Question

Required information Problem 3-5A Preparing financial statements from the adjusted trial balance and computing profit margin LO P3, A1 [The following information applies to the questions displayed below.] The adjusted trial balance for Chiara Company as of December 31, 2018, follows. Debit Credit Cash $ 30,000 Accounts receivable 52,000 Interest receivable 18,000 Notes receivable (due in 90 days) 168,000 Office supplies 16,000 Automobiles 168,000 Accumulated depreciation—Automobiles $ 50,000 Equipment 138,000 Accumulated depreciation—Equipment 18,000 Land 78,000 Accounts payable 96,000 Interest payable 20,000 Salaries payable 19,000 Unearned fees 30,000 Long-term notes payable 138,000 Common stock 20,000 Retained earnings, December 31, 2017 235,800 Dividends 46,000 Fees earned 484,000 Interest earned 24,000 Depreciation expense—Automobiles 26,000 Depreciation expense—Equipment 18,000 Salaries expense 188,000 Wages expense 40,000 Interest expense 32,000 Office supplies expense 34,000 Advertising expense 58,000 Repairs expense—Automobiles 24,800 Totals $ 1,134,800 $ 1,134,800

Answer 1

Financial statements:

Profit margin:

Profit margin = Net income / Total revenue

= 87,200 / 508,000

= 0.1716 (or) 17.16%