Exercise 7 21B Complete the accounting cycle using long term asset transactions (LO7 4, 7 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 Debit Credit Cash $ 60,000 Accounts Receivable 27,600 Allowance for Uncollectible Accounts $ 3,500 Inventory 37,600 Notes Receivable (5 , due in 2 years) 27,600 Land 168,000 Accounts Payable 16,100 Common Stock 233,000 Retained Earnings 68,200 Totals $ 320,800 $ 320,800 During January Year 1, the following transactions occur January 1 Purchase equipment for $20,800 The company estimates a residual value of $2,800 and a five year service life January 4 Pay cash on accounts payable, $10,800 January 8 Purchase additional inventory on account, $95,900 January 15 Receive cash on accounts receivable, $23,300 January 19 Pay cash for salaries, $31,100 January 28 Pay cash for January utilities, $17,800 January 30 Sales for January total $233,000 All of these sales are on account The cost of the units sold is $121,500 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 $4,300 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 2 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 $33,900 Accrued income taxes at the end of January are $10,300 rev 11 22 2018 QC CS 148298, 06 13 2019 QC CS 170054 Exercise 7 21B Part 7 7 Analyze how well the company manages its assets Requirement 1 a 1 Calculate the return on assets ratio for the month of January a 2 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 More profitable Less profitable Requirement 2 b 1 Calculate the profit margin for the month of January b 2 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 More efficient Less efficient Requirement 3 c 1 Calculate the asset turnover ratio for the month of January c 2 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 More efficient Less efficient

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Exercise 7-21B Complete the accounting cycle using long-term asset transactions (LO7-4, 7-7) [The following information applies to the questions displayed below.] On January 1, Year

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

[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	Debit		Credit
Cash	$	60,000
Accounts Receivable		27,600
Allowance for Uncollectible Accounts			$	3,500
Inventory		37,600
Notes Receivable (5%, due in 2 years)		27,600
Land		168,000
Accounts Payable				16,100
Common Stock				233,000
Retained Earnings				68,200
Totals	$	320,800	$	320,800

During January Year 1, the following transactions occur:

January	1	Purchase equipment for $20,800. The company estimates a residual value of $2,800 and a five-year service life.
January	4	Pay cash on accounts payable, $10,800.
January	8	Purchase additional inventory on account, $95,900.
January	15	Receive cash on accounts receivable, $23,300.
January	19	Pay cash for salaries, $31,100.
January	28	Pay cash for January utilities, $17,800.
January	30	Sales for January total $233,000. All of these sales are on account. The cost of the units sold is $121,500.

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 $4,300 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 2% 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 $33,900.
Accrued income taxes at the end of January are $10,300.

rev: 11_22_2018_QC_CS-148298, 06_13_2019_QC_CS-170054

Exercise 7-21B Part 7

7. Analyze how well the company manages its assets:

Requirement 1:

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

a-2. 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?

More profitable
Less profitable

Requirement 2: b-1. Calculate the profit margin for the month of January.

b-2. 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?

More efficient
Less efficient

Requirement 3: c-1. Calculate the asset turnover ratio for the month of January.

c-2. 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?