Question

The following transactions are February activities of Swing Hard Incorporated, which offers golfing lessons in the northeastern United States. Swing Hard collected $20,600 from customers for lesson services provided in February. Swing Hard sold a gift card for golf lessons for $155 cash in February. Swing Hard received $2,300 from credit sales made to customers in January. Swing Hard collected $2,300 in advance payments for golf lessons to start in June. Swing Hard billed a customer $180 for services provided between February 25 and February 28. The bill is to be paid in March. Swing Hard paid $2,600 for wages to its golf instructors for the month of February. Swing Hard paid $2,500 for electricity used in the month of January. Swing Hard received an electricity bill for $1,420 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 company's net profit margin expressed as a percent?

Answer 1

Answer:

Income Statement for Swing Hard Incorporated for the month ended February 28.

Sales                                                 $20,935

Less Expenses

Wages                                               ($2,600)

Electricity                                           ($1,420)

Net Income / (Loss)                           $16,915

Net profit margin =  80.8%

Explanation:

Income Statement for Swing Hard Incorporated for the month ended February 28.

Sales ($20,600 + $155  + $180)      $20,935

Less Expenses

Wages                                               ($2,600)

Electricity                                           ($1,420)

Net Income / (Loss)                           $16,915

Company's net profit margin

Net profit margin = net profit / sales × 100

                            = $16,915 / $20,935 × 100

                            = 80.8%

Note

The Income Statement is always prepared on accrual basis of accounting meaning Revenues and Expenses must the recorded when they occur or incur not as when they are paid.