Airline Company Balance Sheet
As of December 31, 2009
Assets
Cash
.. $ 30,000
Account receivable
50,000
Inventory
.. 80,000
Net plant and equipment
. 200,000
Total Assets
$ 360,000
Liabilities and Stockholders Equity
Accounts Payable
$ 50,000
Accrued expenses
30,000
Long-term debt
.. 120,000
Common stock
60,000
Paid-in capital
.. 20,000
Retained earning
. 80,000
Total liabilities and Stockholders Equity
. $360,000
Airline Company Income Statement
For Year Ended December 31, 2009
Sales (on credit)
$ 720,000
Cost of goods sold
500,000
Gross profit
.$ 220,000
Sales and administration expense
20,000
Depreciation
40,000
Operating profit
.. $ 160,000
Interest expense
. 16,000
Profit before tax
. 144,000
Taxes (50 percent)
72,000
Net income
.. $ 72,000
2. The firms average collection period is?
3. Airline Companys current ratio?
4. Times interest earned for the company is?
5. The firms debt to asset ratio is?
6. Compute Airline Companys after tax profit margin?
7. The firms receivable turnover is?
Show each transaction affects the accounting equation.
1. Mike Jones opened Fresh Pastry Bakery by contributing $15,000 on April 1, 2009, in exchange for common stock.
2. Fresh Pastry borrowed $10,500 from the bank on April 1. The note is an l-year, 12% note, with both principal and interest to be repaid on March 31, 2009.
3. Mike paid $1,500 cash to rent equipment for the shop for the first month.
4. Mike paid $655 cash for the utility bill for the first month.
5. Fresh Pastry was a hit and earned $7,500 in revenue the first month, all cash.
6. Mike hired a friend to be the customer service specialist for the pastry shop and paid $475 cash in salary expense for the first month.
7. The business paid distributions to owners in the amount of $1,000 for the first month.
8. At the end of the month. $105 of interest payable is due on the note from #2.
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