a. Make a full set of financial statements for Evan's Auto Parts (EAP) using the trial balance prepared in Part 1 - this means a
a. Make a full set of financial statements for Evan's Auto Parts ("EAP") using the trial balance prepared in Part 1 - this means a Balance Sheet as of December 31, 2018, as well as an Income Statement , Statement of Stockholder's Equity and Statement of Cash Flows for the year ended December 31, 2018.
b. Prepare the following ratios based on EAP's final balances, and prepare brief comments on what these ratios mean:
c.Return on Equity
d.Debt to Equity
e.Current Ratio
f.Net Operating Profit Margin
g.Gross Profit Margin
h.Times interest earned
Unadjusted Adjusted Post Closing Trial Balance Adjustments Trial Balance Closing Entry Trial Balance Account Name Debits Credits Debits Credits Debit Credits Debits Credits Debits Credits Cash 398,000 398,000 398,000 Accounts Receivable 118,250 1 18,250 118,250 40,625 Allowance for Doubtful Accounts AJE#6 40,625 40,625 Inventory 189,600 AJE#5 57,500 132,100 132, 100 Prepaid Insurance 35,000 AJE#4 7,292 27,708 27,708 19,500 19,500 19,500 Property & Equipment Accumulated Depreciation AJE#3 2,321 2,321 2,321 177, 125 176,125 176, 125 Accounts Payabl AJE#2 9.000 9.000 9.000 Wages Payable Interest Payable AJE#1 300 300 300 AJE#7 17,324 17,324 17,324 Income Tax Payable 60,000 60,000 60,000 Note Payable Unearned Revenue 210,000 AJE#5 70,000 140,000 140,000 150,000 150,000 Common Stoc 150,000 Dividends 5,000 5,000 5,000 Retained Earnings 71,500 71,500 28,453 99,953 Revenue 546,250 AJE#5 70,000 616,250 616,250 Cost of Goods Sold 357,650 AJE#5 57.500 415,150 415, 150 Wage Expense 27,000 AJE#2 9,00 36,000 36,000 7,292 rance Expense AJE#4 7.292 7,292 Interest Expense 3,000 AJE#1 300 3,300 3,300 Rent Expense 60,500 60,500 50,500 AJE#3 2,321 2,321 2,321 Depreciation Expense 375 375 375 Utility Expense Bad Debt Expense AJE#6 40,625 40,625 40,625 Income Tax Expense AJE#7 17,324 17,23 17,234 1,213,875 1,213,875 204,272 204,272 1,283,355 1,283,355 616,250 616,250 695,558 695,558 Pre-tax Income 50,687 Tax Expense 17,324- # Account Debits Credits Cash (A+) 150,000 Common Stock (SE+) 150,000 N Wages Expense (Ex+) 27,000 Cash (A-) 27,000 3 Rent Expense (Ex+) 60,500 Cash (A-) 60,500 4 Cash (A+) 60,000 Note Payable (L+) 60,000 Accounts Payable (L-) 19,500 Equipment (A+) 19,500 6 Cash (A+) 3,000 Interest Expense (Ex-) 3,000 7 Inventory (A+) 375,000 Accounts Payable (L+) 375,000 8 Accounts Receivable (A+) 438,000 Revenue (R+) 438,000 Cost of Goods Sold (Ex+) 273,000 Inventory (A-) 273,000 9 Accounts Payable (L-) 35,000 Cash (A- 35,000 10 Accounts Receivable (A+) 61,250 Revenue (R+ ) 61,250 Cost of Goods Sold (Ex+) 42,000 Inventory (A-) 42,000 11 Prepaid Insurance (A+) 35,000 Cash (A-) 35,000 12 Cash (A+) 438,000 Accounts Receivable (A-) 438,000 13 Accounts Payable (L-) 359,500 Cash (A-) 359,500 14 Dividends (SE-) 5,000 Cash (A-) 5,000 15 Accounts Receivable (A+) 210,000 Unearned Revenue (R+) 210,000 16 Accounts Receivable (A+) 47,000 Revenue (R+) 47,000 Cost of Goods Sold (Ex+) 42,650 Inventory (A-) 42,650 17 Inventory (A+) 165,250 Accounts Payable (L+) 165,250 18 Utilities Expense (Ex-) 375 Accounts Payable (L+) 375 19 See AJE #6 20 n/a 21 See AJE #7Adjusting Journal Entries AJE # 1 Interest Expense (Ex+) 300 Interest Payable (L+) 300 AJE # 2 Wage Expense (Ex+) 9,000 Wage Payable (L+) 9,000 AJE # 3 Depreciation Expense (Ex+) 2,321 Accumulated Depreciation - Equipment (XA+) 2,321 AJE # 4 Insurance Expense (Ex+) 7,292 Equipment Prepaid Insurance 7,292 Cost 19500 AJE # 5 Unearned Revenue (R-) 70,000 Life ( years Revenue (R+) 70,000 Annual Depreciation 2786 Cost of Goods Sold (Ex+) 57,500 Inventory (A-) 57,500 AJE # 6 Bad Debts Expense (Ex+, SE-) 40,625 Monthly Depreciation 232 Allowance for Doubtful accounts (XA+, A-) 40,625 Months Used 10 AJE # 7 Income Tax Expense (Ex+) 17,324 Depreciation needed 2321 Income Tax Payable (L+) 17,324 Total Insurance Policy 35000 Period 24 months Monthly Amount 1458.33 Months Used Adjustment needed 7292 Closing Entry Revenue 616,250 Cost of Goods Sold 415, 150 Wage Expense 36,000 Insurance Expense 7,292 Interest Expense 3.300 Rent Expense 60,500 Depreciation Expense 2,321 Utility Expense 375 Bad Debt Expense 40,625 Income Tax Expense 17,234 Dividends 5,000 Retained Earnings 28,453 616,250 616,250
