Question

P3-10A Pamper Me Salon Inc.’s general ledger at April 30, 2017, included the following: Cash $5,000, Supplies $500, Equipment $24,000, Accounts Payable $2,100, Notes Payable
$10,000, Unearned Service Revenue (from gift certifi cates) $1,000, Common Stock $5,000, and Retained Earnings $11,400. The following events and transactions occurred during May.

May 1 Paid rent for the month of May $1,000.
4 Paid $1,100 of the account payable at April 30.
7 Issued gift certifi cates for future services for $1,500 cash.
8 Received $1,200 cash from customers for services performed.
14 Paid $1,200 in salaries to employees.
15 Received $800 in cash from customers for services performed.
15 Customers receiving services worth $700 used gift certifi cates in payment.
21 Paid the remaining accounts payable from April 30.
22 Received $1,000 in cash from customers for services performed.
22 Purchased supplies of $700 on account. All of these were used during the
month.
25 Received a bill for advertising for $500. This bill is due on June 13.
25 Received and paid a utilities bill for $400.
29 Received $1,700 in cash from customers for services performed.
29 Customers receiving services worth $600 used gift certifi cates in payment.
31 Interest of $50 was paid on the note payable.
31 Paid $1,200 in salaries to employees.
31 Paid income tax payment for the month $150.
Instructions
(a) Using T-accounts, enter the beginning balances in the general ledger as of April 30,
2017.
(b) Journalize the May transactions.
(c) Post the May journal entries to the general ledger.
(d) Prepare a trial balance on May 31, 2017.

e) prepare the Income Statement for the month ended May 31, 2017

f) Prepare the Statement of Retained Earnings for the month ended May 31, 2017

g) Prepare the Balance Sheet for May 31, 2017

h)Prepapre the Statement of Cash Flows for the month ended May 31, 2017

I) Calculate the following for May: Working Capital, Current Ratio, Debt to Asset Ratio, Profit margin, & Return on Equity

Answer 1

Trial Balance as on May 31, 2017
Particulars	Debits	Credits
Cash	$5,100
Supplies	$500
Equipment	$24,000
Salaries	$2,400
Utilities	$400
Advertising Expense	$500
Rent	$1,000
Interest Expense	$50
Income tax Expense	$150
Consumables	$700
Accounts Payable		$1,200
Notes Payable		$10,000
Unearned Service Revenue (Gift Certificates)		$1,200
Common Stock		$5,000
Retained Earnings		$11,400
Service Revenue		$6,000
Total	$34,800	$34,800
Income Statement for the Month ended 31st May 2017
Particulars	Amount $	Amount $
Service Revenue		$6,000
Gross Revenue		$6,000
Less : Expenses
Salaries	2400
Utilities	400
Advertising Expense	500
Rent	1000
Interest Expense	50
Income tax Expense	150
Consumables	700	$5,200
Net profit		$800
Statement of retained earnings for the Month ended 31st May 2017
Particulars	Amount $	Amount $
Opening Balance		$11,400
Add: Net profit		$800
Closing Balance		$12,200
Balance Sheet as on 31st May 2017
Liabilities	Amount $	Assets	Amount $
Common Stock	$5,000	Equipment	$24,000
Retained Earnings	$12,200	Supplies	$500
Accounts Payable	$1,200	Cash	$5,100
Notes Payable ( Long term)	$10,000
Unearned Service Revenue (Gift Certificates)	$1,200
	$29,600		$29,600
Statement of Cash Flows for the Month ended 31st May 2017
Particulars	Amount $	Amount $	Amount $
Cash flows from operating Activity
Add : Operating cash received			$6,200
Less : Operating expenses			($5,900)
Operating cash flows before payment of taxes			$300
Less : Income Taxes paid			($150)
Cash flows from operating Activity (After payment of Taxes)			$150
Cash flows from Investing Activity		$0
Cash flows from Financing Activity
Interest paid on Notes payable		$50	($50)
Net changes in the Cash Flows			$100
Opening cash Balance			$5,000
Closing cash Balance			$5,100

Working capital  
Current Assets   $5,600
Current Liabilities   $2,400
Working capital   $3,200
  
Current Ratio  
Current Assets   $5,600
Current Liabilities   $2,400
Current Ratio   2.33
  
Debt to Asset Ratio  
Total Debt   $12,400
Total Assets   $29,600
Debt to Asset Ratio   0.42

Profit Margin  
Net profit   $800
Revenue   $6,000
Net Profit Margin   $13.33
Gross profit   $1,000
Gross Profit Margin   $16.67