Question

The following transactions are February activities of Swing Hard Incorporated, which offers golfing lessons in the northeastern United States. a. Swing Hard collected $25,400 from customers for lesson services provided in February. b. Swing Hard sold a gift card for golf lessons for $125 cash in February. c. Swing Hard received $3,800 from credit sales made to customers in January. d. Swing Hard collected $2,500 in advance payments for golf lessons to start in June. e. Swing Hard billed a customer $155 for services provided between February 25 and February 28. The bill is to be paid in March. f. Swing Hard paid $4,200 for wages to its golf instructors for the month of February. g. Swing Hard paid $1,000 for electricity used in the month of January. h. Swing Hard received an electricity bill for $910 for the month of February, to be paid in March. Required: 1. Prepare an income statement for Swing Hard Incorporated for the month ended February 28. (This income statement would be considered "preliminary" because it uses unadjusted balances.) 2. What is the company's net profit margin, expressed as a percent? Complete this question by entering your answers in the tabs below. Required Required 1 Prepare an income statement for Swing Hard Incorporated for the month ended February 28. (This income statement would be considered "preliminary" because it uses unadjusted balances.) SWING HARD INCORPORATED Income Statement For the Month Ended February 28 Revenues Total Revenues Expenses Total Expenses Net Income

Answer 1

The solution has been worked out assuming accrual method of accounting.

1. Income Statement

Swing Hard Incorporated
Income Statement	$
For the Month Ended February 28
Revenues
a. Collection for services rendered in Feb. It means services rendered belongs to Feb. Hence, Income accounted in Feb	25,400
b. Sale of gift card for lesson in Feb. Services rendered in Feb. Hence, Income accounted in Feb.	125
c. Receipt of credit sales made in Jan. Income would have already been accounted in Jan. This represents only collection towards sales accounted earlier. Hence, no need to recognize income again.	-
d. Collection of advance. Represents unbilled revenue/deferred revenue which shall be accounted as liability. Income shall be accounted in June when service performed.	-
e. Services rendered in Feb. Hence, Income accounted in Feb	155
Total Revenues	25,680
Expenses
f. Wages for February	4,200
g. Electricity paid for Jan, would have already been accounted as expense in Jan. No need to account as expense again.
h. Electrcity Feb. Accounted as expense in Feb	910
Total Expenses	5,110
Net Income	20,570
Net Profit Margin (%)	80

2. Company's Net Profit Margin is 80%. (Net Income/ Total Revenues *100)