Question 1 (75 pts)

The unadjusted trial balance for JKF Inc is provided below.

Use along with the notes provided below to prepare journal entries to show the accounting treatment for each of the adjustments below. Use the journal entries to prepare the Adjusted Trial Balance.

Use the adjusted Trial Balance to prepare a multi-step income statement, a statement of stockholders equity and a classified balance sheet.

JKF Inc
Unadjusted Trial Balance
For the year ended 31st Dec 2017
	Debit	Credit
Cash	200,000
Accounts Receivable	200,000
Inventory	150,000
Prepaid Insurance	50,000
Equipment	1,200,000
Accumulated DepreciationEquipment		400,000
Land	100,000
Notes Payable (Long term)		75,000
Accounts payable		100,000
Unearned Service Revenue		50,000
Owner's Capital		400,000
Retained earnings		300,000
Sales Revenue		1,275,000
Cost of Goods Sold	500,000
Selling Expenses	150,000
Admin Expenses	100,000
Interest revenues		100,000
Loss on sale of fixed assets	50,000
	2,700,000	2,700,000

The following adjustments were provided

1. Fees of $25,000, received in advance during the year were erroneously recorded in Sales revenue.

2. $50,000 recorded as unearned service was earned during the year.

3. Prepaid Insurance expired during the year $30,000. (Admin Expense)

4. Equipment is expected to last for 5 years. Salvage value is $200,000. (Depreciation in CoGS)

5. Office salaries and wages earned but unrecorded and unpaid December 31, 2017, $20,000. (Admin Expense)

6. A physical count of inventory on 12/31/2017 shows that $100,000 worth is remaining (CoGS).

7. Provide a bad debt allowance of $ 50,000. (Selling Exp)

8. Provide income taxes of 20% of income before taxes

9. Dividends of 50,000 was declared (but not paid) for the year.

For JKF, compute the following ratios (use the definitions provided in the exam).

1 Operating Margin (Operating Income / Net Sales)

2 Sales Margin (Return on Sales)

3 Working Capital

4 Current Ratio

5 Debt to Equity ratio

Comment on the health of the firm based on the ratios you computed above (1 paragraph. This may be typed).

Question 2. (25 pts)

Use the comparative balance sheet and the additional information provided to prepare a cash flow statement for Yannik Inc for the year ended 12/31/2017.

	2017	2016
Cash	600,000	400,000
Accounts receivable (net)	400,000	450,000
Inventory	600,000	500,000
Equipment	1,000,000	600,000
Accumulated depreciation	(300,000)	(250,000)
TOTAL	2,300,000	1,700,000
Accounts payable	500,000	300,000
Notes payable - Long-term	500,000	400,000
Common stock	800,000	700,000
Retained earnings	500,000	300,000
TOTAL	2,300,000	1,700,000

Notes

Net income was $300,000.

Net income include a gain on sale of equipment equal to $20,000. The equipment had a book value of $80,000 at the time of sale.

Depreciation for the year was $50,000

Dividends of 100,000 have been declared and paid.

Increases or decreases in Equipment, Common Stock or Notes Payable refers to relevant purchases, issuances sales or retirements.