The following account balances are available for Tenfour Trucking Company on January 31, 2010: Cash .................. $

Question:

The following account balances are available for Tenfour Trucking Company on January 31, 2010:

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 ................ 4,500

Customer Deposits ............. 6,000

Capital Stock ................ 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

Required

1. Identify and analyze the necessary adjustments at January 31, 2010, for each of the following:

a. Prepaid insurance represents the cost of a 24-month policy purchased on January 1, 2010.

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, 2009. Interest at an annual rate of 9% and the principal of $50,000 are due on December 31, 2010. 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 2010. 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.

2. Prepare in good form the following financial statements:

a. Income statement for the month ended January 31, 2010

b. Statement of retained earnings for the month ended January 31, 2010

c. Balance sheet at January 31, 2010

3. Compute Tenfour’s current ratio. What does this ratio tell you about the company’s liquidity?

4. Compute Tenfour’s profit margin. What does this ratio tell you about the company’s profitability?

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