1
(A)
Anna Car Repairing Shop
Journalize the transactions
January 1,2018
Date Details Ref. Debit Credit
Jan 1 Cash 100000
Owner’s Capital 100000
Jan 2 Prepaid rent 36000
Cash 36000
Jan3 Equipment 80000
Cash 60000
Notes payable 20000
Jan4 Office Supplies 17600
Accounts Payable 17600
Jan13 Cash 28500
Service Revenue 28500
Jan13 Accounts Payable 17600
Cash 17600
Jan14 Salaries and wages expense 19100
Cash 19100
Jan18 Cash 32900
Account Receivable 21200
Service Revenue 54100
Jan23 Cash 15300
Account Receivable 15300
Jan25 Cash 4000
Unearned Service Revenue 4000
Jan26 Office Supplies 5200
Accounts Payable 5200
Jan28 Utility Expense 19000
Cash 19000
Jan31 Advertising expense 5000
Cash 5000
Jan31 Utility Expense 2470
Accounts Payable 2470
Jan31 Telephone Expense 1494
Accounts Payable 1494
Jan31 Miscellaneous Expenses 3470
Cash 3470
(B)
Anna Car Repairing Shop
Ledger account
Cash
Debit Credit
Jan1 Owners capital 100000 Jan2 Prepaid rent 36000
Jan13 Service Charge 28500 Jan3 Equipment 60000
Jan18 Service Revenue 32900 Jan13 Accounts Payable 17600
Jan23 Service Charge 15300 Jan14 Salaries and wages 19100
Jan25 Advance Payment 4000 Jan28 Bill pay 19000
Jan31 Advertising expense 5000
Jan31 Miscellaneous expense 3470
Jan31 C/D 20530
180700 180700
Owner’s Capital
Debit Credit
Jan31 C/D 100000 Jan1 Cash 100000
Prepaid Rent
Debit Credit
Jan2 Cash 36000 Jan31 C/D 36000
Equipment
Debit Credit
Jan3 Cash 60000 Jan 31 C/D 80000
Jan3 Notes Payable 20000
80000 80000
Office Supplies
Debit Credit
Jan4 Accounts Payable 17600 Jan31 C/D 22800
Jan26 Accounts payable 5200
22800 22800
Accounts payable
Debit Credit
Jan13 office supplies 17600 Jan4 Office Supplies 17600
Jan26 Office supplies 5200
Jan31 Electricity bill 2470
Jan31 C/D 9164 Jan31 Telephone bill 1494
26764 26764
Service Revenue
Debit Credit
Jan31 C/D 82600 Jan18 Cash 28500
Jan18 Account Receivable 32900
Jan13 Cash 28500
82600 82600
Notes payable
Debit Credit
Jan31 C/D 20000 Jan3 Equipment 20000
Wage Expense
Debit Credit
Jan14 Cash 19100 Jan31 C/D 19100
Account Receivable
Debit Credit
Jan18 Service Revenue 21800 Jan23 Cash 15300
Jan31 C/D 5900
Unearned Service Revenue
Debit Credit
Jan31 C/D 4000 Jan25 Cash 4000
Utility Expense
Debit Credit
Jan28 Cash 19000 Jan31 C/D 21470
Jan31 Accounts payable 2470
Advertising Expense
Debit Credit
Jan31 Cash 5000 Jan31 C/D 5000
Telephone Expense
Debit Credit
Jan31 Accounts Payable 1494 Jan31 C/D 1494
Miscellaneous Expense
Debit Credit
Jan31 Cash 3470 Jan31 C/D 3470
(C)
Anna Car Repairing Shop
Trial balance
January 31, 2018
Account name Debit Credit
Cash 20530
Equipment 80000
Prepaid Rent 36000
Supplies 22800
Wage Expense 19100
Accounts Receivable 5900
Utility Expense 21470
Advertising Expense 5000
Telephone Expense 1494
Miscellaneous Expense 3470
Owner’s Capital 100000
Notes Payable 20000
Accounts Payable 9164
Service Revenue 82600
Unearned Service Revenue 4000
Total 215764 215764
(D)
Anna Car Repairing Shop
Income Statement
For January 31,2018
Revenue:
Service Revenue 82600
Expenses:
Telephone Expense 1494
Utility Expense 21470
Advertising Expense 5000
Miscellaneous Expense 3470
Salary and Wages Expense 19100
Total expense 50534
Net Income 32066
Anna Car Repairing Shop
Balance Sheet
For the month ended, January 31,2018
Assets:
Current Assets
Cash 20530
Account Receivable 5900
Prepaid Rent 36000
Supplies 22800
Total current assets 85230
Property,Plant and Equipment:
Equipment 80230
Total assets 165230
Liabilities and Owner’s Equity:
Current Liabilities
Accounts Payable 9164
Unearned Service Revenue 4000
13164
Long Term Liabilities:
Notes Payable 20000
Owner’s Equity 132066
Total 165230
2
(A)
Cost Principle: According to the cost principle, assets should be valued at either their
acquisition cost or their original cost.
