a. Received a cash investment from three organizers and issued a total of 200 shares of $0.

05 p
Dr Cash (+A) 8,000
Cr Common stock (+SE) 10
Cr Additional paid-in capital (+SE) 7,990

b. Borrowed $20,000 from a local bank, signing a note due in three years.
Dr Cash (+A) 20,000
Cr Notes Payable (Long-term debt) (+L) 20,000
c. Signed a one-year lease for space near a health club, paying $600 for April rent and $1,800 f
Dr Rent expense (+E) 600
Dr Pre-paid rent (+A) 1,800
Cr Cash (-A) 2,400

d. Purchased equipment costing $15,200, paying 20 percent in cash and agreeing to pay the rem
Dr Equipment (+A) 15,200
Cr Cash (-A) 3,040
Cr Accounts Payable (Short-term note payable) (+L) 12,160

e. Ordered a business computer and printer from Dell for $2,900.

f. Loaned $1,000 to an employee who signed a note due in three months.

Dr Notes Receivable (+A) 1,000
Cr Cash (-A) 1,000

g. Purchased supplies for $2,600 on account.

Dr Supplies (+A) 2,600
Cr Accounts payable (+L) 2,600

h. Paid Facebook $2,000 in advance for advertising. (Facebook charges the account per click, r
Dr Prepaid advertising (+A) 2,000
Cr Cash (-A) 2,000

i. Paid $2,400 for 12 months of insurance coverage. One month ($200) applies to April; the rem
Dr Prepaid insurance (+A) 2,400
Cr Cash (-A) 2,400

j. Purchased short-term investments for $10,000 cash.

Dr Short-term investments (+A) 10,000
Cr Cash (-A) 10,000

k. Provided $42,000 of deep tissue massage services in April. Clients paid half in cash and agre
Dr Cash (+A) 21,000
Dr Accounts Receivable (+A) 21,000
Cr Services revenue (+R) 42,000

l. Paid employees $18,000 in wages for April.

Dr Wages expense (+E) 18,000
Cr Cash (-A) 18,000

m. Received a $310 utility bill for April’s gas and electricity usage. The bill will be paid in May
Dr Utility expense (+E) 310
Cr Accounts payable (+L) 310

n. Paid $1,500 on the long-term bank note (ignore interest).

Dr Notes Payable (Long-term bank note) (-L) 1,500
Cr Cash (-A) 1,500
o. Earned and received $25 in interest on the short-term investments.
Dr Cash (+A) 25
Cr Interest revenue (+R) 25

p. Sent the team to Boston for additional specialty training, costing $2,100 cash.
Dr Training expense (+E) 2,100
Cr Cash (-A) 2,100

q. Received $1,400 cash from clients for services to be performed beginning in May (unearned
Dr Cash (+A) 1,400
Cr Unearned revenue (+L) 1,400
of 200 shares of $0.05 par value stock with a market price of $40 per share.

April rent and $1,800 for rent covering May, June, and July.

d agreeing to pay the remainder on account to the supplier (due in 60 days).

 the account per click, reducing the prepaid balance. The average click is $0.27.)

applies to April; the remainder applies to the rest of the fiscal year (ending March next year).

id half in cash and agreed to pay the remainder in May.

bill will be paid in May.

ning in May (unearned revenue).
 Cash (A)
Debit (+) Credit (-)
Beg. 0
8,000
(b) 20,000
2,400 (c)
3,040 (d)
1,000
2,000
2,400 (i)
10,000
(k) 21,000
18,000 (l)
1,500 (n)
25
2,100 (p)
(q) 1,400
7.985
 Common stock (SE) Additional paid
Debit (-) Credit (+) Debit (-)
0 Beg.
(a)
10

Accounts payable (L) Notes rece

Debit (-) Credit (+) Debit (+)
0 Beg. Beg.
12,160 (d) (f) 1,000
2,600 (g) 1,000
310 (m)
15,070

Services revenue (R) Wages ex

Debit (-) Credit (+) Debit (+)
0 Beg. Beg.
42,000 (k) (l) 18,000
42,000 18,000
 Additional paid-in capital (SE) Notes payable (L)
Debit (-) Credit (+) Debit (-)
0 Beg.
7,990 (d)
7,990 (n) 1,500

Notes receivable (A) Supplies (A)

Debit (+) Credit (-) Debit (+)
0 Beg. 0
1,000 (g) 2,600
1,000 2,600

Wages expense (E) Utility expense (E)

