Exercise 6-21 Complete the accounting cycle using inventory transactions (L06-2, 6-3, 6-5, 6-6, 6- 7) [The following information applies to the questions displayed below.] On January 1, 2021, the general ledger of Big Blast Fireworks includes the following account balances: Accounts Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Land Accounts Payable Notes Payable (8%, due in 3 years) Common Stock Retained Earnings Totals Debit Credit $ 21,900 36,5ee $ 3,180 30,880 61,680 32,480 30, e80 56,080 28,500 $150,000 $15e,eee The $30,000 beginning balance of inventory consists of 300 units, each costing $100. During January 2021, Big Blast Fireworks had the following inventory transactions: January 3 Purchase 1,200 units for $126,eee on account ($105 each). January 8 Purchase 1,300 units for $143,689 on account ($119 each). January 12 Purchase 1,480 units for $161,089 on account ($115 each). January 15 Return 108 of the units purchased on January 12 because of defects. January 19 Sell 4,000 units on account for $680,000. The cost of the units sold is determined using a FIFO perpetual inventory system. January 22 Receive $589,690 from customers on accounts receivable. January 24 Pay $410, Bea to inventory suppliers on accounts payable. January 27 Write off accounts receivable as uncollectible, $2,500. January 31 Pay cash for salaries during January, $128,800. The following information is available on January 31, 2021. a. At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each. b. The company estimates future uncollectible accounts. The company determines $4,000 of accounts receivable on January 31 are past due, and 40% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 4% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger) c. Accrued interest expense on notes payable for January. Interest is expected to be paid each December 31. d. Accrued income taxes at the end of January are $12,300. Exercise 6-21 Part 2 each. a. At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 b. The company estimates future uncollectible accounts. The company determines $4.000 of accounts receivable on January 31 ar past due, and 40% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 4% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.) c. Accrued interest expense on notes payable for January. Interest is expected to be paid each December 31. d. Accrued income taxes at the end of January are $12.300. 2. Record adjusting entries on January 31 for the above transactions. (If no entry is required for a transaction/event, select "No Tournal entry remured in the first account Held View transaction list Journal entry worksheet At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each. Record the adjustment for net realizable value. Note: Enter debits before credits Debit Credit Date General Journal January 31 Cost of goods sold Inventory Record entry Clear entry View general journal View transaction list Journal entry worksheet Accrued interest expense on notes payable for January. Interest is expected to be paid each December 31. Record the adjustment for interest expense. Note: Enter debits before credits. Credit Date General Journal January 31 interest expense Interest payable Debit 200 200 Record entry Clear entry View general journal View transaction list Journal entry worksheet Accrued income taxes at the end of January are 512,300. Record the adjustment for income taxes. Note: Enter debits before credits. Date General Journal Credit Debit 12,300 January 31 income tax expense Income tax payable 12,300 Record entry Clear entry View general journal Credit BIG BLAST FIREWORKS Adjusted Trial Balance January 31, 2021 Accounts Debit Cash s 63.900 Accounts receivable Inventory Land 61.600 Allowance for uncollectible accounts Accounts payable Notes payable Interest payable Income tax payable Common stock Retained earnings Sales revenue Cost of goods sold Salaries expense 128,000 interest expense Income tax expense 40,900 30,000 200 12.300 56,000 28,500 600,000 Totals S 253,500 S 767,900 transaction event, select "No Journal entry required" In the first account fleld.) Answer is complete and correct. No Date General Journal Debit Credit 1 January 03 126.000 Inventory Accounts payable 120,000 2 January 08 143,000 Inventory Accounts payable 00 143.000 3 January 12 161.000 Inventory Accounts payable >> 161.000 > 4 January 15 11.500 Accounts payable Inventory 11.500 5 January 19 600.000 Accounts receivable Sales revenue SIC 600.000 6 January 19 437.000 Cost of goods sold Inventory O 437,000 7 January 22 Cash Accounts receivable ols 580.000 580.000 8 January 24 410.000 > Accounts payable Cash ols 410.000 > 9 January 27 2.500 Allowance for uncollectible accounts Accounts receivable 2.500 10 January 31 128.000 Salaries expense Cash slo 128.000 Exercise 6-21 Part 7 7. Analyze how well Big Blast Fireworks' manages its inventory: 0-1. Calculate the inventory turnover ratio for the month of January (Round your final answer to 1 decimal) The Inventory turnover ratio is --2. If the industry average of the inventory turnover ratio for the month of January is 18.5 times, is the company managing its inventory more or less efficiently than other companies in the same industry? O More O Less b-1. Calculate the gross profit ratio for the month of January (Round your final answer to 1 decimal) The Gross Profit Ratio is b-2 If the industry average gross profit ratio is 33%, is the company more or less profitable per dollar of sales than other companies in the same industry? O More O Less c. Is the company's strategy to sell a higher volume of less expensive items or does the company appear to be selling a lower volume of more expensive items? Higher volume of less expensive O Lower volume of more expensive