Question

Required information

E3-18 (Algo) Analyzing the Effects of Transactions Using T-Accounts and Interpreting the Net Profit Margin Ratio as a Financial Analyst LO3-4, 3-6

[The following information applies to the questions displayed below.]

Massa Company, which has been operating for three years, provides marketing consulting services worldwide for dot-com companies. You are a financial analyst assigned to report on the Massa management team’s effectiveness at managing its assets efficiently. At the start of 2019 (its fourth year), Massa's T-account balances were as follows. Dollars are in thousands.

Transactions for 2019:

1. Provided $60,000 in services to clients who paid $49,400 in cash and owed the rest on account.
2. Received $6,100 cash from clients on account.
3. Received $510 in cash as interest revenue on investments.
4. Paid $34,100 in wages, $12,800 in travel, $6,900 in rent, and $800 on accounts payable.
5. Received $1,600 in cash from clients in advance of services Massa will provide next year.
6. Received a utility bill for $690 for 2019 services.
7. Declared and immediately paid $350 in dividends to stockholders.

Assets

Cash
3,700

Accounts Receivable
8,800

Long-Term Investments
6,800

Liabilities

Accounts Payable
	1,600

Unearned Revenue
	5,100

Long-Term Notes Payable
	1,500

Stockholders’ Equity

Common Stock ($0.10 par value)
	690

Additional Paid-in Capital
	3,910

Retained Earnings
	6,500

Revenues

Consulting Fee Revenue

Interest Revenue

Expenses

Wages Expense

Travel Expense

Utilities Expense

Rent Expense

E3-18 Part 3

3. Compute ending balances in the T-accounts to determine amounts for the following on December 31, 2019: (Enter your answers in thousands, not in dollars.)

$A95W3w5Z8w4MgAAAABJRU5ErkJggg==$

Answer 1

E3-18) T-Accounts:
DEBIT	AMOUNT $	CREDIT	AMOUNT $
Cash a/c
OB	3700	d	34100
a	49400	d	12800
b	6100	d	6900
c	510	d	800
e	1600	g	350
		CB	6360
Accounts Receivable a/c
OB	8800	b	6100
a	10600	CB	13300
LT Investments a/c
OB	6800
Accounts payable a/c
d	800	OB	1600
CB	1490	f	690
Unearned Revenue a/c
CB	6700	OB	5100
		e	1600
LT Notes payable a/c
		OB	1500
Common stock a/c
		OB	690
Additional paid in capital a/c
		OB	3910
Retained Earnings a/c
		OB	6500
Service revenue a/c
		a	60000
Interest revenue a/c
		c	510
Wages expense a/c
d	34100
Travelling expense a/c
d	12800
Rent expense a/c
d	6900
Utilities expense a/c
f	690
Dividends a/c
g	350

Trial Balance:
Acc. Titles	Debit $	Credit $
Cash	6360
AR	13300
LT Investment	6800
AP		1490
Unearned rev.		6700
LT Notes Pay.		1500
CS		690
Addi Paid in Capi		3910
RE		6500
Serv. Rev		60000
Inter. Rev		510
Wage exp	34100
Travel exp	12800
rent exp.	6900
utilities exp.'	690
Dividend	350
Total	81300	81300

Income Statement:
	Amount $
Serv. Rev	60000
Inter. Rev	510
Total Revenues	60510
Less:Expenses:
Wage exp	34100
Travel exp	12800
rent exp.	6900
utilities exp.'	690
Total Expenses	54490
Net Income	6020
Balance Sheet:
Assets:	Amount $
Cash	6360
AR	13300
Current assets	19660
LT Investment	6800
Total Assets	26460
Liabilities & SH Eq.	Amount $
AP	1490
Unearned rev.	6700
Current Liabilities	8190
LT Notes Pay.	1500
Total Liabilities	9690
CS	690
Addi Paid in Capi	3910
RE	6500
Add:net Income	6020
Less:Dividend	-350
total Liab. & Sh Eq.	26460