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On 1st January 2012, a newcompany called Ring is set up by Long and Feng with the total issuance of50,000 common shares. The par value of each share is $20. Long and Feng are theonly shareholders in this new business with the same weigh of ownership. These 50,000 common shares are paid fully with cash. The establishment of Ring is to dothe business of key chain by processing the metal, the following TEN transactionsare happened in January: lSy_cI tF
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1, Ring borrowed $200,000 from bank withannual interest rate of 6% on 1st Jan 2012 /2cn`dR,
2, on 1st Jan 2012, a fullyautomatic machine is bought with the cost of $400,000 +1a2Un
3, Ring purchased the metal on account for$50,000 from suppliers on 15th Jan 2012 :|-^et]a8
4, company received the utility bill of$3,800 at the end of January. The utility bill needs to be paid off in Feburary S3Fj /2Q8
5, in January, total sales revenue of keychain is $100,000 with 70% of cash sales and 30% of credit sales. 30% of creditsales will be paid off by customer on Feburary {rzQ[_)EC
6, Ring received the cash of $35,000 fromcustomer in January for the delivery of key chain in March D G,m;vg+
7, on 15th Jan, Ring paid$12,000 in cash for business insurance of covering the rest of year 2012 (365days is used for calculation in 2012) Ev T"+;9/p
8, on 1st January, Ringpurchased a 12-times training course for employees with the total payment of$2,400. The payment is half in cash and half on account. L+lX $k
9, Ring paid $20,000 in wages for the monthof January w6ck wn,
10, annual rent of $36,000 is paid in cash 9R: ?vk4
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Question 1: Prepare journal entry andT-account for these TEN transactions in January (40 marks) U^Iq]L
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Question 2: Following the revenuerealization principle and expense matching principle to do theadjusting entry (using “Adjustment Process of Three steps”) for Ring at the endof January 2012 with combination of the information listed through 1-10 inQuestion 1 and the additional information as following:
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- annual depreciation expense ofthe fully automatic machine is calculated as $120,000 D 7 7$a
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- metal on hand is $40,000 at theend of January L?(m5u~b
- the 12-times training course isused two times by employees V$ho9gQ!l[
(22 marks) [4-u{Tu
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Question 3: Prepare the income statementand balance sheet for Ring, by referring to your answer for Question 1 and 2and the additional information as following: ^ Yo2 R
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- Ring considers the tax rate of35% and is only paid at the end of quarter uFG ;AY|
- the dividend is paid in cash of$10,000 at the end of January {~V_6wY g
(24 marks) {D X1/49
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Question 4: Doing DuPont analysis d 1 O+qS
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- calculating the ROA, Net profitmargin and Total asset turnover for Feburary, if net income, net sales and totalassets are increasing by $10,000 at the end of Feburary in comparison withJanuary &D` $YUl@
- Give your suggestions about howto improve ROA ratio for Ring } <q
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(14 marks)
