INCOME STATEMENT

Revenues
ASSETS
Rental Revenue 125900
Expenses Accounts Receivable
1) 2)
Advertising Expense 14500 Cash
Rental expense 60000 Display Fixtures
Water, Electricity & Gas 3600 Supplies Inventory
Salaries & wage expenses 17900
NET INCOME 29900 Total Assets

Dividends paid during the year 12000

RETAINED EARNINGS = NET INCOME - DIVIDENDS 4) Yes, I would invest $1000 in t

3)
Retained Earnings as of January 1, 2012 35390

RETAINED EARNINGS 53290

 BALANCE SHEET

ASSETS LIABILITIES STOCKHOLDER'S EQUITY

Accounts Receivable 300 Accounts Payable 4500 Capital Stock 50000

Cash 2490 Notes Payable 10000 Retained Earnings 53290
Display Fixtures 45000 Total Liabilities 14500 Total 103290
Supplies Inventory 70000

Total Assets 117790 Total Liabilities & Stockholder's equity 117790

Yes, I would invest $1000 in this company as the profit margin is 23.74% but the previous year's financial reports is also required in ord
ial reports is also required in order to assess it better.
 Retained Earnings 97850

ASSETS LIABILITIES

Accounts Receivable 23200 29600

1)
Cash 14750 Accounts Payable
Buildings & Equipments 177300
Supplies 12200 Total Liabilities 29600
Total Assets 227450
Total Liabilities & Stockholder's equity

The balance sheet Pete's assistant prepared had the following accounts placed in the wrong places :
a) Accounts Payable was is the Assets column which is supposed to be a liability
2) b) Accounts Receivable was in the liability column which is supposed to be an asset
c) Supplies was mentioned as a liability while it is an asset
d) Cash dividends paid and the Net income was mentioned as asset and liability respectively while both the a
 STOCKHOLDER'S EQUITY

Capital Stock 100000

Retained Earnings 97850
Total 197850

227450

wrong places :
y
sset

y respectively while both the accounts should be in the income statement

 CURRENT ASSETS CURRENT LIABILITIES
2012 2011 2012 2011
Accounts Receivable 16500 26000 Accounts Payable 10500 6500
Cash 12750 11800 Salaries Payable 1800 800
Interest Receivable 200 0 Taxes Payable 10000 5800
Office Supplies 900 1100 Total current liabilities 22300 13100
1) Prepaid Insurance 400 250
Total current assets 30750 39150

2012 2011
WORKING CAPITAL 8450 26050
CURRENT RATIO 1.378924 2.98855

The company's liquidity was greater in the beginning of the year 2011 and then it decreased over the end of the ye
2)
The liquidity decreased due to the increase in the accounts payable, salary payable and Taxes payable accounts and
 sed over the end of the year 2012
Taxes payable accounts and also due to the decrease in the Accounts Receivables and the office supplies accoun
 Sales Revenue
cost of goods sold
Gross Profit
Operating Expenses
Selling Expense

General & administrative expenses

1)

Total operating Expense

Income from operations
Other Revenue & Expenses
Dividend Revenue
Interest Expense
Excess of other expense over other revenue
Income before income taxes
Income tax expense
Net Income

2) In this form of the income statements there is detailed information provided regarding the expenses and revenue w

PROFIT MARGIN = NET INCOME / SALES REVENUE

3) PROFIT MARGIN 0.167285714285714
PROFIT MARGIN % 16.73%

4) As the company's profit margin is 16.73%, the company is consideres to be in a good profitable situation. To assess
 350000
150000
200000

Advertising Expense 9000

Rent Expenses - Salesperson's car 18000
Total Selling Expenses 27000
ve expenses
Depreciation Expense - computer 4500
Rent Expenses - office 26400
Supplies expenses - office 1300
Utilities expense 6750
Wages expense - office 45600
Total General & administrative expenses 84550
111550
88450

2700
1900
800
89250
30700
58550

led information provided regarding the expenses and revenue whill calculating the net income.

pany is consideres to be in a good profitable situation. To assess the profitability of the company demand, cost of goods and competition n
cost of goods and competition needs to be taken into account.