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On January 1, Year 1, the general ledger of a company includes the following account balances: Accounts Debit Credit Cash $ 59,700 Accounts Receivable 27,000
On January 1, Year 1, the general ledger of a company includes the following account balances:
Accounts | Debit | Credit | |||||
Cash | $ | 59,700 | |||||
Accounts Receivable | 27,000 | ||||||
Allowance for Uncollectible Accounts | $ | 3,200 | |||||
Inventory | 37,300 | ||||||
Notes Receivable (5%, due in 2 years) | 24,000 | ||||||
Land | 165,000 | ||||||
Accounts Payable | 15,800 | ||||||
Common Stock | 230,000 | ||||||
Retained Earnings | 64,000 | ||||||
Totals | $ | 313,000 | $ | 313,000 | |||
During January Year 1, the following transactions occur:
January | 1 | Purchase equipment for $20,500. The company estimates a residual value of $2,500 and a six-year service life. | ||
January | 4 | Pay cash on accounts payable, $10,500. | ||
January | 8 | Purchase additional inventory on account, $92,900. | ||
January | 15 | Receive cash on accounts receivable, $23,000. | ||
January | 19 | Pay cash for salaries, $30,800. | ||
January | 28 | Pay cash for January utilities, $17,500. | ||
January | 30 | Sales for January total $230,000. All of these sales are on account. The cost of the units sold is $120,000. |
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 $4,000 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 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 $33,600.
- Accrued income taxes at the end of January are $10,000.
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.
Requirement 2:
b-1. Calculate the profit margin for the month of January.
Requirement 3:
c-1. Calculate the asset turnover ratio for the month of January.
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