530 • Working Papers
REINFORCEMENT ACTIVITY 2, Part B (continued)
Gulf Uniform Supply, Inc.
Adjusted Trial Balance
December 31, 20–
ACCOUNT TITLE DEBIT CREDIT
Dividends
Income Summary
Sales
Advertising Expense
Cash Short and Over
Credit Card Fee Expense
Depreciation Expense—Office Equipment
Depreciation Expense—Store Equipment
Insurance Expense
Miscellaneous Expense
Payroll Taxes Expense
Rent Expense
Salary Expense
TE
3 0 0 0 00
3 9 9 3 16
426 8 8 3 60
15 2 6 5 90
7 15
4 9 6 0 10
5 4 6 0 00
6 9 8 0 00
12 0 0 0 00
5 2 5 9 30
7 0 0 9 87
19 2 0 0 00
84 7 6 4 00
Name Date Class
REINFORCEMENT ACTIVITY 2, Part B (continued)
Reinforcement Activity 2, Part B • 531
Total of income statement credit accounts…………………………… $
Less total of income statement debit accounts
excluding federal income tax …………………………………………..
Equals net income before federal income tax ……………………… $
Net Income before
Federal Income
Tax
–Of the Amount
Over =
Net Income
Subject to
Marginal Tax Rate
×Marginal
Tax Rate =Marginal
Income Tax
18.
360,645.91
436,731.92
76,086.01
532 • Working Papers
REINFORCEMENT ACTIVITY 2, Part B (continued)
21.
% OF NET
SALES
TE
Gulf Uniform Supply, Inc.
Income Statement
For Year Ended December 31, 20–
Operating Revenue:
Net Purchases 177 4 0 1 73
Total Cost of Mdse. Avail. for Sale 226 5 5 6 57
Less Mdse. Inventory, December 31, 20– 53 1 4 8 00
Cost of Merchandise Sold 173 4 0 8 57 40.9
Gross Profit 250 7 8 9 71 59.1
Operating Expenses:
Advertising Expense 15 2 6 5 90
Rent Expense 19 2 0 0 00
Salary Expense 84 7 6 4 00
Supplies Expense—Office 2 2 3 6 98
Supplies Expense—Store 3 0 4 9 60
Uncollectible Accounts Expense 1 1 1 4 10
Utilities Expense 7 4 3 0 70
Total Operating Expenses 174 7 3 7 70 41.2
Income from Operations 76 0 5 2 01 17.9
Name Date Class
Name Date Class
REINFORCEMENT ACTIVITY 2, Part B (continued)
22.
Reinforcement Activity 2, Part B • 533
Gulf Uniform Supply, Inc.
Statement of Stockholders’ Equity
For Year Ended December 31, 20–
Capital Stock:
$10.00 Par Value
January 1, 20–, 5,500 Shares Issued 55 0 0 0 00
Issued during Current Year, 500 Shares 5 0 0 0 00
Balance, December 31, 20–, 6,000 Shares Issued 60 0 0 0 00
Retained Earnings:
Balance January 1, 20– 23 3 5 2 50
534 • Working Papers
REINFORCEMENT ACTIVITY 2, Part B (continued)
23.
TE
Gulf Uniform Supply, Inc.
Balance Sheet
December 31, 20–
Assets
Current Assets:
Cash 49 7 4 3 48
Petty Cash 2 5 0 00
Accounts Receivable 22 8 2 7 83
Plant Assets:
Office Equipment 23 2 4 5 97
Less Accumulated Depreciation—Office Equipment 8 6 7 0 00 14 5 7 5 97
Store Equipment 36 4 8 9 20
Less Accumulated Depreciation—Store Equipment 13 1 6 2 00 23 3 2 7 20
Total Plant Assets 37 9 0 3 17
Total Assets 170 5 5 7 47
Liabilities
Current Liabilities:
Accounts Payable 18 5 4 7 00
Sales Tax Payable 2 5 2 7 07
Employee Income Tax Payable 4 6 6 00
Social Security Tax Payable 8 8 6 36
Medicare Tax Payable 2 0 7 30
Health Insurance Premiums Payable 9 6 0 00
Retirement Benefits Payable 3 6 0 00
Unemployment Tax Payable—Federal 2 1 32
Name Date Class
REINFORCEMENT ACTIVITY 2, Part B (continued)
24.
GENERAL JOURNAL PAGE 15
DATE ACCOUNT TITLE DOC.
NO.
POST.
REF. DEBIT CREDIT
1 1
2 2
3 3
4 4
5 5
6 6
13 13
14 14
15 15
16 16
17 17
18 18
19 19
20 20
21 21
28 28
29 29
30 30
Closing Entries
20–
Dec. 31 Sales 4110 426 8 8 3 60
Purchases Discount 5120 2 2 2 6 67
Purchases Returns and Allowances 5130 3 5 9 4 49
Interest Income 7110 3 4 00
Income Summary 3140 432 7 3 8 76
Credit Card Fee Expense 6115 4 9 6 0 10
Depreciation Expense—Office Equipment 6120 5 4 6 0 00
Depreciation Expense—Store Equipment 6125 6 9 8 0 00
Insurance Expense 6130 12 0 0 0 00
Miscellaneous Expense 6135 5 2 5 9 30
Payroll Taxes Expense 6140 7 0 0 9 87
Rent Expense 6145 19 2 0 0 00
Salary Expense 6150 84 7 6 4 00
Supplies Expense—Office 6155 2 2 3 6 98
31 Retained Earnings 3120 3 0 0 0 00
Dividends 3130 3 0 0 0 00
REINFORCEMENT ACTIVITY 2, Part B (continued)
25.
