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

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[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	$	59,300
Accounts Receivable		26,200
Allowance for Uncollectible Accounts					$	2,800
Inventory		36,900
Notes Receivable (5%, due in 2 years)		19,200
Land		161,000
Accounts Payable						15,400
Common Stock						226,000
Retained Earnings						58,400
Totals	$	302,600			$	302,600

During January 2021, 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 life.
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		Sales for January total $226,000. All of these sales are on account. The cost of the units sold is $118,000.

Information for adjusting entries:

1. Depreciation on the equipment for the month of January is calculated using the straight-line method.
2. The company estimates future uncollectible accounts. The company determines $3,600 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.)
3. Accrued interest revenue on notes receivable for January.
4. Unpaid salaries at the end of January are $33,200.
5. Accrued income taxes at the end of January are $9,600.

Record the closing entry for revenues.

Record the closing entry for expenses.

Prepare a classified balance sheet as of January 31, 2021.

Prepare an adjusted trial balance as of January 31, 2021.

Analyze how well TNT Fireworks manages its assets:

Requirement 1:

a-1. Calculate the return on assets ratio for the month of January.