This assignment is based on Textbook Exercise- M3 -21 (Equilibrium Riding, Inc.) p. 131.

Based on the information provided, you are required to :

1. Prepare an Income Statement for the year ending December 31;
2. Calculate the Net Profit Margin; and
3. Briefly explain what the profit margin means.

Present your answers in the Excel Workbook attached. Rename the file with the filename: Week 5 Assignment-Your First Name, Last Name.

C H A P T E R 3 The Income Statement 131 M3-21 Preparing Financial Statements from a Trial Balance The following accounts are taken from Equilibrium Riding, Inc., a company that specializes in occupational therapy and horseback riding lessons, as of December 31. LO 3-1, 3-4 EQUILIBRIUM RIDING, INC. Unadjusted Trial Balance At December 31 Account Name Debits Credits Cash $ 59,750 Accounts Receivable 3,300 Prepaid Insurance 4,700 Equipment 64,600 Land 23,000 Accounts Payable $ 29,230 Deferred Revenue 1,500 Notes Payable (long-term) 74,000 Common Stock 5,000 Retained Earnings 14,500 Dividends 0 Service Revenue 35,700 Salaries and Wages Expense 3,900 Repairs and Maintenance Expense 410 Office Expense 270 Totals $159,930 $159,930 Required: Using the unadjusted trial balance provided, create a classified Balance Sheet, Statement of Retained Earnings, and Income Statement for Equilibrium Riding, Inc., for the year ended December 31. (These financial statements would be considered preliminary because they use unadjusted balances.) TIP: Create the Income Statement first, followed by the Statement of Retained Earnings, and finally the classified Balance Sheet. Follow the formats presented in Exhibits 1.3, 1.4, and 2.13. M3-22 Preparing an Income Statement and Calculating Net Profit Margin For each of the following items in Old Time Cable, Inc.s financial statements, indicate (1) whether it is reported in the income statement (I/S) or balance sheet (B/S) and (2) whether it is an asset (A), liability (L), stockholders equity (SE), revenue (R), or expense (E) account. The first item is given as an example. LO 3-1, 3-5 Item (1) Statement (2) Account Type Example. Cash $ 880 B/S A 1. Service Revenue 5,500 2. Accounts Receivable 900 3. Interest Expense 380 4. Deferred Revenue 200 5. Income Tax Expense 250 6. Retained Earnings 120 Old Time Cable also reported $4,340 in operating expenses. Based on the available information, determine the companys net profit margin expressed as a percent (to one decimal place). Final PDF to printer