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Chapter 3: Q10E (page 147)

Question: Use the following information to compute profit margin for each separate companyathroughe.
Net Income Net Sales Net Income Net Sales
a. \( 4,361 \) 44,500 d. \(65,646 \)1,458,800
b. 97,706 398,800 e. 80,132 435,500
c. 111,281 257,000
Which of the five companies is the most profitable according to the profit margin ratio? Interpret the
profit margin ratio for company c.

Short Answer

Expert verified

Company C is more profitable according to the profit margin ratio. Profit margin ratio of Company C as compared to the other companies.

Step by step solution

01

Definition of net profit margin

The percentage of profit in revenue is known as the net profit margin.

02

Calculation of net profit margin

Company A:

Company B:

Company C:

Company D:

Company E:

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Most popular questions from this chapter

What contra account is used when recording and reporting the effects of depreciation? Why is it used?

In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.

A. Current assets E. Current liabilities

B. Long-term investments F. Long-term liabilities

C. Plant assets G. Equity

D. Intangible assets

20. Depreciation expense—Trucks

For each of the following separate cases, prepare adjusting entries required of financial statements for

the year ended (date of) December 31, 2017. (Entries can draw from the following partial chart of

accounts:

Cash; Interest Receivable; Supplies; Prepaid Insurance; Equipment; Accumulated

Depreciation—Equipment; Wages Payable; Interest Payable; Unearned Revenue; Interest Revenue;

Wages Expense; Supplies Expense; Insurance Expense; Interest Expense; Depreciation Expense—

Equipment.)

a. Wages of \(8,000 are earned by workers but not paid as of December 31, 2017.

b. Depreciation on the company’s equipment for 2017 is \)18,000.

c. The Office Supplies account had a \(240 debit balance on December 31, 2016. During 2017, \)5,200 of

office supplies are purchased. A physical count of supplies at December 31, 2017, shows \(440 of supplies

available.

d. The Prepaid Insurance account had a \)4,000 balance on December 31, 2016. An analysis of insurance

policies shows that \(1,200 of unexpired insurance benefits remain at December 31, 2017.

e. The company has earned (but not recorded) \)1,050 of interest from investments in CDs for the year

ended December 31, 2017. The interest revenue will be received on January 10, 2018.

f. The company has a bank loan and has incurred (but not recorded) interest expense of $2,500 for the

year ended December 31, 2017. The company must pay the interest on January 2, 2018.

On December 31, 2016, Yates Co. prepared an adjusting entry for \(12,000 of earned but unrecorded consulting

fees. On January 16, 2017, Yates received \)26,700 cash in consulting fees, which included the

accrued fees earned in 2016. (Assume the company uses reversing entries.)

a. Prepare the December 31, 2016, adjusting entry.

b. Prepare the January 1, 2017, reversing entry.

c. Prepare the January 16, 2017, cash receipt entry.

In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.

A. Current assets E. Current liabilities

B. Long-term investments F. Long-term liabilities

C. Plant assets G. Equity

D. Intangible assets

19. Land (used in operations)

See all solutions

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