Problem 4-5A Preparing closing entries, financial statements, and ratios LO C3,

Question

Problem 4-5A Preparing closing entries, financial statements, and ratios LO C3, A1, P2

  

  

O. Tybalt invested $6,500 cash in the business during year 2013 (the December 31, 2012, credit balance of the O. Tybalt, Capital account was $121,800). Tybalt Construction is required to make a $8,500 payment on its long-term notes payable during 2014.

  

Prepare the income statement for the calendar-year 2013.

          

Prepare the statement of owner's equity for the calendar-year 2013.

          

Prepare the classified balance sheet at December 31, 2013.

            

        

Use the information in the financial statements to compute the following ratios:

a) return on assets ( total assets at december 31, 2012 was 200,000$

b) debt ratio

c) profit margin ration

d) current ratio

The adjusted trial balance for Tybalt Construction as of December 31, 2013, follows.

Explanation / Answer

1.1 Income Statement for 2013:

1.2 Statement of owner's equity for 2013:

1.3 Balance Sheet as of December 31 2013:

2. Closing entries:

3. a. Return on assets = Net income / Total assets x 100 = 24,660 / 244,360 x 100 = 10.09%

b. Debt ratio = Total liabilities / Total assets x 100 = 101,600 / 244,360 x 100 = 41.58%

c. Profit margin = Net income / Total revenue x 100 = 24,660 / 119,500 x 100 = 20.64%

d. Current ratio = Current assets / Current liabilities = 47,000 / 43,100 = 1.09

$ $ Professional fees earned 98,000 Rent earned 16,000 Dividend earned 2,500 Interest earned 3,000 Total revenue 119,500 Expenses Wages expense 28,000 Insurance expense 7,800 Rent expense 11,600 Supplies expense 6,700 Postage expense 2,900 Repairs expense 6,200 Telephone expense 2,100 Utilities expense 4,300 Property tax expense 3,200 Depreciation expense 17,440 90,240 Income from operations 29,260 Interest expense 4,600 Net income 24,660

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