Exercise 7 21 Complete the accounting cycle using long term asset transactions (LO7 4, 7 7) Skip to question The following information applies to the questions displayed below On January 1, 2021, the general ledger of TNT Fireworks includes the following account balances Accounts Debit Credit Cash $ 58,700 Accounts Receivable 25,000 Allowance for Uncollectible Accounts $ 2,200 Inventory 36,300 Notes Receivable (5 , due in 2 years) 12,000 Land 155,000 Accounts Payable 14,800 Common Stock 220,000 Retained Earnings 50,000 Totals $ 287,000 $ 287,000 During January 2021, the following transactions occur January 1 Purchase equipment for $19,500 The company estimates a residual value of $1,500 and a five year service life January 4 Pay cash on accounts payable, $9,500 January 8 Purchase additional inventory on account, $82,900 January 15 Receive cash on accounts receivable, $22,000 January 19 Pay cash for salaries, $29,800 January 28 Pay cash for January utilities, $16,500 January 30 Firework sales for January total $220,000 All of these sales are on account The cost of the units sold is $115,000 Information for adjusting entries Depreciation on the equipment for the month of January is calculated using the straight line method The company estimates future uncollectible accounts The company determines $3,000 of accounts receivable on January 31 are past due, and 50 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 ) Accrued interest revenue on notes receivable for January Unpaid salaries at the end of January are $32,600 Accrued income taxes at the end of January are $9,000 2 Record the adjusting entries on January 31 for the above transactions (If no entry is required for a particular transaction event, select No Journal Entry Required in the first account field ) 3 Prepare an adjusted trial balance as of January 31, 2021 4 Prepare a multiple step income statement for the period ended January 31, 2021 5 Prepare a classified balance sheet as of January 31, 2021 (Deductible amounts should be indicated with a minus sign ) 6 Record closing entries (If no entry is required for a particular transaction event, select No Journal Entry Required in the first account field ) 7 Analyze how well TNT Fireworks manages its assets Requirement 1 a 1 Calculate the return on assets ratio for the month of January Requirement 2 b 1 Calculate the profit margin for the month of January If the industry average profit margin is 4 Requirement 3 c 1 Calculate the asset turnover ratio for the month of January If the industry average asset turnover is 0 5 times per month

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 18, 2024

Exercise 7-21 Complete the accounting cycle using long-term asset transactions (LO7-4, 7-7) Skip to question [The following information applies to the questions displayed below.] On

Exercise 7-21 Complete the accounting cycle using long-term asset transactions (LO7-4, 7-7)

Skip to question

[The following information applies to the questions displayed below.] On January 1, 2021, the general ledger of TNT Fireworks includes the following account balances:

Accounts	Debit		Credit
Cash	$	58,700
Accounts Receivable		25,000
Allowance for Uncollectible Accounts			$	2,200
Inventory		36,300
Notes Receivable (5%, due in 2 years)		12,000
Land		155,000
Accounts Payable				14,800
Common Stock				220,000
Retained Earnings				50,000
Totals	$	287,000	$	287,000

During January 2021, the following transactions occur:

January	1	Purchase equipment for $19,500. The company estimates a residual value of $1,500 and a five-year service life.
January	4	Pay cash on accounts payable, $9,500.
January	8	Purchase additional inventory on account, $82,900.
January	15	Receive cash on accounts receivable, $22,000.
January	19	Pay cash for salaries, $29,800.
January	28	Pay cash for January utilities, $16,500.
January	30	Firework sales for January total $220,000. All of these sales are on account. The cost of the units sold is $115,000.

Information for adjusting entries:

Depreciation on the equipment for the month of January is calculated using the straight-line method.
The company estimates future uncollectible accounts. The company determines $3,000 of accounts receivable on January 31 are past due, and 50% 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.)
Accrued interest revenue on notes receivable for January.
Unpaid salaries at the end of January are $32,600.
Accrued income taxes at the end of January are $9,000.

2. Record the adjusting entries on January 31 for the above transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

3. Prepare an adjusted trial balance as of January 31, 2021. 4. Prepare a multiple-step income statement for the period ended January 31, 2021. 5. Prepare a classified balance sheet as of January 31, 2021. (Deductible amounts should be indicated with a minus sign.) 6. Record closing entries. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) 7. Analyze how well TNT Fireworks manages its assets: Requirement 1: a-1. Calculate the return on assets ratio for the month of January.

Requirement 2: b-1. Calculate the profit margin for the month of January. If the industry average profit margin is 4%.

Requirement 3: c-1. Calculate the asset turnover ratio for the month of January. If the industry average asset turnover is 0.5 times per month.