Question

1.

At the beginning of the current year, Trenton Company's total assets were $274,000 and its total liabilities were $188,000. During the year, the company reported total revenues of $119,000, total expenses of $89,000 and owner withdrawals of $18,000. There were no other changes in owner's capital during the year and total assets at the end of the year were $286,000. Trenton Company's debt ratio at the end of the current year is:

• 52.1%.

• 1.52%.

• 34.3%.

• 65.7%.

• 68.6%.

2.

Joe Jackson opened Jackson's Repairs on March 1 of the current year. During March, the following transactions occurred and were recorded in the company's books:

1. Jackson invested $38,000 cash in the business.
2. Jackson contributed $113,000 of equipment to the business.
3. The company paid $3,300 cash to rent office space for the month of March.
4. The company received $29,000 cash for repair services provided during March.
5. The company paid $7,500 for salaries for the month of March.
6. The company provided $4,300 of services to customers on account.
7. The company paid cash of $1,800 for utilities for the month of March.
8. The company received $4,400 cash in advance from a customer for repair services to be provided in April.
9. Jackson withdrew $6,300 for his personal use from the company.

Based on this information, net income for March would be:

• $6,600.

• $26,500.

• $7,100.

• $20,700.

• $26,400.

Answer 1

Solution:

1)

Ending total assets		$286,000
Less: Ending stockholders equity
Beginning stockholders equity($274,000 - $188,000)	$86,000
Add: Revenue	$119,000
Less: Expenses	$(89,000)
Less: Dividends	$(18,000)
Ending stockholders equity		$98,000
ending liabilities		$188,000

debit ratio = Total liabilities / total assets

Debit ratio = $188,000 / 286,000

Debit ratio = 65.7%

Answer is 65.7%

2)

Net income = Revenue - expenses

Cash receive for repair service                    = $29,000

Add : service provided to customer              = $4,300

Less: Rent paid                                               = $3,300

Less:Salaries paid                                         = $7,500

Less:Cash paid for monthly utilities            = $1,800

Net income                                                        = $20,700

Answer is $20,700