E3-12 Recording Journal Entries and Determining Net Income and Net Profit Margin

Question

E3-12 Recording Journal Entries and Determining Net Income and Net Profit Margin [LO 3-2, LO3-3, 3-5 ons Air Transport Service. Inc. . has been in operation for three years. The following transactions occurred in February Feb. 1 Paid $288 for rent of hangar space in February d customer payment of $aee to ship several items to Philadelphia next month. Feb. 4 Receive Feb. 7 Flew cargo from Denver to Dallas; the customer paid in full (s9e0 cash) Feb.18 Incurred and paid $1,200 in pilot wages for flying in February Feb. 14 Paid $100 for an advertisement run in the local paper on February 14. Feb.18 1las to Albuqu uerque for $1,700; one customer paid sse0 cash and the other asked to be Feb. 2s Purchazed on account $1, se in suppltes for future use on the planes. Required: Prepare accrual basis journal entries for each transaction. 2. Calculate the company's preliminary net income. 3. Calculate the company's net profit 1. n expressed as a percent Complete this question by entering your answers in the tabs below select "No Journal

Explanation / Answer

Solution 1:

Solution 2:

Solution 3:

Net Profit margin = Net Income / revenues = $1,100 / $2,600 = 42.31%

Journal Entries - Rowland & Sons Date Particulars Debit Credit 1-Feb Rent Expense Dr $200.00           To Cash $200.00 (To record rent payment) 4-Feb Cash Dr $800.00           To Unearned revenue $800.00 (To record advance received from customer) 7-Feb Cash Dr $900.00           To Service revenue $900.00 (To record receipt of cash for goods transport service) 10-Feb Salaries and wages expense Dr $1,200.00           To Cash $1,200.00 (To record wages payment to pilot) 14-Feb Advertisement expenses Dr $100.00           To Cash $100.00 (To record payment for news paper advertisement) 18-Feb Cash Dr $500.00 Accounts receivables Dr $1,200.00           To Service revenue $1,700.00 (To record revenue for cargo transport) 25-Feb Supplies Dr $1,350.00           To Accounts payable $1,350.00 (To record purchase of supplies on account)

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