Question

The adjusted trial balance for Tybalt Construction as of December 31, 2015, follows.

   

TYBALT CONSTRUCTION Adjusted Trial Balance December 31, 2015
No.	Account Title	Debit				Credit
101	Cash		$	5,000
104	Short-term investments			23,000
126	Supplies			8,100
128	Prepaid insurance			7,000
167	Equipment			40,000
168	Accumulated depreciation—Equipment						$	20,000
173	Building			150,000
174	Accumulated depreciation—Building							50,000
183	Land			55,000
201	Accounts payable							16,500
203	Interest payable							2,500
208	Rent payable							3,500
210	Wages payable							2,500
213	Property taxes payable							900
233	Unearned professional fees							7,500
251	Long-term notes payable							67,000
301	O. Tybalt, Capital							126,400
302	O. Tybalt, Withdrawals			13,000
401	Professional fees earned							97,000
406	Rent earned							14,000
407	Dividends earned							2,000
409	Interest earned							2,100
606	Depreciation expense—Building			11,000
612	Depreciation expense—Equipment			6,000
623	Wages expense			32,000
633	Interest expense			5,100
637	Insurance expense			10,000
640	Rent expense			13,400
652	Supplies expense			7,400
682	Postage expense			4,200
683	Property taxes expense			5,000
684	Repairs expense			8,900
688	Telephone expense			3,200
690	Utilities expense			4,600
	Totals		$	411,900			$	411,900

  

O. Tybalt invested $5,000 cash in the business during year 2015 (the December 31, 2014, credit balance of the O. Tybalt, Capital account was $121,400). Tybalt Construction is required to make a $7,000 payment on its long-term notes payable during 2016.

  

Required:
1.1	Prepare the income statement for the calendar year 2015. 1.2 Prepare the statement of owner's equity for the calendar year 2015. 1.3 Prepare the classified balance sheet at December 31, 2015. 2. Prepare the necessary closing entries at December 31, 2015. Closing entries (all dated December 31, 2015): 3. Use the information in the financial statements to compute the following ratios:       Denominator:=Return on total assets/=Return on total assets 0 (b) Debt ratioNumerator:/Denominator:=Debt ratio/=Debt ratio 0 (c) Profit margin ratio (use total revenues as the denominator)Numerator:/Denominator:=Profit margin/=Profit margin 0%(d) Current ratioNumerator:/Denominator:=Current ratio/=Current ratio 0

Answer 1

Part 1 - Income Statement

Tybalt Construction

Income Statement

For the year ended December 31, 2015

Particulars		Amount
Revenue
Professional Fees earned	$97000
Rent Earned	$14000
Dividend earned	$2000
Interest earned	$2100
Total Revenue (A)		$115100
Expenses
Depreciation expenses - Building	$11000
Depreciation expenses - Equipment	$6000
Wages expenses	$32000
Interest expenses	$5100
Insurance expenses	$10000
Rent expenses	$13400
Supplies expenses	$7400
Postage expenses	$4200
Property taxes expenses	$5000
Repairs expenses	$8900
Telephone expenses	$3200
Utilities expenses	$4600
Total Expenses (B)		$110800
Net Income (A - B)		$4300

Part 2 - Statement of owners equity

Tybalt construction

Statement of owners equity

For the year ended December 2015

Particulars		Amount
Beginning balance of Tybalt capita on 1 january 2015		$121400
Add : Net Income	$4300
Add : Investment made (Capital Contribution)	$5000	$9300
		$130700
Less : Withdrawals		$13000
Tybalt closing balance capital on 31 december 2015		$117700

Part 3 - Balance sheet

Tybalt construction

Balance sheet

As on december 31, 2015

Particulars		Amount
Assets
Current Assets
Cash	$5000
Short Term Investment	$23000
Supplies	$8100
Prepaid Insurance	$7000
Total Current Assets (A)		$43100
Plant, Property and equipment
Equipment	$40000
Less : Accumulated Depreciation - Equipment	$20000	$20000
Building	$150000
Less : Accumulated depreciation - Building	$50000	$100000
Land		$55000
Total Plant Assets ($20000 + $100000 + $55000) (B)		$175000
Total Assets (A + B)		$218100
Liabilities
Current Liabilities
Accounts Payable	$16500
Interest Payable	$2500
Rent payable	$3500
Wages payable	$2500
Property tax payable	$900
Unearned professional fees	$7500
Note Payable (Current portion payable within 1 year)	$7000
Current Liabilities		$40400
Long term Liabilities
Long term Note payable ($67000 - $7000)		$60000
Total Liabilities (C) ($40400 + $100000)		$100400
Equity
Taybat Capital balance (From part 2) (D)		$117700
Total Liabilities and equity (C + D)		$218100

Part 4 - Closing Journal Entries for December 2015

Number	Accounts Title	Debit	Credit
1	Tybat Capital	$13000
	Drawings		$13000
	(Drawings transferred to capital account of tybat construction)
2	Net Income	$4300
	Income summary		$4300
	(Net income transferred to income summary
3	Income summary	$4300
	Tybat construction Capital balance		$4300
	(Being Income summary transferred to tybat corporation balance)

Part 5 - Calculation of ratios

Return on assets (Net income/Average total assets) Assuming opening balance of assets = $200000 Closing balance = $218100 Average = ($200000+$218100)/2 = $209050	2.06% ($4300/$209050)
Debt Ratio (Total Liabilties/Total Assets)	0.46 ($100400/$218100)
Profit Margin ratio (Net Income/Total Revenue)	3.74% ($4300/$115100)
Current ratio (Current Assets/Current Liabilities)	1.07 ($43100/$40400)