Current Year Prior Year
Amount Percent Amount Percent
Net Sales 349 1 8 4 81 329 1 1 4 71
Cost of Merchandise Sold 149 7 8 4 15 141 4 1 4 31
Gross Prot 199 4 0 0 66 187 7 0 0 40
Operating Expenses:
Depreciation Expense 12 1 9 4 64 11 9 4 4 39
Ofce Expense 12 4 9 1 22 10 9 1 4 72
Health Fashions, Inc.
Comparative Income Statement
For Years Ended December 31, 20— and 20–
100.0 100.0
42.9 43.0
57.1 57.0
3.5 3.6
3.6 3.3
Name Date Class
REINFORCEMENT ACTIVITY 2, Part B (continued)
Current Year Prior Year
Amount Percent Amount Percent
ASSETS
Current Assets:
Cash 24 8 9 6 33 8 4 1 4 46
Accounts Receivable (net) 25 1 9 5 49 16 4 8 4 39
Merchandise Inventory 45 8 8 4 46 34 1 1 8 17
Other Current Assets 17 9 4 8 28 16 4 8 1 27
LIABILITIES
Current Liabilities:
Accounts Payable 13 4 4 8 34 12 4 9 8 17
Dividends Payable 2 0 0 0 00 2 0 0 0 00
Other Current Liabilities 1 7 4 4 99 1 6 4 8 27
Total Liabilities 17 1 9 3 33 16 1 4 6 44
STOCKHOLDERS’ EQUITY
Health Fashions, Inc.
Comparative Balance Sheet
December 31, 20— and 20–
Reinforcement Activity 2, Part B • 537
15.3 7.1
15.5 13.9
28.3 28.7
11.1 13.9
8.3 10.5
1.2 1.7
1.1 1.4
10.6 13.6
538 • Working Papers
REINFORCEMENT ACTIVITY 2, Part B (continued)
26.
Current
Year
Prior
Year
Increase (Decrease)
Amount Percent
Net Sales 349 1 8 4 81 329 1 1 4 71
Cost of Merchandise Sold 149 7 8 4 15 141 4 1 4 31
Salaries and Payroll Tax Expense 74 9 1 8 15 73 1 4 8 39
Store Expense 39 4 8 1 19 37 4 9 4 08
Total Operating Expenses 139 0 8 5 20 133 5 0 1 58
Income from Operations 60 3 1 5 46 54 1 9 8 82
Other Revenue 2 3 5 00 1 9 4 00
Health Fashions, Inc.
Comparative Income Statement
For Years Ended December 31, 20— and 20–
TE
20 0 7 0 10 6.1
8 3 6 9 84 5.9
1 7 6 9 76 2.4
1 9 8 7 11 5.3
5 5 8 3 62 4.2
6 1 1 6 64 11.3
4 1 00 21.1
Name Date Class
Current
Year
Prior
Year
Increase (Decrease)
Amount Percent
ASSETS
Current Assets:
Cash 24 8 9 6 33 8 4 1 4 46
Plant Assets:
Ofce Equipment (net) 22 4 9 4 65 18 4 9 5 17
Store Equipment (net) 25 9 4 8 69 24 9 1 4 71
Total Plant Assets 48 4 4 3 34 43 4 0 9 88
Total Assets 162 3 6 7 90 118 9 0 8 17
LIABILITIES
Current Liabilities:
Accounts Payable 13 4 4 8 34 12 4 9 8 17
Dividends Payable 2 0 0 0 00 2 0 0 0 00
Other Current Liabilities 1 7 4 4 99 1 6 4 8 27
Total Liabilities 17 1 9 3 33 16 1 4 6 44
STOCKHOLDERS’ EQUITY
Health Fashions, Inc.
Comparative Balance Sheet
December 31, 20— and 20–
REINFORCEMENT ACTIVITY 2, Part B (continued)
Reinforcement Activity 2, Part B • 539
16 4 8 1 87 195.9
3 9 9 9 48 21.6
1 0 3 3 98 4.2
5 0 3 3 46 11.6
43 4 5 9 73 36.5
9 5 0 17 7.6
0.0
9 6 72 5.9
1 0 4 6 89 6.5
540 • Working Papers
REINFORCEMENT ACTIVITY 2, Part B (concluded)
27.
28.
Current
Year
Prior
Year
Increase over
Prior Year
(Yes or No)
Evaluation
Earnings per share
Target Ranges for GUS Actual Ratios
for HFI
Favorable
Result
Low High
Working capital $75,000.00 $100,000.00
Ratio
Target Ranges
for GUS
Actual Ratios
for HFI Favorable
Trend
Favorable
Result
Low High Current Year Prior Year
Gross margin 57.0% 58.0%
Total operating expenses 38.0% 40.0%
Operating margin 17.0% 20.0%
29.
TE
57.1% 57.0% Yes Yes
39.8% 40.6% Yes Yes
17.3% 16.5% Yes Yes
$1.01 $0.92 Yes EPS increased by $0.09 per share,
a 10% increase over the prior
year, a favorable trend.
$96,731.23 Yes
HFI seems to be a good fit for GUS. All of HFI’s financial ratios except one are showing favorable
trends. All but two of the financial ratios are within GUS’s benchmarks.