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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:

AccountsDebitCredit
Cash$59,700
Accounts Receivable27,000
Allowance for Uncollectible Accounts$3,200
Inventory37,300
Notes Receivable (5%, due in 2 years)24,000
Land165,000
Accounts Payable15,800
Common Stock230,000
Retained Earnings64,000
Totals$313,000$313,000


During January Year 1, the following transactions occur:

January1Purchase equipment for $20,500. The company estimates a residual value of $2,500 and a six-year service life.
January4Pay cash on accounts payable, $10,500.
January8Purchase additional inventory on account, $92,900.
January15Receive cash on accounts receivable, $23,000.
January19Pay cash for salaries, $30,800.
January28Pay cash for January utilities, $17,500.
January30Sales 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:

  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 $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.)
  3. Accrued interest revenue on notes receivable for January.
  4. Unpaid salaries at the end of January are $33,600.
  5. 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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