Quick Study 3-19

ZAHURAK COMPANY
Income Statement
For Year Ended December 31, 2018

Plumbing fees earned............................................... $84,000

Expenses
Depreciation expense—Trucks........................... $6,500
Salaries expense.................................................. 46,700
Rent expense........................................................ 13,000
Total expenses..................................................... 66,200
Net income................................................................. $ 17,800

ZAHURAK COMPANY
Statement of Retained Earnings
For Year Ended December 31, 2018

Retained earnings, December 31, 2017................... $45,500

Add: Net income...................................................... 17,800
63,300
Less: Dividends........................................................ (15,400
Retained earnings, December 31, 2018................... $47,900
Quick Study 3-19 (concluded)

ZAHURAK COMPANY
Balance Sheet
December 31, 2018
Assets
Cash.................................................................. $ 7,000
Accounts receivable....................................... 27,200
Trucks............................................................... 24,500
Land................................................................. 32,000
Total assets...................................................... $ 90,700
Liabilities
Accounts payable............................................ $ 15,000
Salaries payable.............................................. 4,200
Unearned fees.................................................. 3,600
Total liabilities................................................. $ 22,800
Equity
Common stock................................................ 20,000
Other Equity..................................................... 47,900
Total equity...................................................... 67,900
Total liabilities and equity.............................. $ 90,700
Exercise 3-8

WILSON TRUCKING COMPANY

Income Statement
For Year Ended December 31, 2018

Trucking fees earned................................................ $130,000

Expenses
Depreciation expense—Trucks........................... $23,500
Salaries expense.................................................. 61,000
Office supplies expense...................................... 8,000
Repairs expense—Trucks................................... 12,000
Total expenses..................................................... 104,500
Net income................................................................. $ 25,500

WILSON TRUCKING COMPANY

Statement of Retained Earnings
For Year Ended December 31, 2018

Retained earnings, December 31, 2017................... $155,000

Add: Net income...................................................... 25,500
180,500
Less: Dividends........................................................ (20,000
Retained earnings, December 31, 2018................... $160,500
Exercise 3-8 (concluded)

WILSON TRUCKING COMPANY

Balance Sheet
December 31, 2018
Assets
Cash.................................................................. $ 8,000
Accounts receivable....................................... 17,500
Office supplies................................................. 3,000
Trucks............................................................... 136,000
Land.................................................................. 85,000
Total assets...................................................... $249,500
Liabilities
Accounts payable............................................ $ 12,000
Interest payable............................................... 4,000
Long-term notes payable................................ 53,000
Total liabilities................................................. 69,000
Equity
Common stock................................................ 20,000
Other Equity .................................................... 160,500
Total equity...................................................... 180,500
Total liabilities and equity.............................. $249,500
Problem 3-8A
Part 1
TYBALT CONSTRUCTION
Income Statement
For Year Ended December 31, 2018
Revenues
Professional fees earned................................... $97,000
Rent earned......................................................... 14,000
Dividends earned............................................... 2,000
Interest earned.................................................... 2,100
Total revenues.................................................... $115,100
Expenses
Depreciation expense—Building...................... 11,000
Depreciation expense—Equipment.................. 6,000
Wages expense.................................................. 32,000
Interest expense................................................. 5,100
Insurance expense............................................. 10,000
Rent expense...................................................... 13,400
Supplies expense............................................... 7,400
Postage expense................................................ 4,200
Property taxes expense..................................... 5,000
Repairs expense................................................. 8,900
Telephone expense............................................ 3,200
Utilities expense................................................. 4,600
Total expenses................................................... 110,800
Net income............................................................ $ 4,300

TYBALT CONSTRUCTION
Statement of Retained Earnings
For Year Ended December 31, 2018
Retained earnings, December 31, 2017.............. $121,400
Add: Net income................................................. 4,300
125,700
Less: Dividends................................................... (13,000
Retained earnings, December 31, 2018.............. $112,700
Problem 3-8A (Continued)

