dr Income Tax Expense (+E, SE) 9 cr Income Tax Payable (+L) 9
2.
+ Cash (A)
Accounts + Receivable(A)
Prepaid
+ Insurance (A)
Bal. 38
Bal. 9
Bal. 6 a 5
Bal. 38
Bal. 9
Bal. 1
+ Equipment (A)
Accumulated
Depreciation (xA) +
Accounts
Payable (L) +
Bal 80
Bal. 0
Bal. 9
b 4
Bal. 80
Bal. 4
Bal. 9
Wages Payable (L) +
Income Tax
Payable (L) +
Contributed
Capital (SE) +
Bal. 0
Bal. 0
Bal. 76
c 7
d 9
Bal. 7
Bal. 9
Bal. 76
Retained
Earnings (SE) +
Sales
Revenue (R) +
Administrative
+ Expenses (E)
Bal. 4
Bal. 80
Bal. 26
Bal. 4
Bal. 80
Bal. 26
Req. 2 (continued)
Wages
+ Expense (E)
Depreciation + Expense (E)
Insurance
+ Expense (E)
Bal. 10
Bal. 0
Bal. 0
c 7
b 4
a 5
Bal. 17
Bal. 4
Bal. 5
Income Tax
+ Expense (E)
Bal. 0
d 9
Bal. 9
Mint ClEANING INC.
Adjusted Trial Balance
December 31, 2013
(in thousands of dollars)
Account Titles
Debit
Credit
Cash
$ 38
Accounts Receivable
9
Prepaid Insurance
1
Equipment
80
Accumulated Depreciation
$ 4
Accounts Payable
9
Wages Payable
7
Income Tax Payable
9
Contributed Capital
76
Retained Earnings
4
Sales Revenue
80
Administrative Expenses
26
Wages Expense
17
Depreciation Expense
4
Insurance Expense
5
Income Tax Expense
9
Totals
$ 189
$ 189
Req. 3
Without adjusting journal entries, net income would have been overstated by $25 (because expenses for $5 + 4 + 7 + 9 = 25 would not have been recorded).
E5-8
Req. 1
2010
Asset turnover
=
Total Revenue
=
$4,473
=
1.94
Average Total Assets
($2,175 + $2,429)/2
2009
Asset turnover
=
Total Revenue
=
$4,276
=
1.94
Average Total Assets
($2,429 + $1,990)/2
2010
Net profit margin
=
Net Income
=
$206
=
.046
=
4.6%
Total Revenue
$4,473
2009
Net profit margin
=
Net Income
=
$205
=
.048
=
4.8%
Total Revenue
$4,276
Req. 2
The asset turnover ratio determines how well assets are used to generate revenue. This analysis indicates that the company has maintained its efficiency in using assets to generate revenue at 1.94 in both 2010 and 2009.
Net profit margin measures a company’s ability to generate profits from each dollar of revenue. This analysis indicates that the company’s performance in this regard has declined from 4.8% in 2009 to 4.6% in 2010.
