a. It is not an expense since product is not yet sent.

b. Wages paid, so it is an expense

c. Inventory which cannot be sold, so it is an expense.
Ans 3.1
d. Since the goods are given to customer, so $25,000 is COGS, hence expense.
e. Advertisement cost, so it is an expense.
f. Since we havee an asset here, so it is not an expense.

a.Revenue=$275,000

Ans 3.2 b. Expenses= COGS+Salaries+Rent+Taxes+Other=$246,315

c. Net Income=Revenue - Expenses= 275,000-246,315=$28,685

Ans 3.3 COGS=Beginning

31000=$74,000
Inventory+Inventory Purchase for period-Ending inventory=27000+78000-

a. 1. Gross Margin=Sales Revenue-COGS=85,000-45,000=$40,000

a. 2. %Gross Margin= (Gross Margin/Sales Revenue)x100=(40000/85000)x100=47%
Ans 3.4 a. 3. %Profit Margin=(Net Profit/Sales)x100, (9000/85000)X100=10.58%
b. From the above data, it can said that other expenses accounts 36.4% of net revenue
generated.
b. No
expense
since
a. Associated Expense would be depreciation. It will come in income statement as expense
land is a
non
Ans 3.5 deprecia
c. The expense associated is COGS. It will be $7,500
ble
d. Expense will be for the first year for the second year it will be prepaid expense which is an
asset.

The Price of Insurance paid is $30,000 for 24 months on October 1st 20X5. Thus Per month price
for insurance will be 30,000/24=$1,250.

1. Expense for the year 20X5 will be value for 3 months i.e Oct, Nov and Dec. This is equal to 3x1250=3750

Ans 3.6 2. Expense for year 20X6 will be cost of insurance for 12 months. This is equal to 12x1250=$15,000
3. Expense for the year 20X7 will be the cost of insurance for 9 months i.e from Jan 20X7 to Sept 20X7.
This is equal to 9x1250= $11,250
4. The value of insurance as on Dec 20X5=30,000-3750=$26,250
 5. The value of Insurance in Dec 20X6=26,250-15000=$11,250
6. The value of insurance in Dec 20X7=0(Since it will be expired).

Ans 3.7
QED Electronics Company
Income Statement
For the Month of April
Revenues:-
Service Revenue $33,400
Total Revenues:- $33,400
Expenses:-
NPA $645
Parts Used $3,700
Selling Expense $1,900
Wages $10,000
Administrative & Miscellaneous Expense $4,700
Depreciation $2,700
Interest Expense $880
Utilities $800
Total Expenses:- $25,325
Profit Before tax $8,075
Tax $2,800
Profit After tax $5,275

Ans 3.8
Current Liabilities, $50,000 Purchase during the period $40,000
ending balance
Current Ratio 1.6:1 Inventory, ending balance $30,000
Owners' equity,
beginning balance $120,000 45%
Gross margin percentage
Inventory, beginning $35,000 10%
balance Profit margin
Long term debt, ending 40,000
balance

COGS= Inventory beginning balance+purchase Inventory-Closing balance

COGS= 35000+40000-30000=$45,000

Current liabilities=$50,000
Current ratio=1.6:1
Current Asset=Current ratioxCurrent Liabilities=1.6x50000=$80,000
Owners' Equity =$120,000
Long term Debt= $40,000

% Gross Margin= (Total Sales-COGS)/Total sales x100

Total sales= $81,818.2
Gross Margin=Total sales-COGS=$36,812.2
% Profit Margin=(Total sales-Total Expense)/Total Sales x100
Total expense= $8182

ABC Company
Balance sheet
For The End of Period
Current Asset $80,000 Current Liabilities $50,000
Long Term Debt $40,000
Other Assets $138,182
Total Liabilities $90,000
Owners' Equity
Paid in Capital $120,000
Net Profit $8182
Total Owners' Equity $128,182

Total Assets $218,182 Total Liabilities & Owners' $218,182

equity
27000+78000-

0=47%

revenue

nt as expense

nse which is an

us Per month price

equal to 3x1250=3750

1250=$15,000

0X7 to Sept 20X7.

 $33,400
$33,400

$645
$3,700
$1,900
$10,000
$4,700
$2,700
$880
$800
$25,325
$8,075
$2,800
$5,275