TYBALT CONSTRUCTION
Balance Sheet
December 31, 2018
Assets
Current assets
Cash..................................................................... $ 5,000
Short-term investments..................................... 23,000
Supplies.............................................................. 8,100
Prepaid insurance.............................................. 7,000
Total current assets........................................... $ 43,100
Plant assets
Equipment............................................ 20,000
Building............................................................... 100,000
Land..................................................................... 55,000
Total plant assets............................................... 175,000
Total assets........................................................... $218,100
Liabilities
Current liabilities
Accounts payable............................................... $ 16,500
Interest payable.................................................. 2,500
Rent payable....................................................... 3,500
Wages payable................................................... 2,500
Property taxes payable...................................... 900
Unearned professional fees.............................. 7,500
Current portion of long-term note payable…... 7,000
Total current liabilities....................................... $ 40,400
Long-term liabilities
Long-term notes payable ($67,000-$7,000).......... 60,000
Total liabilities...................................................... 100,400
Equity
Common stock..................................................... 5,000
Other Equity ......................................................... 112,700
Total equity........................................................... 117,700
Total liabilities and equity................................... $218,100
Problem 3-8A (Continued)
Part 2
Closing entries (all dated December 31, 2018)
Instructor note: Entries are shown without an account reference column because no posting is required.

(1) Professional Fees Earned............................ 97,000

Rent Earned................................................... 14,000
Dividends Earned......................................... 2,000
Interest Earned.............................................. 2,100
Income Summary.................................. 115,100
Close the revenue accounts.
(2) Income Summary.......................................... 110,800
Depreciation Expense—Building......... 11,000
Depreciation Expense—Equipment..... 6,000
Wages Expense..................................... 32,000
Interest Expense.................................... 5,100
Insurance Expense................................ 10,000
Rent Expense......................................... 13,400
Supplies Expense.................................. 7,400
Postage Expense................................... 4,200
Property Taxes Expense....................... 5,000
Repairs Expense................................... 8,900
Telephone Expense............................... 3,200
Utilities Expense.................................... 4,600
Close the expense accounts.
(3) Income Summary.......................................... 4,300
Retained Earnings................................. 4,300
Close the income summary account.
(4) Retained Earnings........................................ 13,000
Dividends............................................... 13,000
Close the dividends account.

Part 3
a. Return on assets = $4,300/[($200,000 + $218,100)/2] = 2.1% (or 0.021)
b. Debt ratio = $100,400/$218,100 = 0.46
c. Profit margin = $4,300/$115,100 =3.7% (or 0.037)
d. Current ratio = $43,100/$40,400 = 1.07
Problem 3-5B
Part 1

SPEEDY COURIER
Income Statement
For Year Ended December 31, 2018

Revenues
Delivery fees earned..................................... $611,800
Interest earned............................................... 34,000
Total revenues............................................... $645,800
Expenses
Depreciation expense—Trucks.................... 29,000
Depreciation expense—Equipment............. 48,000
Salaries expense........................................... 74,000
Wages expense............................................. 300,000
Interest expense............................................ 15,000
Office supplies expense............................... 31,000
Advertising expense..................................... 27,200
Repairs expense—Trucks............................ 35,600
Total expenses.............................................. 559,800
Net income....................................................... $ 86,000

SPEEDY COURIER
Statement of Retained Earnings
For Year Ended December 31, 2018

Retained earnings, December 31, 2017......... $110,000

Plus: Net income............................................ 86,000
196,000
Less: Dividends.............................................. 50,000
Retained earnings, December 31, 2018......... $146,000
Problem 3-5B (Concluded)

SPEEDY COURIER
Balance Sheet
December 31, 2018
Assets
Cash....................................................................... $ 58,000
Accounts receivable............................................ 120,000
Interest receivable................................................ 7,000
Notes receivable (due in 90 days)......................... 210,000
Office supplies...................................................... 22,000
Trucks.................................................................... 76,000

Equipment............................................................. 70000

Land....................................................................... 100,000
Total assets........................................................... $663,000

Liabilities
Accounts payable................................................. $134,000
Interest payable.................................................... 20,000
Salaries payable................................................... 28,000
Unearned delivery fees........................................ 120,000
Long-term notes payable..................................... 200,000
Total liabilities...................................................... 502,000

