Exercise 7-21 (Algo) Complete the accounting cycle using long-term asset transactions (LO7-4, 7-7) (GL) On January 1,2024 , the general ledger of TNT Fireworks includes the following account balances: During January 2024 , the following transactions occur: January 1 Purchase equipment for $20,100. The company estimates a residual value of $2,100 and a four-year service January 4 Paye. January 4 Pay cash on accounts payable, $10,100. January 8 Purchase additional inventory on account, $88,900. January 15 Receive cash on accounts receivable, $22,600. January 19 Pay cash for salaries, $30,400. January 28 Pay cash for January utilities, $17,100. January 30 Firework sales for January total $226,000. All of these sales are on account. The cost of the units sold is $118,000. The following information is available on January 31, 2024. Depreciation on the equipment for the month of January is calculated using the straight-line method. o. The company records an adjusting entry for $5,780 for estimated future uncollectible accounts. c. The company has accrued interest on notes receivable for January. d. Unpaid salaries owed to employees at the end of January are $33,200. e. The company accrued income taxes at the end of January $9,600 1. Record each of the transactions listed above in the 'General Journal' tab (these are shown as items 1 to 8 ) assuming a FIFO perpetual inventory system. The transaction on January 30 requires two entries: one to record sales revenue and one to record cost of goods sold. Review the 'General Ledger' and the 'Trial Balance' tabs to see the effect of the transactions on the account balances. 2. Record adjusting entries on January 31 in the 'General Journal' tab (these are shown as items 9 to 13 ). 3. Review the adjusted 'Trial Balance' as of January 31, 2024, in the 'Trial Balance' tab. 4. Prepare a multiple-step income statement for the period ended January 31,2024 , in the 'Income Statement' tab. 5. Prepare a classified balance sheet as of January 31, 2024, in the 'Balance Sheet' tab. 6. Record the closing entries in the 'General Journal' tab (these are shown as items 14 and 15 ). 7. Using the information from the requirements above, complete the 'Analysis' tab. Analyze how well TNT Fireworks manages its assets: (a) Calculate the return on assets ratio for the month of January. If the average return on assets for the industry in January is 2%, is the company more or less profitable than other companies in the same industry? The return on assets ratio is: The company is more profitable. (True or False) (b) Calculate the profit margin for the month of January. If the industry average profit margin is 4%, is the company more or less efficient at converting sales to profit than other companies in the same industry? \begin{tabular}{|l|l|l|} \hline The profit margin is: & % \\ \hline The company is more efficient at converting sales to profit. (True or False) \\ \hline (c) Calculate the asset turnover ratio for the month of January. If the industry average asset turnover is 0.4 times per month, is \\ the company more or less efficient at producing revenues with its assets than other companies in the same industry? \\ \hline The asset turnover ratio is: \\ \hline The company is more efficient at producing revenues with its assets. (True or False) \end{tabular} Exercise 7-21 (Algo) Complete the accounting cycle using long-term asset transactions (LO7-4, 7-7) (GL) On January 1,2024 , the general ledger of TNT Fireworks includes the following account balances: During January 2024 , the following transactions occur: January 1 Purchase equipment for $20,100. The company estimates a residual value of $2,100 and a four-year service January 4 Paye. January 4 Pay cash on accounts payable, $10,100. January 8 Purchase additional inventory on account, $88,900. January 15 Receive cash on accounts receivable, $22,600. January 19 Pay cash for salaries, $30,400. January 28 Pay cash for January utilities, $17,100. January 30 Firework sales for January total $226,000. All of these sales are on account. The cost of the units sold is $118,000. The following information is available on January 31, 2024. Depreciation on the equipment for the month of January is calculated using the straight-line method. o. The company records an adjusting entry for $5,780 for estimated future uncollectible accounts. c. The company has accrued interest on notes receivable for January. d. Unpaid salaries owed to employees at the end of January are $33,200. e. The company accrued income taxes at the end of January $9,600 1. Record each of the transactions listed above in the 'General Journal' tab (these are shown as items 1 to 8 ) assuming a FIFO perpetual inventory system. The transaction on January 30 requires two entries: one to record sales revenue and one to record cost of goods sold. Review the 'General Ledger' and the 'Trial Balance' tabs to see the effect of the transactions on the account balances. 2. Record adjusting entries on January 31 in the 'General Journal' tab (these are shown as items 9 to 13 ). 3. Review the adjusted 'Trial Balance' as of January 31, 2024, in the 'Trial Balance' tab. 4. Prepare a multiple-step income statement for the period ended January 31,2024 , in the 'Income Statement' tab. 5. Prepare a classified balance sheet as of January 31, 2024, in the 'Balance Sheet' tab. 6. Record the closing entries in the 'General Journal' tab (these are shown as items 14 and 15 ). 7. Using the information from the requirements above, complete the 'Analysis' tab. Analyze how well TNT Fireworks manages its assets: (a) Calculate the return on assets ratio for the month of January. If the average return on assets for the industry in January is 2%, is the company more or less profitable than other companies in the same industry? The return on assets ratio is: The company is more profitable. (True or False) (b) Calculate the profit margin for the month of January. If the industry average profit margin is 4%, is the company more or less efficient at converting sales to profit than other companies in the same industry? \begin{tabular}{|l|l|l|} \hline The profit margin is: & % \\ \hline The company is more efficient at converting sales to profit. (True or False) \\ \hline (c) Calculate the asset turnover ratio for the month of January. If the industry average asset turnover is 0.4 times per month, is \\ the company more or less efficient at producing revenues with its assets than other companies in the same industry? \\ \hline The asset turnover ratio is: \\ \hline The company is more efficient at producing revenues with its assets. (True or False) \end{tabular}