense Telephone expense Utilties expense 12,320 6,750 29,000 4,700 7,000 12,600 6,200 2,600 3,200 7,100 2,600 3,900 4 5 7 8

31-Dec Income summary 23,330 Retained Earnings 23,330 31-Dec Retained Earnings 10,700 Dividend 10,700

17 3. Use the information in the financial statements to compute the following ratios 18 19 (a) Return on assets (total assets at December 31, 2016, was $200,000) Net incomeAverage total assets 23330 447030 (b) Debt ratio Total liabilities/total assets 103700 /247030 (c) Profit margin ratio (use total revenues as the denominator) Net incometotal revenues 23330 /121300 (d) Current ratio Current assets/Current liabilities 47000 /42700 Return on total assets 21 5.22% 23 24 25 26 27 28 29 30 31 32 Debt ratico 0.42 Profit margin 19.23% 34 35 36 37 38 39 Current ratio 1.10