Debit (+) Credit (-) Debit (+)
0 Beg. 0
18,000 310
18,000 310
Notes payable (L) Rent expense (A)
Credit (+) Debit (+) Credit (-)
0 Beg. Beg. 0
20,000 (b) (c) 600
600
18,500

Supplies (A) Pre-paid advertising (A)

Credit (-) Debit (+) Credit (-)
Beg. 0
(h) 2,000
2,000

tility expense (E) Interest revenue (R)

Credit (-) Debit (-) Credit (+)
0 B
(o)
25
e (A) Pre-paid rent (A)
Credit (-) Debit (+) Credit (-)
Beg. 0
(c) 1,800
1,800

sing (A) Pre-paid insurance (A)

Credit (-) Debit (+) Credit (-)
Beg. 0
(i) 2,400
2,400

ue (R) Training expense (E)

Credit (+) Debit (+) Credit (-)
Beg. Beg. 0
(o) (f) 2,100
2,100
 Equipment (A)
Debit (+) Credit (-)
Beg. 0
(b) 15,200
15,200

Short-term investments (A)

Debit (+) Credit (-)
Beg. 0
(j) 10,000
10,000

Unearned revenue (L)

Debit (-) Credit (+)
0 Beg.
1,400 (o)
1,400
 Accounts receivable (A)
Debit (+) Credit (-)
Beg. 0
(k) 21,000
21,000
 IthacaDeep, Inc.
Unadjusted Trial Balance
For the quarter ended April 30, 2019
(in dollars) Debit Credit
Cash 7.985
Short-term investments 10,000
Accounts receivable 21,000
Notes receivable 1,000
Supplies 2,600
Pre-paid advertising 2,000
Pre-paid rent 1,800
Pre-paid insurance 2,400
Equipment 15,200
Accounts payable 15,070
Unearned revenue 1,400
Notes payable 18,500
Common stock 10
Additional paid-in capital 7,990
Service revenue 42,000
Interest revenue 25
Wages expense 18,000
Rent expense 600
Utility expense 310
Training expense 2,100

Total 84.995 84.995

 IthacaDeep, Inc.
Income Statement
For the month ended April 30, 2019
(in dollars)

Revenues
Service revenue
Interest revenue
Total revenue
Expenses
Rent expense
Utility expense
Training expense
Wages expense
Income before income taxes
Income tax expense
Net income
Earnings per share

IthacaDeep, In
Statement of Stockholde
For the month ended Ap
(in dollars)

Common
Stock

Beginning balance $0
Net income for the year
Stock issuance 10
Dividents
Balance April 30, 2019 $10
 19

$ 42,000
25
42.025

600
310
2,100
18,000
21.015
0
$ 21,015
$ 105,075

IthacaDeep, Inc.
ment of Stockholders’ Equity
month ended April 30, 2019
(in dollars)

Additional Total
Retained
Paid-in Stockholders'
Earnings
Captital Equity
$0 $0 $0
21.015 21.015
7,990 8,000
$7,990 $21,015 $29,015
 IthacaDeep, Inc.
Balance Sheet
At April 30, 2019
(in dollars)

Assets:
Current Assets
Cash
Short-term Investment
Accounts receivable
Notes receivable
Supplies
Pre-paid advertising
Pre-paid rent
Pre-paid insurance
Total current assets
Equipment
Total assets

Liabilities and stockholders' equity:

Liabilities
Current liabilities:
Accounts payable
Unearned revenue
Total current liabilities
Notes payable
Total liabilities

Stockholders' equity
Common stock
Retained earnings
Additional paid-in capital
Total stockholders' equity
Total liabilities and stockholders' equity
$ 7,985
10,000
21,000
1,000
2,600
2,000
1,800
2,400
48.785
15,200
$ 63,985

$ 15,070
1,400
16,470
18,500
34,970

10
21.015
7,990
29.015
$ 63,985
1. Current Ratio = Current assets : Current liabilities
Current Ratio = 48,785 : 16,470 = 2,96
2. Net profit margin = Net income : Net sales
Net profit margin = 21,015 : 42,000 = 0,50 or 50,04%
--> Current ratio shows a comfortable short-term liquidity position - the company should be
due.
--> IthacaDeep earned roughly $0.50 of profit for every $1.00 of service revenue in April, sh
revenues in the first month. Moreover, some expenses are prepaid and not recognized yet so
ition - the company should be able to meet short-term obligations as they come

of service revenue in April, shows low cost structure for the month and high
paid and not recognized yet so that it heightens the revenue.