Exercise 6-21B Complete the accounting cycle using inventory transactions (LO6-2, 6-3, 6-5, 6-6, 6-7)

(The following information applies to the questions displayed below.) 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 (6%, 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. 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. No Date General Journal Debit Credit 1 January 03 121,900 Inventory Accounts payable 121,900 2 January 08 138,750 Inventory Accounts payable 138,750 3 January 12 156,600 Inventory Accounts payable 156,600 4 January 15 19,140 Accounts payable Inventory 19,140 5 January 19 624,000 Accounts receivable Sales revenue 624,000 6 January 19 427,770 Cost of goods sold Inventory 427,770 7 January 22 573,000 Cash Accounts receivable 573,000 8 January 24 380,000 Accounts payable Cash 380,000 9 January 27 2,200 Allowance for uncollectible accounts Accounts receivable 2,200 10 January 31 132,000 Salaries expense Cash 132,000 Exercise 6-21B Part 2 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. 2. Record adjusting entries on January 31 for the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Answer is complete but not entirely correct. No General Journal Credit Date January 31 Debit 1,840 1 Costs of goods sold Inventory 1,840 2 January 31 4,516 Bad debt expense Allowance for uncollectible accounts 4,516 % 3 January 31 215 Interest expense Interest payable elo 215 4 January 31 13,600 Income tax expense Income tax payable 13,600 Rectangular Snip Exercise 6-21B Part 3 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. At the end of January, $5,300 of accounts receivable are past due, and the company estimates that 35% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 3% will not be collected. 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. 3. Prepare an adjusted trial balance as of January 31, Year 1. Adjusted Trial Balance January 31, Year 1 Accounts Debit Credit Totals S 0 S 0 Exercise 6-21B Part 4 4. Prepare a multiple-step income statement for the period ended January 31, Year 1. Multiple-step Income Statement For the year ended January 31, Year 1 0 Total operating expenses Operating income (loss) Exercise 6-21B Part 5 5. Prepare a classified balance sheet as of January 31, Year 1. (Amounts to be deducted should be indicated with a minus sign.) Classified Balance Sheet January 31, Year 1 Assets Liabilities Total current assets Total current liabilities Total liabilities Stockholders' Equity Total stockholders' equity tangular Snip Total liabilities and stockholders' equity Total assets Exercise 6-21B Part 6 6. Record closing entries. (If no entry is required for a transaction/event, select "No journal entry required in the first account field.) View transaction list Journal entry worksheet 1 2 N Record the closing entry for revenue accounts. Note: Enter debits before credits. General Journal Debit Credit Date January 31 Record entry Clear entry View general journal Exercise 6-21B Part 6 6. Record closing entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the closing entry for expense accounts. Note: Enter debits before credits. Date General Journal Debit Credit January 31 Record entry Clear entry View general journal lectangular Shi Exercise 6-21B Part 7 7. Analyze how well the company manages its inventory. 2-1. Calculate the inventory turnover ratio for the month of January. (Round your final answer to 1 decimal place) The Inventory turnover ratio is a-2. If the industry average of the inventory turnover ratio for the month of January is 12 times, is the company managing its inventory more or less efficiently than other companies in the same Industry? More Less b-1. Calculate the gross profit ratio for the month of January. (Round your final answer to 1 decimal place) The Gross Profit Ratio is b-2. If the industry average gross profit ratio is 37.3%, Is the company more or less profitable per dollar of sales than other companies In the same Industry? More 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 Lower volume of more expensive Rectangular Ship