Ask Question
14 March, 22:49

Rowland & Sons Air Transport Service, Inc., has been in operation for three years. The following transactions occurred in February: Feb. 1 Paid $200 for rent of hangar space in February. Feb. 4 Received customer payment of $800 to ship several items to Philadelphia next month. Feb. 7 Flew cargo from Denver to Dallas; the customer paid in full ($900 cash). Feb. 10 Incurred and paid $1,200 in pilot wages for flying in February. Feb. 14 Paid $100 for an advertisement run in the local paper on February 14. Feb. 18 Flew cargo for two customers from Dallas to Albuquerque for $1,700; one customer paid $500 cash and the other asked to be billed $1,200. Feb. 25 Purchased on account $1,350 in supplies for future use on the planes. Required: Prepare accrual basis journal entries for each transaction. Calculate the company's preliminary net income. Calculate the company's net profit margin expressed as a percent.

+4
Answers (1)
  1. 14 March, 23:00
    0
    Journal entries

    Feb 01

    Rent Expense Debit $ 200

    Cash Credit $ 200

    Record payment of hanger rent for Feb

    Feb 04

    Cash Debit $ 800

    Unearned Revenue Credit $ 800

    Recording of cash received in advance

    Feb 7

    Cash Debit $ 900

    Service Revenue Credit $ 900

    To record service revenue received in cash

    Feb 10

    Salaries and wages Debit $ 1,200

    Cash Credit $ 1,200

    To record salaries paid for services received in February

    Feb 14

    Advertisement expenses Debit $ 100

    Cash Credit $ 100

    To record payment of advertisement expenses

    Feb 18

    Cash Debit $ 500

    Accounts Receivables Debit $ 1,200

    Service Revenue Credit $ 1,700

    To record services provided on cash and on credit

    Feb 25

    Supplies Inventory Debit $ 1,350

    Accounts Payable Credit $ 1,350

    Recording of purchase of supplies for future use on credit

    The preliminary net income for February is $ 1,100

    The net profit margin is 42.3 %

    Explanation:

    Computation of net income and net profit margin

    Revenues ($ 900 + $ 1,700) $ 2,600

    Expenses ($ 200 + $ 1,200 + $ 100) $ 1,500

    Net Income $ 1,100

    Net profit margin = Net income / Revenues

    Net Profit margin = $ 1,100 / $ 2,600 = 42.3 %

    The other entries for collections made on Feb 04 for services to be performed next month and the purchase of supplies to be used in the future are not to be considered in revenues and expenses as they do not pertain to the current month
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Rowland & Sons Air Transport Service, Inc., has been in operation for three years. The following transactions occurred in February: Feb. 1 ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers