Vanishing Games Corporation (VGC) operates a massively multiplayer online game, charging players a monthly subscription of $12. At the start of January 2015, VGC’s income statement accounts had zero balances and its balance sheet account balances were as follows:
Cash $ 1,590,000
Accounts Receivable 245,000
Supplies 17,800
Equipment 922,000
Land 1,250,000
Building 435,000
Accounts Payable 137,000
Unearned Revenue 140,000
Notes Payable (due 2018) 81,000
Common Stock 2,800,000
Retained Earnings 1,301,800
In addition to the above accounts, VGC’s chart of accounts includes the following: Service Revenue, Salaries and Wages Expense, Advertising Expense, and Utilities Expense.
1. Analyze the effect of the January transactions (shown below) on the accounting equation, and indicate the account, amount, and direction of the effect (+ for increase and − for decrease) of each transaction.(Enter any decreases to account balances with a minus sign.)
a. Received $65,250 cash from customers for subscriptions that had already been earned in 2014.
b. Received $215,000 cash from Electronic Arts, Inc. for service revenue earned in January.
c. Purchased 10 new computer servers for $34,600; paid $14,400 cash and signed a three-year note for the remainder owed.
d. Paid $12,600 for an Internet advertisement run on Yahoo! in January.
e. Sold 19,200 monthly subscriptions at $12 each for services provided during January. Half was collected in cash and half was sold on account.
f. Received an electric and gas utility bill for $5,250 for January utility services. The bill will be paid in February.
g. Paid $420,000 in wages to employees for work done in January.
h. Purchased $3,300 of supplies on account.
Paid $3,300 cash to the supplier in (h).
Prepare journal entries for the January transactions listed in part 1, using the letter of each transaction as a reference. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Create T-accounts, enter the beginning balances shown above, post the journal entries to the T-accounts, and show the unadjusted ending balances in the T-accounts.
Prepare an unadjusted trial balance as of January 31, 2015.
Prepare an Income Statement for the month ended January 31, 2015, using unadjusted balances from part 4
Calculate net profit margin, expressed as a percent