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Kaylee James, a connoisseur of fine chocolate, opened Kaylee's Sweets in Collegetown on February 1. The shop specializes in a selection of gourmet chocolate candies and a line of gourmet ice cream. You have been hired as manager. Your duties include maintaining the store's financial records. The following transactions occurred in February, the first month of operations.

Received four shareholders' contributions totaling $28,400 cash to form the corporation; issued 400 shares of $0.10 par value common stock.

Paid three months' rent for the store at $1,810 per month (recorded as prepaid expenses).

Purchased and received candy inventory for $5,800 on account, due in 60 days.

Purchased supplies for $1,330 cash.

Negotiated and signed a two-year $16,000 loan at the bank, receiving cash at the time.

Used the money from (e) to purchase a computer for $3,400 (for recordkeeping and inventory tracking); used the balance for furniture and fixtures for the store.

Placed a grand opening advertisement in the local paper for $410 cash; the ad ran in the current month.

Made sales on Valentine's Day totaling $3,500; $2,635 was in cash and the rest on accounts receivable.

The cost of the candy sold in (h) above was $1,700. (Reminder: Used inventory is an expense called Cost of Goods Sold.)

Made a $580 payment on accounts payable.

Incurred and paid employee wages of $1,300.

Collected accounts receivable of $190 from customers.

Made a repair to one of the display cases for $115 cash.

Made cash sales of $3,100 during the rest of the month.

The cost of the candy sold in (n) above was $1,910.

Required:

1 and 2. Record in the T-accounts the effects of each transaction for Kaylees Sweets in February, referencing each transaction in the accounts with the transaction letter.

3. Prepare an unadjusted income statement at the end of the first month of operations ended February 28.

5. After three years in business, you are being evaluated for a promotion. One measure is how effectively you managed the sales and expenses of the business. The following data are available:

	2025*	2024	2023
Total assets	$87,500	$52,500	$35,000
Total liabilities	46,000	21,000	16,500
Total stockholders equity	41,500	31,500	18,500
Net sales revenue	92,000	85,000	54,500
Net income	22,600	10,300	4,300

*At the end of 2025, Kaylee decided to open a second store, requiring loans and inventory purchases prior to the stores opening in early 2026.

5-a. Calculate the net profit margin ratio for each year.

5-b. Do you think you should be promoted?

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