Question

a. How much net income did J & G Tool, Inc., generate during 2018? What was its net profit margin?

b. Is the company financed primarily by liabilities or stockholders’ equity?

c. What is its current ratio?

Required information The following information applies to the questions displayed below) Intemational celebrity Jay and Goku began operations of their machine shop (J&G Tool, Inc.) on January 1, 2016. The annual reporting period ends December 31. The trial balance on January 1, 2018, follows the amounts are rounded to thousands of dollars to simplify): Account Titles Debit Credit Cash Accounts Receivable Supplies = Land - Equipment 3 Accumulated depreciation Software Accumulated amortization Accounts payable Notes payable (short-term) Salaries and Wages Payable Interest Payable Income Tax Payable Common Stock 72 Retained earnings Service revenue Salaries and wages expense Depreciation expense Amortization expense Income tax expense Interest expense Supplies expense Totals $99

Answer 1

a)	Net Income		$   24.00
	Net Profit Margin		14.63%	($ 24/ $ 164)
b)	By observing the balance sheet, we could easily conclude that the main source of finance
	for the company it it's stockholder's equity
c)	Current Assets		$ 101.00
	Current Liabilities		$   44.00
	Ratio		2.30	($ 101 / $ 44)

Workings:

	Income Statement
	Service Revenue			$ 164.00
Less:	Expenses:
	Salaries and Wages Expense			$   98.00
	Depreciation Expense			$      7.00
	Amortization Expense			$      7.00
	Income Tax Expense			$      9.00
	Interest Expense			$      2.00
	Supplies Expense			$   17.00
		Net Income		$   24.00

	Statement of Retained Earnings
	Beginning Balance		$      7.00
Add:	Net Income		$   24.00
	Ending Balance		$   31.00

	Balance Sheet
	Current Assets
	Cash			$   70.00
	Accounts Receivable			$   20.00
	Supplies			$   11.00
	Non- Current Assets
	Land			$      7.00
	Equipment		$   62.00
Less:	Accu. Dep		$ (14.00)	$   48.00
	Software		$   30.00
Less:	Accu. Amor		$ (14.00)	$   16.00
				$ 172.00
	Current Liabilities
	Accounts Payable			$      9.00
	Notes Payable			$   13.00
	Salaries and Wages Payable			$   11.00
	Interest Payable			$      2.00
	Income Tax Payable			$      9.00
				$   44.00
	Stockholder's Equity
	Common Stock			$   97.00
	Retained Earnings			$   31.00
				$ 128.00
				$ 172.00