P3-4 Analyzing the Effects of Transactions Using T-Accounts, Preparing an Income Statement, and Evaluating the Net Profit Margin Ratio as a Manager LO3-4, 3-5, 3-6
Kaylee James, a connoisseur of fine chocolate, opened Kaylees Sweets in Collegetown on February 1, 2014. The shop specializes in a selection of gourmet chocolate
candies and a line of gourmet ice cream. You have been hired as manager. Your duties include maintaining the stores financial records. The following
transactions occurred in February 2014, the first month of operations.
a.	Received four shareholders contributions totaling $30,200 cash to form the corporation; issued 400 shares of $.10 par value common stock.
b.	Paid three months' rent for the store at $1,750 per month (recorded as prepaid expenses).
c.	Purchased and received candy for $6,000 on account, due in 60 days.
d.	Purchased supplies for $1,560 cash.
e.	Negotiated and signed a two-year $11,000 loan at the bank.
f.	Used the money from (e) to purchase a computer for $2,750 (for recordkeeping and inventory tracking); used the balance for furniture and fixtures for the store.
g.	Placed a grand opening advertisement in the local paper for $400 cash; the ad ran in the current month.
h.	Made sales on Valentine's Day totaling $3,500; $2,675 was in cash and the rest on accounts receivable. The cost of the candy sold was $1,600.
i.	Made a $550 payment on accounts payable.
j.	Incurred and paid employee wages of $1,300.
k.	Collected accounts receivable of $600 from customers.
l.	Made a repair to one of the display cases for $400 cash.
m.	Made cash sales of $1,200 during the rest of the month. The cost of the candy sold was $600.
Required:
1 & 2.	Record in the T-accounts the effects of each transaction for Kaylees Sweets in February, referencing each transaction in the accounts with the transaction
	letter. Show the ending balances in the T-accounts. An example amount has been posted to the Cash T-Account from transaction (l).
Cash					Accounts Receivable
Beg. bal.					Beg. bal.
		400	(l)
					End. bal.
End. bal.		400
Supplies					Inventory
Beg. bal.					Beg. bal.
End. bal.					End. bal.
Prepaid Expenses					Equipment
Beg. bal.					Beg. bal.
End. bal.					End. bal.
Furniture and Fixtures					Accounts Payable
Beg. bal.					Beg. bal.
End. bal.					End. bal.
Notes Payable					Common Stock
Beg. bal.					Beg. bal.
End. bal.					End. bal.
Additional Paid-in Capital					Sales Revenue
Beg. bal.					Beg. bal.
End. bal.					End. bal.
Cost of Goods Sold					Repair Expense
Beg. bal.					Beg. bal.
					End. bal.
End. bal.
Advertising Expense					Wage Expense
Beg. bal.					Beg. bal.
End. bal.					End. bal.
Required:
3	Prepare an income statement at the end of the month ended February 28, 2014.
				KAYLEES SWEETS
				Income Statement (unadjusted)
				For the Month Ended February 28, 2014
				Revenues:
				Expenses:
				Total cost and expenses	-
Required:
5	After three years in business, you are being evaluated for a promotion. One measure is how effectively you managed the sales and expenses of the business.
	The following data are available:
					2016*	2015	2014
				Total assets	$ 88,000	$ 58,500	$ 52,500
				Total liabilities	49,500	22,000	18,500
				Total stockholders equity	38,500	36,500	34,000
				Net sale revenue	93,500	82,500	55,000
				Net income	22,000	11,000	4,400
				* At the end of 2016, Kaylee decided to open a second store, requiring loans and inventory
				purchases prior to the stores opening in early 2017.
5-a.	Calculate the net profit margin ratio for each year. (Round your answers to 1 decimal place.)
		Net Profit Margin Ratio
	2016		%
	2015		%
	2014		%
5-b.	Do you think you should be promoted?