Ten-Column Work Sheet and Financial Statements (Appendix)

The following unadjusted trial balance is available for Tenfour Trucking Company on January 31, 2008:

Required 1. Enter the unadjusted trial balance in the first two columns of a ten-column work sheet.
2. Enter the necessary adjustments in the appropriate columns of the work sheet for each of the following:

a. Prepaid insurance represents the cost of a 24-month policy purchased on January 1, 2008.

b. The warehouse has an estimated useful life of 20 years and an estimated salvage value of $4,000.

c. The truck fleet has an estimated useful life of six years and an estimated salvage value of $15,000.

d. The promissory note was signed on January 1, 2007. Interest at an annual rate of 9% and the principal of $50,000 are due on December 31, 2008.

e. The customer deposits represent amounts paid in advance by new customers. A total of $4,500 of the balance in Customer Deposits was earned during January 2008.

f. Wages and salaries earned by employees at the end of January but not yet paid amount to $8,200.
g. Income taxes are accrued at a rate of 30% at the end of each month.
3. Complete the remaining columns of the work sheet.
4. Prepare in good form the following financial statements:

a. Income statement for the month ended January 31, 2008

b. Statement of retained earnings for the month ended January 31, 2008

c. Balance sheet at January 31, 2008 5. Compute Tenfour’s current ratio. What does this ratio tell you about the company’s liquidity?
6. Compute Tenfour’s profit margin. What does this ratio tell you about the company’s profitability?

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Tenfour Trucking Company Unadjusted Trial Balance January 31, 2008 Cash $ 27,340 Accounts Receivable 41,500 Prepaid Insurance 18,000 Warehouse 40,000 Accumulated Depreciation-Warehouse $ 21,600 Truck Fleet 240,000 Accumulated Depreciation-Truck Fleet 112,500 Land 20,000 Accounts Payable 32,880 Notes Payable 50,000 Interest Payable Customer Deposits Capital Stock 4,500 6,000 100,000 Retained Earnings 40,470 Freight Revenue 165,670 Gas and Oil Expense 57,330 Maintenance Expense 26,400 Wage and Salary Expense 43,050 Dividends 20,000 Totals $533,620 $533,620