Question
e)Compute the companys average monthly insurance expense for the 2020 year f )Compute the companys cash outflow (cash paid) to prepay the rent in June
e)Compute the companys average monthly insurance expense for the 2020 year
f )Compute the companys cash outflow (cash paid) to prepay the rent in June 1, 2020 for 10 months
g )If the company purchased all of its office equipment when it first incorporated (first commenced business), for how long has it been in business as of December 31, 2020?
h )Using the financial statements prepared in part b., evaluate the following performance metrics:
Profitability
Liquidity and
Solvency
In addition, provide an explanation of the what the above metrics mean.
Credit TOPJOB INC. CONSULTING SERVICES TopJob Inc. ("TopJob") provides employment consulting services. These services range from maintaining payroll records to taxation services, as well as general business advisory and consulting to new companies. TopJob has performed well in the financial year ended 31 December 2020 and has expanded its customer base significantly. Management of the TopJob have stated that "the financial records need to be accurately recorded so investors and tax authorities can rely on our results". Customers can settle their accounts upfront in cash, or they can settle at a later date, usually within 30 days of the consulting service being provided and invoiced. The company adjusts its accounts monthly but performs closing entries annually on December 31. The adjusting journal entries have been performed for 11 months to November 30. The last month, December, has not been adjusted in the trial balance below. The firm's unadjusted trial balance dated 31 December 2020 is provided below: TopJob Inc. Consulting Services Unadjusted Trial Balance For the 12-month accounting period ended 31 December 2020 Account Debit Cash 319 010 Accounts receivable 94 340 Office supplies 880 Prepaid rent 4 400 Office equipment cost 90 000 Accumulated depreciation : office equipment 34 500 Accounts payable 4 400 Notes payable Interest payable Income taxes payable Dividends payable Unearned consulting fees 24 200 Capital stock (share capital) 226 100 Retained earnings 44 000 Dividends 3 500 Consulting fees earned (revenue) 450 000 Rent expense Insurance expense Office supplies expense 3 950 Depreciation expense : office equipment 16 500 Salaries expense 263 000 Utilities expense 7 380 Interest expense 750 Income taxes expense TOTAL 862 350 50 000 750 14 900 13 500 12 100 3 300 43 240 862 350 Additional information (not taken into account in the above): 1. Consulting fees to the value of $17 500 have been earned by TopJob, at December 31, the customer terms are 30 days. Therefore TopJob, will receive the cash to revenue earned on 31 January 2021. 2. The company determined that $24 200 of previously unearned consulting fees, that had been paid by customers already in full, had now been earned at December 31. 3. After the year end stock count, final office supplies on hand at December 31 total $550 4. The company purchased all of its office equipment when it first began business. At that time, the total estimated useful life of the equipment was five years. There were no additional purchases of office equipment other than when the business first began. 5. The company prepaid its ten-month rent agreement on June 1, 2020. The company only has one property it rents. There have been no escalations in rent in the last 12 months. 6. The company prepaid its six-month insurance policy on December 1, 2020. The annual insurance cost has remained unchanged over the last 3 years and will remain the same for the next year. The insurance policy is renewed every 6 months. The company only has one policy covering all of its assets. 7. Accrued but unpaid salaries total $11 200 at December 31,2020. 8. On September 1, 2020, the company borrowed $50 000 by signing a twelve-month, 6 percent (per annum) note payable. This note is the only liability that accrues interest and the only note payable. The entire amount, plus interest, is due and will be repaid in full on August 31, 2021. No payments of interest or principal are made until August 31, 2021Step by Step Solution
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