For instance, even though the equipment's current price is $15000, if a company buys it for
$10000, they would record it as such on their balance sheet.
(B)
Economic Entity Assumption: The economic entity assumption holds that a business is distinct
from the owner's personal affairs.
For instance, if a businessperson purchases a truck for his transportation company, that truck
would be listed as a business asset. The company, not the businessman personally, owns that
truck. As a result, it would be listed on a balance sheet for a business.
(C)
Monetory Unit Assumption: Financial transactions and events that ought to be measured and
recorded in a stable monetary unit are referred to as meeting the monetary unit assumption,
which is an accounting concept.
For instance, if a company spent $10,000 on equipment, the cost of that equipment would be
listed on the balance sheet in monetary terms, such as BDT.
(D)
Going Concern: According to the accounting principle known as "going concern," a business
entity will continue to operate until its desired objectives are met.
For instance, instead of liquidating a company that is currently losing money, the government
should look for anomalies and try to restore the company's profitability.
(E)
Periodicity: For the purpose of financial reporting, a business's economic activities can be
categorized into distinct and recurring time periods. This is referred to as periodicity.
For instance, Grameenphone pays dividends twice a year to please its stockholders and
facilitate an easier audit.
(F)
Revenue Recognition Principle: The RRP principle serves as a guide when deciding when and
how to accurately recognize revenue.
For instance, if a business keeps its inventory in order to sell it later at a profit, it could suffer
losses. Because there would be more competition the later he entered the market. And RRP
offers this kind of direction.
(G)
Marketing Concept: An accounting principle known as the "matching concept" guarantees that
expenses and revenues are compared to determine profitability.
For example, a business will undoubtedly fail if it spends a lot of money on marketing rather
than making its products better. The matching concept assists people by showing them the return
on their investment as a means of overcoming that.
(H)
Accrual Basis:With the accrual basis, regardless of whether money was exchanged, revenues
and expenses are recognized as they are incurred.
According to the accrual basis method, for instance, prepaid insurance costs would be recorded
as an asset.
(I)
Dual Aspect of Accounting: According to the dual aspect method of accounting, every financial
transaction would have two equal and diametrically opposed effects.
This means that if someone paid cash to buy an asset, they would need to record that transaction
by increasing the asset and concurrently decreasing the cash account as they exchanged the cash
for the asset.
3
(A)
Baker Corporation
Statement of Cash Flows
For The Year Ended 2015
Cash flow from operating $ $
Activities:
Net Income 106000
Adjustment to reconcile net income to net cash provided
by operating activities:
Depreciation Expense 30000
Decrease in Accounts Receivable 30000
Increase in Inventory (140000)
Increase in Accounts Payable 70000
Increase in Notes Payable 20000
10000
116000
Cash flow from investing activities:
Purchase of equipment
Net cash used by investing activities (40000) (40000)
Cash flow from financing activities: 76000
Long term debt
Payment of dividend 30000
Net cash used by financing activities (76000) (46000)
Net increase (46000)
Cash at the beginning of the period 30000
Cash at the end of period 40000
70000
(B)
Current ratio= Total current asset / total current liabilities
= 820000/520000
= 1.58
The result 1.58 means Baker Corporation has 1.58 times more liquid assets than its short term
obligations.
Quick Ratio = (Total current asset-inventory) / total current liabilities
= ( 820000-460000) / 520000
= 0.7
This refers that Baker Corporation has 0.7 times liquid assets compared to liabilities. The
corporation may have difficulties in meeting short term obligations.
Average Receive Turnover = Net credit sales / average accounts receivable
= ( 350000+320000) / 2
= 335000
Account Receivable Turnover = 2200000 / 335000
= 6.57
Account Receivable of Baker Corporation is 6.57; which states that the company collects its
accounts receivables on average every 6.57 days.
Profit margin= profit / revenue
= (106000 / 2200000) *100
= 4.82%
This refers that if Baker Corporation earns $100 revenue, there profit would be 4.82%
Asset Turnover = sales / average asset
= 2200000 / 1155000
= 1.90
This means that the company generates $1.90 of sales for every $1 of its asset.
ROA = net income / average total assets
=( 106000 / 1155000) * 100
= 9.18%
This means that Baker Corporation is 9.18% profitable against its total assets.
Return of common stockholders = net income / common equity
= 106000 / {(100000+100000)/2}
= 106%
This refers to Baker Corporation Generating 106% profit for its shareholders.
Debt to asset = total liabilities / total assets
= 840000 / 1200000
= 0.70
0.70 refers to the portion of a company's asset which originated from debit.
Time interest earned ratio = EBIT / interest
= 180000/29000
= 6.21
6.21 TIER refers that Baker Corporation is 6.21 times capable of covering its interest expense
with its operating income.