Question

Puppy Studs, Inc., provides a stud service for serious dog breeders. The company’s accountant prepared the following list of accounts with their unadjusted balances at the end of the fiscal year, March 31, 2011:
Cash ................ $ 52,200
Accounts receivable .......... 47,500
Prepaid insurance ........... 20,000
Prepaid rent ............. 1,800
Supplies ............. 10,350
Equipment ............ 137,500
Accumulated depreciation ........ (1,700)
Accounts payable ......... 3,500
Unearned service revenue ...... 3,000
Long-term notes payable ...... 35,000
Common stock ........... 50,500
Additional paid-in capital ..... 91,450
Retained earnings ........ 87,120
Dividends ........... 5,320
Service revenue ......... 226,850
Miscellaneous operating expenses ... 149,450
Salary expense .......... 75,000

Additional facts (related to adjustments that have not yet been made):
a. The company owes its employees $2,500 for work done in this fiscal year. The next payday is not until April.
b. $2,000 worth of the unearned service revenue has actually been earned at year end.
c. The equipment is depreciated at the rate of $1,700 per year.
d. At year end $600 worth of prepaid rent and $15,000 of prepaid insurance remains unexpired.
e. Interest on the long-term note for a year at the rate of 6.5% is due on April 1.
f. Supplies on hand at the end of the year amounted to $2,100.
g. On the last day of the fiscal year, the firm earned $20,000. The customer paid $15,000 with cash and owed the remainder on account. However, the accountant left early that day, so the day’s revenue was not recorded in the accounting records.

Requirements
1. For each account, show the adjustment needed at year end.
2. Prepare an income statement for the year ended March 31, 2011, and a balance sheet at March 31, 2011.
3. Calculate the firm’s profit margin on sales ratio for the year.



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  • CreatedSeptember 01, 2014
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