Exercise 6-21B Complete the accounting cycle using inventory transactions (L06-2, 6-3, 6-5, 6-6, 6-7) On January 1, Year 1, the general ledger of a company includes the following account balances: Accounts Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Land Accounts Payable Notes Payable (68, due in 3 years) Common Stock Retained Earnings Totals Debit Credit $ 24,500 43,000 $ 2,900 43,000 81,100 28,700 43,000 69,000 48,000 $191,600 $191,600 The $43,000 beginning balance of inventory consists of 430 units, each costing $100. During January Year 1, the company had the following inventory transactions: January 3 Purchase 1,150 units for $121,900 on account ($106 each). January 8 Purchase 1,250 units for $138,750 on account ($111 each). January 12 Purchase 1,350 units for $156,600 on account ($116 each). January 15 Return 165 of the units purchased on January 12 because of defects. January 19 Sell 3,900 units on account for $624,000. The cost of the units sold is determined using a FIFO perpetual inventory system. January 22 Receive $573,000 from customers on accounts receivable. January 24 Pay $380,000 to inventory suppliers on accounts payable. January 27 Write off accounts receivable as uncollectible, $2,200. January 31 Pay cash for salaries during January, $132,000. The following information is available on January 31, Year 1. The following information is available on January 31, Year 1. 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 $5,300 of accounts receivable on January 31 are past due, and 35% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 3% 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 $13,600. Post-closing General Ledger Account Cash Accounts Receivable Debit Credit No. Debit Credit No. Date 7 Date Jan 01 Jan 22 Jan 24 Jan 31 573,000 Balance 24,500 597,500 217,500 85,500 5 Jan 19 624,000 Balance 43,000 667,000 94,000 91,800 8 7 Jan 22 380,000 132,000 573,000 2.200 10 9 Jan 27 Allowance for Uncollectible Accounts Inventory No. Date Debit Credit No. Date Debit Credit Balance 2.900 700 4,450 Jan 01 Jan 03 2,200 1 9 12 Jan 27 Jan 31 3,750 2 Jan 08 121,900 138.750 156,600 Balance 43,000 164,900 303,650 460,250 441,110 13,340 11,500 3 Jan 12 Jan 15 4 6 Jan 19 19,140 427,770 1,840 11 11 Jan 31 Land Accounts Payable No. Debit Credit No. Date Debit Credit Date Jan 01 Balance 81.100 1 2 Jan 03 Jan 08 Jan 12 121,900 138,750 156,600 Balance 28,700 150,600 289,350 445,950 426,810 46,810 3 4 Jan 15 19,140 380,000 8 Jan 24 Interest Payable Debit Credit Income Taxes Payable Debit Credit No. Date Balance No. Date Balance 0 0 1 13 Jan 31 215 215 14 Jan 31 13,600 13,600 Common Stock Notes Payable Debit Credit No. Date No. Date Debit Credit Balance 43,000 Balance 69,000 Retained Earnings Sales Revenue No. Date Debit Credit No. Date Debit Credit Balance 48,000 672,000 716,825 5 11 Jan 19 624,000 15 16 Jan 31 Jan 31 624,000 44,825 Balance 0 624,000 0 (44,825) * 15 16 Jan 31 Jan 31 624,000 44,825 Cost of Goods Sold Salaries Expense No. Date Debit Credit Balance No. Date Debit Credit 0 Balance 0 132,000 6 10 Jan 31 Jan 19 Jan 31 132,000 427,770 1,840 427.770 429,610 11 Bad Debt Expense Interest Expense No. Date Debit Credit Balance No. Date Debit Credit Balance 0 1 12 Jan 31 3,750 3,750 13 Jan 31 215 215 Income Tax Expense Debit Credit No. Date Balance 0 . 14 Jan 31 13,600 13,600 Notice the dropdown below that gives the options to select the unadjusted, adjusted or post-closing trial balance. The option you choose will be the values used to populate the income statement and balance sheet tabs. Post-closing Trial Balance January 31, 2021 Account Title Debit Credit IS 85,500 91,800 4,450 11,500 81,100 46,810 215 Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Land Accounts Payable Interest Payable Income Taxes Payable Notes Payable Common Stock Retained Earnings Sales Revenue Cost of Goods Sold Salaries Expense Bad Debt Expense Interest Expense Income Tax Expense Total 13,600 43,000 69,000 716,825 44,825 429,610 132,000 3,750 215 13,600 893,900 S $ 893,900 Choose the appropriate accounts to complete the company's income statement balances will appear for each account, based on your selection. Post-closing Multiple-Step Income Statement For the year ended January 31, Year 1 Gross Profit $ 0 0 Total Operating Expenses Operating Income 0 Income Before Taxes 0 $ 0 Post-closing Classified Balance Sheet January 31, Year 1 Assets Liabilities Current Assets: Current Liabilities: $ 0 0 0 0 0 Total Current Liabilities 0 0 0 0 Total Current Assets 0 0 Total Liabilities Stockholders' Equity Long-term Assets: 0 0 0 Total Stockholders' Equity Total Liabilities & Stockholders' Equity ola Total Assets $ 0 S Using the information from the requirements above, complete the 'Analysis' tab. Enter your Inventory Turnover ratio and gross profit ratio value in one decimal pla Analyze how well the company manages its inventory: (a) Calculate the inventory turnover ratio for the month of January. If the industry average of the inventory turnover ratio for the month of January is 13.2 times, is the company managing its inventory more or less efficiently than other companies in the same industry? The inventory turnover ratio is: times The company managing its inventory more efficiently. (True or False) (b) Calculate the gross profit ratio for the month of January. 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? The gross profit ratio is: % Is the company more or less profitable per dollar of sales? (C) Used together, what might the inventory turnover ratio and gross profit ratio suggest about the company business strategy? 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? Based on the inventory turnover ratio and the gross profit ratio, the company business strategy appears to be selling a 13 Jan 31 215 Interest Expense Interest Payable 215 14 Jan 31 13,600 Income Tax Expense Income Taxes Payable OO 13,600 15 Jan 31 624,000 Sales Revenue Retained Earnings 624,000 16 Jan 31 44,825 Sales Revenue Retained Earnings 44,825 Exercise 6-21B Complete the accounting cycle using inventory transactions (L06-2, 6-3, 6-5, 6-6, 6-7) On January 1, Year 1, the general ledger of a company includes the following account balances: Accounts Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Land Accounts Payable Notes Payable (68, due in 3 years) Common Stock Retained Earnings Totals Debit Credit $ 24,500 43,000 $ 2,900 43,000 81,100 28,700 43,000 69,000 48,000 $191,600 $191,600 The $43,000 beginning balance of inventory consists of 430 units, each costing $100. During January Year 1, the company had the following inventory transactions: January 3 Purchase 1,150 units for $121,900 on account ($106 each). January 8 Purchase 1,250 units for $138,750 on account ($111 each). January 12 Purchase 1,350 units for $156,600 on account ($116 each). January 15 Return 165 of the units purchased on January 12 because of defects. January 19 Sell 3,900 units on account for $624,000. The cost of the units sold is determined using a FIFO perpetual inventory system. January 22 Receive $573,000 from customers on accounts receivable. January 24 Pay $380,000 to inventory suppliers on accounts payable. January 27 Write off accounts receivable as uncollectible, $2,200. January 31 Pay cash for salaries during January, $132,000. The following information is available on January 31, Year 1