Equity
Common stock..................................................... 15,000
Other Equity ......................................................... 146,000
Total equity........................................................... 161,000
Total liabilities and equity................................... $663,000

Part 2

Profit margin = $86,000 / $645,800 = 13.3%

Problem 3-8B
Part 1
ANARA CO.
Income Statement
For Year Ended December 31, 2018
Revenues
Professional fees earned................................... $59,600
Rent earned......................................................... 4,500
Dividends earned............................................... 1,000
Interest earned.................................................... 1,320
Total revenues.................................................... $66,420
Expenses
Depreciation expense—Building...................... 2,000
Depreciation expense—Equipment.................. 1,000
Wages expense.................................................. 18,500
Interest expense................................................. 1,550
Insurance expense............................................. 1,525
Rent expense...................................................... 3,600
Supplies expense............................................... 1,000
Postage expense................................................ 410
Property taxes expense..................................... 4,825
Repairs expense................................................. 679
Telephone expense............................................ 521
Utilities expense................................................. 1,920
Total expenses................................................... 37,530
Net income............................................................ $28,890

ANARA CO.
Statement of Retained Earnings
For Year Ended December 31, 2018
Retained earnings, December 31, 2017.............. $ 62,800
Add: Net income.................................................. 28,890
91,690
Less: Dividends.................................................... (8,000)
Retained earnings, December 31, 2018.............. $ 83,690
Problem 3-8B (Continued)
ANARA CO.
Balance Sheet
December 31, 2018
Assets
Current assets
Cash..................................................................... $ 7,400
Short-term investments..................................... 11,200
Supplies.............................................................. 4,600
Prepaid insurance.............................................. 1,000
Total current assets........................................... $ 24,200
Plant assets
Equipment.......................................................... 20,000
Building............................................................... 90,000
Land..................................................................... 30,500
Total plant assets............................................... 140,500
Total assets........................................................... $164,700
Liabilities
Current liabilities
Accounts payable............................................... $ 3,500
Interest payable.................................................. 1,750
Rent payable....................................................... 400
Wages payable................................................... 1,280
Property taxes payable...................................... 3,330
Unearned professional fees.............................. 750
Current portion of long-term note payable...... 8,400
Total current liabilities....................................... $ 19,410
Long-term liabilities
Long-term notes payable ($40,000-$8,400).......... 31,600
Total liabilities...................................................... 51,010
Equity
Common stock..................................................... 30,000
Other equity.......................................................... 83,690
Total equity........................................................... 113,690
Total liabilities and equity................................... $164,700
Problem 3-8B (Continued)
Part 2
Closing entries (all dated December 31, 2018)
Instructor note: Entries are shown without an account reference column because no posting is required.

(1) Professional Fees Earned............................ 59,600

Rent Earned................................................... 4,500
Dividends Earned......................................... 1,000
Interest Earned.............................................. 1,320
Income Summary.................................. 66,420
Close the revenue accounts.

(2) Income Summary.......................................... 37,530

Depreciation Expense—Building......... 2,000
Depreciation Expense—Equipment..... 1,000
Wages Expense..................................... 18,500
Interest Expense.................................... 1,550
Insurance Expense................................ 1,525
Rent Expense......................................... 3,600
Supplies Expense.................................. 1,000
Postage Expense................................... 410
Property Taxes Expense....................... 4,825
Repairs Expense................................... 679
Telephone Expense............................... 521
Utilities Expense.................................... 1,920
Close the expense accounts.

(3) Income Summary.......................................... 28,890

Retained Earnings................................. 28,890
Close the Income Summary account.

(4) Retained Earnings........................................ 8,000

Dividends............................................... 8,000
Close the dividends account.

Part 3
a. Return on assets = $28,890/[($160,000 + $164,700)/2] = 17.8% (or 0.178)
b. Debt ratio = $51,010/$164,700 = 0.31
c. Profit margin = $28,890/$66,420 = 43.5% (or 0.435)
d. Current ratio = $24,200/$19,410 = 1.25