Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2018, the general ledger of TNT Fireworks includes the following account balances: Accounts Debit Credit Cash $ 58,800 Accounts Receivable 25,200 Inventory

On January 1, 2018, the general ledger of TNT Fireworks includes the following account balances:

Accounts Debit Credit
Cash $ 58,800
Accounts Receivable 25,200
Inventory 36,400
Notes Receivable (5%, due in 2 years) 13,200
Land 156,000
Allowance for Uncollectible Accounts 2,300
Accounts Payable 14,900
Common Stock 221,000
Retained Earning 51,400

Totals $ 289,600 $ 289,600

During January 2018, the following transactions occur: January 1. Purchase equipment for $19,600. The company estimates a residual value of $1,600 and a six-year service life. January 4. Pay cash on accounts payable, $9,600. January 8. Purchase additional inventory on account, $83,900. January 15. Receive cash on accounts receivable, $22,100 January 19. Pay cash for salaries, $29,900. January 28. Pay cash for January utilities, $16,600. January 30. Firework sales for January total $221,000. All of these sales are on account. The cost of the units sold is $115,500.

Information for adjusting entries:

1. Depreciation on the equipment for the month of January is calculated using the straight-line method. 2. At the end of January, $3,100 of accounts receivable are past due, and the company estimates that 50% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 2% will not be collected. The note receivable of $13,200 is considered fully collectible and therefore is not included in the estimate of uncollectible accounts. 3. Accrued interest revenue on notes receivable for January. 4. Unpaid salaries at the end of January are $32,700. 5. Accrued income taxes at the end of January are $9,100

I have already completed journal entries for transactions and adjusting entries

1. Prepare a multiple-step income statement for the period ended January 31, 2018.

2. Prepare a classified balance sheet as of January 31, 2018. (Deductible amounts should be indicated with a minus sign)

3. Analyze how well TNT Fireworks manages its assets:

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?

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

b-2. If the industry average profit margin is 5%, is the company more or less efficient at converting sales to profit than other companies in the same industry?

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

c-2. If the industry average asset turnover is 0.5% is the company more or less efficient at producing revenues with its assets than other companies in the same industry?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting And Business Ethics An Introduction

Authors: Ken McPhail, Diane Walters

1st Edition

0674018788, 9780415362368

More Books

Students also viewed these Accounting questions

Question

What is activity-based management?

Answered: 1 week ago